P4Y April 22, 2025 March 4, 2026 September 15, 2026 January 26, 2027 April 9, 2029 September 10, 2029 October 30, 2029 January 23, 2031 February 1, 2030 September 25, 2030 July 23, 2035
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 1
CONSOLIDATED FINANCIAL STATEMENTS
Page
Management’s Responsibility for Financial Information
2
Report of Independent Registered Public
Accounting Firm – Public Company Accounting
Oversight Board Standards (United States)
7
Report of Independent Registered Public
Accounting Firm – Internal Control over
Financial Reporting
10
Consolidated Financial Statements
Consolidated Balance Sheet
11
Consolidated Statement of Income
12
Consolidated Statement of Comprehensive
Income
13
Consolidated Statement of Changes in Equity
14
Consolidated Statement of Cash Flows
15
Notes to Consolidated Financial Statements
Note 1
Nature of Operations
16
Note 2
Summary of Material Accounting Policies
16
Note 3
Significant Accounting Judgments, Estimates,
and Assumptions
26
Note 4
Current and Future Changes in Accounting
Policies
30
Note 5
Fair Value Measurements
30
Note 6
Offsetting Financial Assets and Financial Liabilities
40
Note 7
Securities
41
Note 8
Loans, Impaired Loans, and Allowance for
Credit Losses
44
Note 9
Transfers of Financial Assets
51
Note 10
Structured Entities
52
Note 11
Derivatives
55
Note 12
Investments in Associates and Joint Ventures
63
Note 13
Goodwill and Other Intangibles
64
Note 14
Land, Buildings, Equipment, Other Depreciable
Assets, and Right-of-Use Assets
66
Note 15
Other Assets
67
Note 16
Deposits
67
Note 17
Other Liabilities
68
Note 18
Subordinated Notes and Debentures
69
Note 19
Equity
69
Note 20
Insurance
72
Note 21
Share-Based Compensation
75
Note 22
Employee Benefits
77
Note 23
Income Taxes
82
Note 24
Earnings Per Share
84
Note 25
Provisions, Contingent Liabilities, Commitments,
Guarantees, Pledged Assets, and
Collateral
85
Note 26
Related Party Transactions
89
Note 27
Segmented Information
90
Note 28
Interest Income and Expense
92
Note 29
Credit Risk
93
Note 30
Regulatory Capital
94
Note 31
Information on Subsidiaries
96
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 2
FINANCIAL RESULTS
Consolidated Financial Statements
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL
INFORMATION
The management of The Toronto-Dominion Bank and its subsidiaries (the “Bank”)
is responsible for the integrity, consistency, objectivity,
and reliability of the
Consolidated Financial Statements of the Bank
and related financial information as
presented. International Financial Reporting Standards
as issued by the
International Accounting Standards Board,
as well as the requirements of the
Bank Act (Canada)
, and related regulations have been applied and
management has
exercised its judgment and made best estimates
where appropriate.
The Bank’s accounting system and related internal
controls are designed, and supporting procedures
maintained, to provide reasonable assurance
that
financial records are complete and accurate,
and that assets are safeguarded against
loss from unauthorized use or disposition.
These supporting procedures
include the careful selection and training
of qualified staff, the establishment of organizational
structures providing a well-defined division
of responsibilities and
accountability for performance, and the
communication of policies and guidelines
of business conduct throughout the Bank.
Management has assessed the effectiveness of the
Bank’s internal control over financial reporting
as at October 31, 2025,
using the framework found in
Internal Control – Integrated Framework issued
by the Committee of Sponsoring Organizations
of the Treadway Commission 2013 Framework. Based upon
this
assessment, management has concluded
that as at October 31, 2025,
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
Financial Statements and recommends them
to the Board for approval.
Other responsibilities of the Audit Committee
include monitoring the Bank’s system of internal
control over the financial reporting process
and making
recommendations to the Board and shareholders
regarding the appointment of the external
auditor.
The Bank’s Chief Auditor, who has full and free access to the Audit
Committee, conducts an extensive program
of audits. This program supports the
system of
internal control and is carried out by a professional
staff of auditors.
The Office of the Superintendent of Financial
Institutions Canada, makes such examination
and enquiry into the affairs of the Bank as deemed
necessary to
ensure that the provisions of the
Bank Act (Canada)
, having reference to the safety of the depositors,
are being duly observed and that the Bank
is in sound
financial condition.
Ernst & Young LLP,
the independent auditors appointed by
the shareholders of the Bank, have audited
the effectiveness of the Bank’s internal control over
financial reporting as of October 31, 2025, in addition
to auditing the Bank’s Consolidated Financial
Statements as of the same date. Their
reports, which
expressed unqualified opinions, can be found
on the following pages. Ernst & Young LLP have full and free access
to, and meet periodically with, the Audit
Committee to discuss their audit and
matters arising therefrom, such as, comments
they may have on the fairness of financial
reporting and the adequacy of
internal controls.
Raymond Chun
Kelvin Tran
Group President and
Group Head and
Chief Executive Officer
Chief Financial Officer
Toronto, Canada
December 3, 2025
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TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 7
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of The Toronto-Dominion Bank
Opinion on the Consolidated Financial
Statements
We have audited the accompanying Consolidated
Balance Sheets
of The Toronto-Dominion Bank (TD) as of October 31, 2025
and 2024, the related Consolidated
Statements
of Income, Comprehensive Income,
Changes in Equity, and Cash Flows for the years then ended,
and the related notes (collectively referred
to as the
“consolidated financial statements”). In our opinion,
the consolidated financial statements present
fairly, in all material respects, the consolidated financial position
of TD at October 31, 2025 and 2024, its
consolidated financial performance and its
consolidated cash flows for the years then
ended, in conformity with
International Financial Reporting Standards
(IFRS) as issued by the International Accounting
Standards Board.
We also have audited, in accordance with the
standards of the Public Company Accounting
Oversight Board (United States) (PCAOB),
TD’s internal control over
financial reporting as of October 31, 2025, based
on criteria established in Internal Control –
Integrated Framework issued by the Committee
of Sponsoring
Organizations of the Treadway Commission (2013 framework)
and our report dated December 3, 2025, expressed
an unqualified opinion thereon.
Basis for Opinion
These consolidated financial statements are
the responsibility of TD’s management. Our responsibility
is to express an opinion on TD’s consolidated
financial
statements based on our audits. We are a public
accounting firm registered with the PCAOB
and are required to be independent with respect
to TD in accordance
with the U.S. federal securities laws and
the applicable rules and regulations of
the Securities and Exchange Commission
and the PCAOB.
We conducted our audits in accordance with
the standards of the PCAOB. Those standards
require that we plan and perform the audit
to obtain reasonable
assurance about whether the financial
statements are free of material misstatement,
whether due to error or fraud. Our audits
included performing procedures to
assess the risks of material misstatement
of the financial statements, whether due
to error or fraud, and performing procedures
that respond to those risks. Such
procedures included examining, on a test basis,
evidence regarding the amounts and disclosures
in the consolidated financial statements.
Our audits also included
evaluating the accounting principles used and
significant estimates made by management,
as well as evaluating the overall presentation
of the consolidated
financial statements. We believe that our audits
provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below
are matters arising from the current
period audit of the consolidated financial
statements that were communicated
or required to be communicated to the audit
committee and that: (1) relate to accounts
or disclosures that are material to the consolidated
financial statements,
and (2) involved our especially challenging,
subjective, or complex judgments.
The communication of critical audit
matters does not alter in any way our opinion
on
the consolidated financial statements, taken
as a whole, and we are not, by communicating
the critical audit matters below, providing separate opinions on
the
critical audit matters or on the accounts or
disclosures to which they relate.
Allowance for credit losses
Description of the Matter
TD describes its significant accounting judgments,
estimates, and assumptions in relation
to the allowance for credit losses in Note 3
of the consolidated financial statements. As
disclosed in Note 8 to the consolidated financial
statements, TD recognized $9,745 million
in allowances for credit losses on its
consolidated balance sheet using an expected
credit loss model (ECL). The ECL is an
unbiased
and probability-weighted estimate of credit losses
expected to occur in the future, which is
based on the probability of default (PD),
loss given default (LGD) and exposure at
default (EAD) or the expected cash
shortfall relating to the underlying financial asset.
The
ECL is determined by evaluating a range
of possible outcomes incorporating the time
value of money and reasonable and supportable
information about past events, current conditions,
and future economic forecasts. ECL allowances
are measured at amounts equal to
either (i) 12-month ECL; or (ii) lifetime ECL
for those financial instruments that have experienced
a significant increase in credit risk
(SICR) since initial recognition or when
there is objective evidence of impairment.
Auditing the allowance for credit losses was
complex and required the application of
significant judgment and involvement of
specialists because of the sophistication of
the models, the forward-looking nature
of the key assumptions, and the inherent
interrelationship of the critical variables used
in measuring the ECL. Key areas of judgment
include evaluating: (i) the models and
methodologies used for measuring both the
12-month and lifetime expected credit losses;
(ii) the assumptions used in the ECL
scenarios including forward-looking information
(FLI) and assigning probability weighting;
(iii) the determination of SICR; and (iv)
the
assessment of the qualitative component applied
to the modelled ECL based on management’s
expert credit judgment.
How We Addressed the
Matter in Our Audit
We obtained an understanding, evaluated the design,
and tested the operating effectiveness of
management’s controls over the
allowance for credit losses. The controls
we tested included, amongst others, the development
and validation of models and selection
of appropriate inputs including economic forecasting,
determination of non-retail borrower
risk ratings, the integrity of the data used
including the associated controls over relevant
information technology (IT) systems,
and the governance and oversight over the
modelled results and the use of expert credit judgment.
To test the allowance for credit losses, our audit procedures included, amongst
others, involving our credit risk specialists
to assess
whether the methodology and assumptions,
including management’s SICR triggers, used in
significant models that estimate the ECL
across various portfolios are consistent
with the requirements of IFRS. This included
reperforming the model validation procedures
for
a sample of models to evaluate whether management’s
conclusions were appropriate. With the assistance
of our economic specialists,
we evaluated the models, methodology and
process used by management to develop
the FLI variable forecasts for each scenario
and
the scenario probability weights. For a sample
of FLI variables, we compared management’s
FLI to independently derived forecasts
and publicly available information. On a sample
basis, we recalculated the ECL to test
the mathematical accuracy of management’s
models. We tested the completeness and accuracy
of data used in measuring the ECL by agreeing
to source documents and systems
and evaluated a sample of management’s non-retail
borrower risk ratings against TD’s risk rating
policy. With the assistance of our
credit risk specialists, we also evaluated
management’s methodology and governance
over the application of expert credit judgment
by
evaluating that the amounts recorded
were reflective of underlying credit quality and
macroeconomic trends. We also assessed the
adequacy of disclosures related to the allowance
for credit losses.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 8
Fair value measurement of derivatives
Description of the Matter
TD describes its significant accounting judgments,
estimates, and assumptions in relation
to the fair value measurement of derivatives
in Note 3 of the consolidated financial
statements. As disclosed in Note 5 of the
consolidated financial statements, TD
has derivative
assets of $82,972 million and derivative liabilities
of $79,356 million recorded at fair value.
Certain of these derivatives are complex
and illiquid and require valuation techniques
that may include complex models and
non-observable inputs, requiring management’s
estimation and judgment.
Auditing the valuation of certain derivatives required
the application of significant auditor judgment
and involvement of valuation
specialists in assessing the complex
models and non-observable inputs used. Certain
valuation inputs used to determine fair
value
that may be non-observable include volatilities,
correlations, and credit spreads. The
valuation of certain derivatives is sensitive
to
these inputs as they are forward-looking and
could be affected by future economic and market
conditions.
How We Addressed the
Matter in Our Audit
We obtained an understanding, evaluated the design,
and tested the operating effectiveness of
management’s controls, including the
associated controls over relevant IT systems,
over the valuation of TD’s derivative portfolio.
The controls we tested included, amongst
others, the controls over the suitability and
mechanical accuracy of models used in the
valuation of derivatives, and controls over
management’s independent assessment of
fair values, including the integrity of data used
in the valuation such as the significant
inputs noted above.
To test the valuation of these derivatives, our audit procedures included,
amongst others, an evaluation of the
methodologies and
significant inputs used by TD. With the assistance
of our valuation specialists, we performed
an independent valuation for a sample of
derivatives to assess the modelling assumptions
and significant inputs used to estimate
the fair value, which involved obtaining
significant inputs from independent external
sources,
where available.
We also assessed the adequacy of the
disclosures related to
the fair value measurement of derivatives.
Measurement of provision for uncertain
tax positions
Description of the Matter
TD describes its significant accounting judgments,
estimates, and assumptions in relation
to income taxes in Note 3 and Note 23 of
the
consolidated financial statements. As a
financial institution operating in multiple jurisdictions,
TD is subject to complex and constantly
evolving tax legislation. Uncertainty in a tax position
may arise as tax laws are subject to interpretation.
TD uses significant judgment in
i) determining whether it is probable that TD
will have to make a payment to tax authorities
upon their examination of certain uncertain
tax positions and ii) measuring the amount of
the provision.
Auditing TD’s provision for uncertain tax positions
involved
the application of judgment and is based on
interpretation of tax legislation
and jurisprudence.
How We Addressed the
Matter in Our Audit
We obtained an understanding, evaluated the design,
and tested the operating effectiveness of
management’s controls over TD’s
provision for uncertain tax positions.
The controls we tested included, amongst others,
the controls over the assessment of the
technical merits of tax positions and management’s
process to measure the provision for
uncertain tax positions.
With the assistance of our tax professionals,
we assessed the technical merits and the
amount recorded for uncertain tax positions.
Our audit procedures included, amongst others,
using our knowledge of, and experience
with, the application of tax laws by the
relevant income tax authorities to evaluate
TD’s interpretations and assessment of tax laws
with respect to uncertain tax positions.
We
assessed the implications of correspondence
received by TD from the relevant tax authorities
and evaluated income tax opinions or
other third-party advice obtained. We also assessed
the adequacy of the disclosures related
to uncertain tax positions.
Valuation of Goodwill in the U.S. Personal and
Commercial Banking group of Cash Generating
Units
Description of
the Matter
TD describes its significant accounting judgments,
estimates, and assumptions in relation
to the recoverable amount of its cash
generating units (“CGU”) or group of
CGUs to which goodwill has been allocated
in Note 3 of the consolidated financial
statements. As
disclosed in Note 13 of the consolidated financial
statements, TD has $14,776 million of goodwill
in the U.S. Retail segment, which
predominantly relates to the U.S. Personal
and Commercial Banking group of cash generating
units (“US P&C CGUs”). Goodwill is
assessed for impairment annually, or more frequently if impairment
indicators are present.
Auditing the recoverable amount for the
U.S. P&C CGUs was complex and required
the application of significant auditor judgment
and
involvement of valuation specialists in assessing
certain significant assumptions in the impairment
test. Significant assumptions in the
estimate of the recoverable amount included
the discount rate and certain forward-looking
assumptions, such as the terminal
growth
rate, and forecasted earnings,
which are affected by expectations about future
market or economic conditions.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 9
How We Addressed the
Matter in Our Audit
We obtained an understanding, evaluated the design,
and tested the operating effectiveness of
management’s controls over the
recoverable amount of TD’s U.S. P&C CGUs.
The controls we tested included, amongst
others, the controls over management’s
review of TD’s forecast
as well as controls over management’s review
of the model and methodology over significant
assumptions
such as the discount rate and the terminal
growth rate.
We also tested controls over management’s review
of the integrity of the data
used and the mathematical accuracy of
their valuation model.
To test the estimated recoverable amount of the U.S. P&C CGUs, our audit procedures
included, amongst others, with the assistance
of our valuation specialists, assessing
the methodology and testing the significant
assumptions and underlying data used by
TD in its
assessment. We considered the selection and
application of the discount rate by evaluating
the inputs and mathematical accuracy of
the calculation, while also developing an independent
estimate and comparing it to the discount
rate selected by management. We
considered the selection and application of
the terminal growth rate by evaluating the
selected rate against relevant market
and
economic forecast data. We evaluated the reasonability
of the forecasted earnings by comparing
to historical results and considering
our current understanding of the business as
well as current economic trends. We assessed
the historical accuracy of management’s
prior year estimates by performing a comparison
of management’s prior year projections to actual
results. We performed sensitivity
analysis on the significant assumptions to
consider the impact of changes in the recoverable
amount that would result from changes in
the assumptions. We also assessed the adequacy
of the disclosures related to the valuation of
goodwill.
/s/ Ernst & Young LLP
Chartered Professional Accountants
Licensed Public Accountants
We have served as TD’s sole auditor since 2006. Prior
to 2006, we or our predecessor firm have
served as joint auditor with various other firms
since 1955.
Toronto, Canada
December 3, 2025
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 10
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of The Toronto-Dominion Bank
Opinion on Internal Control over Financial
Reporting
We have audited The Toronto-Dominion Bank’s (TD) internal control over financial reporting
as of October 31, 2025, based on criteria
established in Internal
Control – Integrated Framework issued by
the Committee of Sponsoring Organizations
of the Treadway Commission (2013 framework) (the
COSO criteria). In our
opinion, TD maintained, in all material respects,
effective internal control over financial
reporting as of October 31, 2025, based on
the COSO criteria.
We also have audited, in accordance with the
standards of the Public Company Accounting
Oversight Board (United States) (PCAOB),
the Consolidated Balance
Sheets
of TD as of October 31, 2025
and 2024, the related Consolidated Statements
of Income, Comprehensive Income,
Changes in Equity and Cash Flows for
the years then ended, and the related notes,
and our report dated December 3, 2025, expressed
an unqualified opinion thereon.
Basis for Opinion
TD’s management is responsible for maintaining
effective internal control over financial reporting,
and for its assessment of the effectiveness of
internal control
over financial reporting included in the accompanying
Management’s Report on Internal Control over
Financial Reporting contained in the accompanying
Management’s Discussion and Analysis. Our responsibility
is to express an opinion on TD’s internal control
over financial reporting based on our
audit. We are a
public accounting firm registered with the PCAOB
and are required to be independent with respect
to TD in accordance with the U.S. federal securities
laws and
the applicable rules and regulations of the
Securities and Exchange Commission and
the PCAOB.
We conducted our audit in accordance with the
standards of the PCAOB. Those standards
require that we plan and perform the audit
to obtain reasonable
assurance about whether effective internal control
over financial reporting was maintained in
all material respects.
Our audit included obtaining an understanding
of internal control over financial reporting,
assessing the risk that a material weakness
exists, testing and evaluating
the design and operating effectiveness of internal
control based on the assessed risk, and performing
such other procedures as we considered necessary
in the
circumstances. We believe that our audit provides
a reasonable basis for our opinion.
Definition and Limitations of Internal Control
over Financial Reporting
A company’s internal control over financial
reporting is a process designed to provide reasonable
assurance regarding the reliability of financial
reporting and the
preparation of financial statements for external
purposes in accordance with International
Financial Reporting Standards as issued by the
International Accounting
Standards Board. A company’s internal control over
financial reporting includes those policies
and procedures that (1) pertain to the
maintenance of records that,
in reasonable detail, accurately and fairly reflect
the transactions and dispositions of
the assets of the company; (2) provide reasonable
assurance that
transactions are recorded as necessary to
permit preparation of financial statements
in accordance with International Financial
Reporting Standards as issued by
the International Accounting Standards Board,
and that receipts and expenditures of the
company are being made only in accordance
with authorizations of
management and directors of the company;
and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized
acquisition, use, or
disposition of the company’s assets that could have
a material effect on the financial statements.
Because of its inherent limitations, internal
control over financial reporting may not prevent
or detect misstatements. Also, projections
of any evaluation of
effectiveness to future periods are subject to
the risk that controls may become inadequate
because of changes in conditions, or that
the degree of compliance
with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Chartered Professional Accountants
Licensed Public Accountants
Toronto, Canada
December 3, 2025
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 11
Consolidated Financial Statements
CONSOLIDATED BALANCE SHEET
(As at and in millions of Canadian dollars)
October 31, 2025
October 31, 2024
ASSETS
Cash and due from banks
$
7,512
$
6,437
Interest-bearing deposits with banks
109,417
169,930
116,929
176,367
Trading loans, securities, and other
(Note 5)
220,136
175,770
Non-trading financial assets at fair value through
profit or loss
(Note 5)
7,395
5,869
Derivatives
(Notes 5, 11)
82,972
78,061
Financial assets designated at fair value through
profit or loss
(Notes 5, 7)
6,986
6,417
Financial assets at fair value through other
comprehensive income
(Note 5)
126,369
93,897
443,858
360,014
Debt securities at amortized cost, net
of allowance for credit losses (Notes 5,
7)
240,439
271,615
Securities purchased under reverse repurchase
agreements (Note 6)
247,078
208,217
Loans (Notes 5, 8)
Residential mortgages
315,063
331,649
Consumer instalment and other personal
259,033
228,382
Credit card
41,662
40,639
Business and government
345,943
356,973
961,701
957,643
Allowance for loan losses
(Note 8)
(8,689)
(8,094)
Loans, net of allowance for loan losses
953,012
949,549
Other
Investment in Schwab
(Note 12)
–
9,024
Goodwill
(Note 13)
18,980
18,851
Other intangibles
(Note 13)
3,409
3,044
Land, buildings, equipment, other depreciable
assets, and right-of-use assets
(Note 14)
10,132
9,837
Deferred tax assets
(Note 23)
5,388
4,937
Amounts receivable from brokers, dealers,
and clients
27,345
22,115
Other assets
(Note 15)
27,988
28,181
93,242
95,989
Total assets
$
2,094,558
$
2,061,751
LIABILITIES
Trading deposits
(Notes 5, 16)
$
37,882
$
30,412
Derivatives
(Notes 5, 11)
79,356
68,368
Securitization liabilities at fair value
(Notes 5, 9)
25,283
20,319
Financial liabilities designated at fair value
through profit or loss
(Notes 5, 16)
197,635
207,914
340,156
327,013
Deposits (Notes 5, 16)
Personal
650,396
641,667
Banks
27,233
57,698
Business and government
589,475
569,315
1,267,104
1,268,680
Other
Obligations related to securities sold
short
(Note 5)
43,795
39,515
Obligations related to securities sold
under repurchase agreements
(Note 6)
221,150
201,900
Securitization liabilities at amortized
cost
(Notes 5, 9)
14,841
12,365
Amounts payable to brokers, dealers, and
clients
27,434
26,598
Insurance contract liabilities
(Note 20)
7,278
7,169
Other liabilities
(Note 17)
34,240
51,878
348,738
339,425
Subordinated notes and debentures (Notes
5, 18)
10,733
11,473
Total liabilities
1,966,731
1,946,591
EQUITY
Shareholders’ Equity
Common shares
(Note 19)
24,727
25,373
Preferred shares and other equity instruments
(Note 19)
11,625
10,888
Treasury – common shares
(Note 19)
–
(17)
Treasury – preferred shares and other equity instruments
(Note 19)
(4)
(18)
Contributed surplus
285
204
Retained earnings
78,320
70,826
Accumulated other comprehensive income (loss)
12,874
7,904
Total equity
127,827
115,160
Total liabilities and equity
$
2,094,558
$
2,061,751
The accompanying Notes are an integral part of these Consolidated Financial Statements.
Raymond Chun
Nancy G. Tower
Group President and Chief Executive Officer
Chair, Audit Committee
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 12
CONSOLIDATED STATEMENT OF INCOME
(millions of Canadian dollars, except
as noted)
For the years ended October 31
2025
2024
Interest income
1
(Note 28)
Loans
$
51,730
$
53,676
Reverse repurchase agreements
9,859
11,621
Securities
Interest
18,209
20,295
Dividends
2,648
2,371
Deposits with banks
5,175
5,426
87,621
93,389
Interest expense (Note 28)
Deposits
40,039
46,860
Securitization liabilities
886
1,002
Subordinated notes and debentures
519
436
Repurchase agreements and short sales
11,602
13,322
Other
1,513
1,297
54,559
62,917
Net interest income
33,062
30,472
Non-interest income
Investment and securities services
8,522
7,400
Credit fees
1,650
1,898
Trading income (loss)
4,602
3,628
Service charges
2,788
2,626
Card services
2,905
2,947
Insurance revenue
(Note 20)
7,737
6,952
Other income (loss)
(Notes 7, 8, 12)
6,511
1,300
34,715
26,751
Total revenue
67,777
57,223
Provision for (recovery of) credit losses
(Note 8)
4,506
4,253
Insurance service expenses (Note 20)
6,089
6,647
Non-interest expenses
Salaries and employee benefits
18,227
16,733
Occupancy, including depreciation
1,961
1,958
Technology and equipment, including depreciation
2,872
2,656
Amortization of other intangibles
780
702
Communication and marketing
1,643
1,516
Restructuring charges
(Note 25)
686
566
Brokerage-related and sub-advisory fees
528
498
Professional, advisory and outside services
4,288
3,064
Other
2,554
7,800
33,539
35,493
Income before income taxes and share
of net income from investment in Schwab
23,643
10,830
Provision for (recovery of) income taxes
(Note 23)
3,410
2,691
Share of net income from investment
in Schwab (Note 12)
305
703
Net income
20,538
8,842
Preferred dividends and distributions
on other equity instruments
565
526
Net income available to common shareholders
$
19,973
$
8,316
Earnings per share
(Canadian dollars)
(Note 24)
Basic
$
11.57
$
4.73
Diluted
11.56
4.72
Dividends per common share
(Canadian dollars)
4.20
4.08
1
Includes $
79,001
million for the year ended October 31, 2025 (October 31, 2024 – $
84,324
million), which has been calculated based on the effective interest rate method
(EIRM).
The accompanying Notes are an integral part of these Consolidated Financial Statements.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 13
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(millions of Canadian dollars)
For the years ended October 31
2025
2024
Net income
$
20,538
$
8,842
Other comprehensive income (loss)
Items that will be subsequently reclassified
to net income
Net change in unrealized gain/(loss) on
financial assets at fair value through
other comprehensive income
Change in unrealized gain/(loss)
579
285
Reclassification to earnings of net loss/(gain)
71
(23)
Changes in allowance for credit losses recognized
in earnings
1
(1)
Income taxes relating to:
Change in unrealized gain/(loss)
(159)
(68)
Reclassification to earnings of net loss/(gain)
(1)
12
491
205
Net change in unrealized foreign currency
translation gain/(loss) on
investments in foreign operations, net
of hedging activities
Change in unrealized gain/(loss)
1,094
540
Reclassification to earnings of net loss/(gain)
(534)
(19)
Net gain/(loss) on hedges
(1,088)
(457)
Reclassification to earnings of net loss/(gain)
on hedges
799
41
Income taxes relating to:
Net gain/(loss) on hedges
298
122
Reclassification to earnings of net loss/(gain)
on hedges
(220)
(11)
349
216
Net change in gain/(loss) on derivatives
designated as cash flow hedges
Change in gain/(loss)
7,840
3,354
Reclassification to earnings of loss/(gain)
(4,858)
173
Income taxes relating to:
Change in gain/(loss)
(2,164)
(929)
Reclassification to earnings of loss/(gain)
1,337
(50)
2,155
2,548
Share of other comprehensive income (loss)
from investment in Schwab
1,870
2,007
Items that will not be subsequently reclassified
to net income
Remeasurement gain/(loss) on employee
benefit plans
Gain/(loss)
22
(151)
Income taxes
(5)
40
17
(111)
Change in net unrealized gain/(loss)
on equity securities designated at
fair value through other comprehensive income
Change in net unrealized gain/(loss)
150
222
Income taxes
(39)
(60)
111
162
Gain/(loss) from changes in fair value due
to own credit risk on
financial liabilities designated at fair value
through profit or loss
Gain/(loss)
(8)
22
Income taxes
2
(6)
(6)
16
Total other comprehensive income (loss)
4,987
5,043
Total comprehensive income (loss)
$
25,525
$
13,885
Attributable to:
Common shareholders
$
24,960
$
13,359
Preferred shareholders and other equity instrument
holders
565
526
The accompanying Notes are an integral part of these Consolidated Financial Statements.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 14
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(millions of Canadian dollars)
For the years ended October 31
2025
2024
Common shares (Note 19)
Balance at beginning of year
$
25,373
$
25,434
Proceeds from shares issued on exercise of stock options
165
112
Shares issued as a result of dividend reinvestment plan
130
529
Purchase of shares for cancellation and other
(941)
(702)
Balance at end of year
24,727
25,373
Preferred shares and other equity instruments (Note 19)
Balance at beginning of year
10,888
10,853
Issuance of shares and other equity instruments
1,787
1,335
Redemption of shares and other equity instruments
(1,050)
(1,300)
Balance at end of year
11,625
10,888
Treasury – common shares (Note 19)
Balance at beginning of year
(17)
(64)
Purchase of shares
(13,094)
(11,209)
Sale of shares
13,111
11,256
Balance at end of year
–
(17)
Treasury – preferred shares and other equity instruments (Note 19)
Balance at beginning of year
(18)
(65)
Purchase of shares and other equity instruments
(1,535)
(625)
Sale of shares and other equity instruments
1,549
672
Balance at end of year
(4)
(18)
Contributed surplus
Balance at beginning of year
204
155
Net premium (discount) on sale of treasury instruments
32
20
Issuance of stock options, net of options exercised
12
22
Other
37
7
Balance at end of year
285
204
Retained earnings
Balance at beginning of year
70,826
73,008
Impact of reclassification of securities supporting insurance operations
related to the adoption of IFRS 17
–
(10)
Net income attributable to equity instrument holders
20,538
8,842
Common dividends
(7,228)
(7,163)
Preferred dividends and distributions on other equity instruments
(565)
(526)
Share and other equity instrument issue expenses
(7)
(7)
Net premium on repurchase of common shares and redemption of preferred shares and other equity instruments
(Note 19)
(5,265)
(3,295)
Remeasurement gain/(loss) on employee benefit plans
17
(111)
Realized gain/(loss) on equity securities designated at fair value through other comprehensive income
4
88
Balance at end of year
78,320
70,826
Accumulated other comprehensive income (loss)
Net unrealized gain/(loss) on financial assets at fair value through other comprehensive income:
Balance at beginning of year
(208)
(413)
Impact of reclassification of securities supporting insurance operations
related to the adoption of IFRS 17
–
10
Other comprehensive income (loss)
490
196
Allowance for credit losses
1
(1)
Balance at end of year
283
(208)
Net unrealized gain/(loss) on equity securities designated at fair value through other comprehensive income:
Balance at beginning of year
35
(127)
Other comprehensive income (loss)
115
250
Reclassification of loss/(gain) to retained earnings
(4)
(88)
Balance at end of year
146
35
Gain/(loss) from changes in fair value due to own credit risk on financial liabilities designated at fair value
through profit or loss:
Balance at beginning of year
(22)
(38)
Other comprehensive income (loss)
(6)
16
Balance at end of year
(28)
(22)
Net unrealized foreign currency translation gain/(loss) on investments in foreign operations, net of hedging activities:
Balance at beginning of year
12,893
12,677
Other comprehensive income (loss)
349
216
Balance at end of year
13,242
12,893
Net gain/(loss) on derivatives designated as cash flow hedges:
Balance at beginning of year
(2,924)
(5,472)
Other comprehensive income (loss)
2,155
2,548
Balance at end of year
(769)
(2,924)
Share of accumulated other comprehensive income (loss) from Investment in Schwab
–
(1,870)
Total accumulated other comprehensive income
12,874
7,904
Total equity
$
127,827
$
115,160
The accompanying Notes are an integral part of these Consolidated Financial Statements.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 15
CONSOLIDATED STATEMENT OF CASH FLOWS
(millions of Canadian dollars)
For the years ended October 31
2025
2024
Cash flows from (used in) operating activities
Net income
$
20,538
$
8,842
Adjustments to determine net cash flows from (used in) operating activities
Provision for (recovery of) credit losses
(Note 8)
4,506
4,253
Depreciation
(Note 14)
1,386
1,325
Amortization of other intangibles
(Note 13)
780
702
Net securities loss/(gain)
(Note 7)
1,951
358
Share of net income from investment in Schwab
(Note 12)
(305)
(703)
Gain on sale of Schwab shares
(Note 12)
(9,159)
(1,022)
Deferred taxes
(Note 23)
(764)
(1,061)
Changes in operating assets and liabilities
Interest receivable and payable
(Notes 15, 17)
(1,072)
1,133
Securities sold under repurchase agreements
19,250
35,046
Securities purchased under reverse repurchase agreements
(38,861)
(3,884)
Obligations related to securities sold short
4,280
(5,146)
Trading loans, securities, and other
(44,366)
(23,680)
Loans net of securitization and sales
(8,024)
(57,908)
Deposits
5,894
69,922
Derivatives
6,077
6,049
Non-trading financial assets at fair value through profit or loss
(1,526)
1,471
Financial assets and liabilities designated at fair value through profit or loss
(10,848)
15,185
Securitization liabilities
7,440
5,552
Current income taxes
441
658
Amounts receivable and payable from brokers, dealers, and clients
(4,394)
4,027
Other, including unrealized foreign currency translation loss/(gain)
(22,870)
(6,182)
Net cash from (used in) operating activities
(69,646)
54,937
Cash flows from (used in) financing activities
Issuance of subordinated notes and debentures
(Note 18)
2,283
3,324
Redemption or repurchase of subordinated notes and debentures
(Note 18)
(3,175)
(1,544)
Common shares issued, net of issuance costs
(Note 19)
150
100
Repurchase of common shares, including tax on net value of share repurchases
(Note 19)
(6,206)
(3,997)
Preferred shares and other equity instruments issued, net of issuance costs
(Note 19)
1,780
1,328
Redemption of preferred shares and other equity instruments
(Note 19)
(1,050)
(1,300)
Sale of treasury shares and other equity instruments
(Note 19)
14,692
11,948
Purchase of treasury shares and other equity instruments
(Note 19)
(14,629)
(11,834)
Dividends paid on shares and distributions paid on other equity instruments
(7,663)
(7,160)
Repayment of lease liabilities
(1,683)
(678)
Net cash from (used in) financing activities
(15,501)
(9,813)
Cash flows from (used in) investing activities
Interest-bearing deposits with banks
61,591
(71,153)
Activities in financial assets at fair value through other comprehensive income
Purchases
(77,185)
(42,542)
Proceeds from maturities
33,481
18,825
Proceeds from sales
14,425
4,130
Activities in debt securities at amortized cost
Purchases
(53,435)
(11,306)
Proceeds from maturities
49,646
49,606
Proceeds from sales
39,026
5,772
Net purchases of land, buildings, equipment, other depreciable assets, and other intangibles
(Note 14)
(2,145)
(2,177)
Net cash acquired from divestitures
(Note 12)
20,784
3,423
Net cash from (used in) investing activities
86,188
(45,422)
Effect of exchange rate changes on cash and due from banks
34
14
Net increase (decrease) in cash and due from banks
1,075
(284)
Cash and due from banks at beginning of year
6,437
6,721
Cash and due from banks at end of year
$
7,512
$
6,437
Supplementary disclosure of cash flows from operating activities
Amount of income taxes paid (refunded) during the year
$
4,332
$
3,812
Amount of interest paid during the year
55,466
61,779
Amount of interest received during the year
84,808
91,013
Amount of dividends received during the year
2,687
2,694
The accompanying Notes are an integral part of these Consolidated Financial Statements.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 16
Notes to Consolidated Financial Statements
NOTE 1: NATURE OF OPERATIONS
CORPORATE INFORMATION
The Toronto-Dominion Bank is a bank chartered under the
Bank Act (Canada)
. The shareholders of a bank are not, as
shareholders, liable for any liability, act, or
default of the bank except as otherwise provided
under the
Bank Act (Canada)
. The Toronto-Dominion Bank and its subsidiaries are collectively known
as TD
Bank Group (“TD” or the “Bank”). The Bank
was formed through the amalgamation
on February 1, 1955,
of The Bank of Toronto (chartered in 1855) and The
Dominion Bank (chartered in 1869). The Bank
is incorporated and domiciled in Canada
with its registered and principal business
offices located at 66 Wellington
Street West, Toronto, Ontario. TD serves customers in four business segments
operating in a number of locations in key
financial centres around the globe:
Canadian Personal and Commercial Banking,
U.S. Retail, Wealth Management and Insurance,
and Wholesale Banking.
BASIS OF PREPARATION
The accompanying Consolidated Financial
Statements and accounting principles
followed by the Bank have been prepared in
accordance with International
Financial Reporting Standards (IFRS),
as issued by the International Accounting
Standards Board (IASB), including the
accounting requirements of the Office of
the Superintendent of Financial Institutions
Canada (OSFI).
The Consolidated Financial Statements are
presented in Canadian dollars, unless
otherwise indicated.
These Consolidated Financial Statements
were prepared using the accounting policies
as described in Note 2. Certain comparative
amounts have been revised
to conform with the presentation adopted in
the current period.
The preparation of the Consolidated Financial
Statements requires that management
make judgments, estimates, and assumptions
regarding the reported
amount of assets, liabilities, revenue and expenses,
and disclosure of contingent assets and
liabilities, as further described
in Note 3. Accordingly, actual results
may differ from estimated amounts as future
confirming events occur.
The accompanying Consolidated Financial
Statements of the Bank were approved and
authorized for issue by the Bank’s Board of
Directors, in accordance
with a recommendation of the Audit Committee,
on December 3, 2025.
The risk management policies and procedures
of the Bank are provided in the Management’s
Discussion and Analysis (MD&A).
The shaded sections of the
“Managing Risk” section of the 2025 MD&A,
relating to market, liquidity, and insurance risks, are an integral
part of these Consolidated Financial Statements,
as
permitted by IFRS.
NOTE 2: SUMMARY OF MATERIAL ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
The Consolidated Financial Statements include
the assets, liabilities, results of operations,
and cash flows of the Bank and its subsidiaries
including certain
structured entities which it controls.
The Bank’s Consolidated Financial Statements have
been prepared using uniform accounting policies
for like transactions and events in similar
circumstances.
All intercompany transactions, balances,
and unrealized gains and losses on transactions
are eliminated on consolidation.
Subsidiaries
Subsidiaries are corporations or other legal
entities controlled by the Bank, generally
through directly holding more than half of
the voting power of the entity.
Control of subsidiaries is determined based
on the power exercisable through ownership
of voting rights and is generally aligned with
the risks and/or returns
(collectively referred to as “variable returns”)
absorbed from subsidiaries through those
voting rights. As a result, the Bank controls
and consolidates subsidiaries
when it holds the majority of the voting rights
of the subsidiary, unless there is evidence that another investor
has control over the subsidiary. The existence and
effect of potential voting rights that are currently
exercisable or convertible are considered
in assessing whether the Bank controls
an entity. Subsidiaries are
consolidated from the date the Bank obtains
control and continue to be consolidated until
the date when control ceases to exist.
The Bank may consolidate certain subsidiaries
where it owns 50% or less of the voting rights.
Most of those subsidiaries are structured entities
as described in the
following section.
Structured Entities
Structured entities are entities created
to accomplish a narrow and well-defined objective.
Structured entities may take the form
of a corporation, trust, partnership,
or unincorporated entity. They are often created with legal arrangements
that impose limits on the decision-making powers
of their governing board, trustee, or
management. Structured entities are consolidated
when the substance of the relationship
between the Bank and the structured entity
indicates that the Bank
controls the entity. When assessing whether the Bank has to consolidate
a structured entity, the Bank evaluates three primary criteria in order
to conclude
whether, in substance:
●
The Bank has the power to direct the activities
of the structured entity that have the
most significant impact on the entity’s variable returns;
●
The Bank is exposed to significant variable
returns arising from the entity; and
●
The Bank has the ability to use its power
to affect the variable returns to which it is exposed.
Consolidation conclusions are reassessed at
the end of each financial reporting period.
The Bank’s policy is to consider the impact on consolidation
of all
significant changes in circumstances,
focusing on the following:
●
Substantive changes in ownership, such as
the purchase or disposal of more than
an insignificant interest in an entity;
●
Changes in contractual or governance arrangements
of an entity;
●
Additional activities undertaken, such as providing
a liquidity facility beyond the original terms
or entering into a transaction not originally
contemplated;
●
Changes in the financing structure of an entity;
and
●
Changes in the rights to exercise power over
an entity.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 17
INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
Entities over which the Bank has significant
influence are associates and entities over
which the Bank has joint control are joint
ventures. Significant influence is
the power to participate in the financial and
operating policy decisions of an investee,
but is not control or joint control over these
entities. Significant influence is
presumed to exist where the Bank holds between
20
% and
50
% of the voting rights of an entity. Significant influence may
also exist where the Bank holds less
than
20
% of the voting rights and has influence over
financial and operating policy-making processes,
through board representation and significant
commercial
arrangements. Associates and joint ventures
are accounted for using the equity method
of accounting. Investments in associates and
joint ventures are carried on
the Consolidated Balance Sheet initially at
cost and increased or decreased to recognize
the Bank’s share of the profit or loss of the associate
or joint venture,
capital transactions, including the receipt of any
dividends, and write-downs to reflect
any impairment in the value of such entities.
These increases or decreases,
together with any gains and losses realized
on disposition, are reported on the
Consolidated Statement of Income. The
carrying amount of the investments also
includes the Bank’s share of the investee’s other comprehensive
income or loss, which is reported in
the relevant section of the Consolidated
Statement of
Comprehensive Income.
At each balance sheet date, the Bank assesses
whether there is any objective evidence
that the investment in an associate or joint
venture is impaired. The
Bank calculates the amount of impairment
as the difference between the higher of fair
value or value-in-use and its carrying value.
CASH AND DUE FROM BANKS
Cash and due from banks consist of cash and
amounts due from banks which are issued
by investment grade financial institutions.
These amounts are due on
demand or have an original maturity of three
months or less.
REVENUE RECOGNITION
Revenue is recognized at an amount that reflects
the consideration the Bank expects to be
entitled to in exchange for transferring
services to a customer,
excluding amounts collected on behalf of
third parties. The Bank recognizes revenue
when it transfers control of a good or a service
to a customer at a point in
time or over time. The determination
of when performance obligations are satisfied
requires the use of judgment. Refer
to Note 3 for further details.
The Bank identifies contracts with customers
subject to IFRS 15,
Revenue from Contracts with Customers
, which create enforceable rights and obligations.
The
Bank determines the performance obligations
based on distinct services promised to
the customers in the contracts. The Bank’s
contracts generally have a term of
one year or less, consist of a single performance
obligation, and the performance obligations
generally reflect services.
For each contract, the Bank determines the
transaction price, which includes estimating
variable consideration and assessing whether
the price is constrained.
Variable consideration is included in the transaction
price to the extent that it is highly probable
that a significant reversal of the amount will not
occur when the
uncertainty associated with the amount of
variable consideration is subsequently resolved.
As such, the estimate of the variable consideration
is constrained until
the end of the invoicing period. The
uncertainty is generally resolved at the end
of the reporting period and as such, no significant
judgment is required when
recognizing variable consideration in revenues.
The Bank’s receipt of payment from customers
generally occurs subsequent to the
satisfaction of performance obligations or a
short time thereafter. As such,
the Bank has not recognized any material
contract assets (unbilled receivables) or
contract liabilities (deferred revenues)
and there is no significant financing
component associated with the consideration
due to the Bank.
When another party is involved in the transfer
of services to a customer, an assessment is made to evaluate
whether the Bank is the principal such that
revenues are reported on a gross basis or
the agent such that revenues are reported
on a net basis. The Bank is the principal
when it controls the services in the
contract promised to the customer before
they are transferred. Control is demonstrated
by the Bank being primarily responsible
for fulfilling the transfer of the
services to the customer, having discretion in establishing pricing
of the services, or both.
Investment and securities services
Investment and securities services income
includes
asset management fees, administration
and commission fees, and investment banking
fees. The Bank
recognizes asset management and administration
fees based on time elapsed, which depicts
the rendering of investment management
and related services over
time. The fees are primarily calculated based
on average daily or point in time assets
under management (AUM) or assets under administration
(AUA) depending
on the investment mandate.
Commission fees include sales, trailer and
brokerage commissions. Sales and brokerage
commissions are generally recognized at a point
in time when the
transaction is executed. Trailer commissions are recognized
over time and are generally calculated based
on the average daily net asset value of
the fund during
the period.
Investment banking fees include advisory
fees and underwriting fees and are generally
recognized at a point in time upon successful
completion of the
engagement.
Credit fees
Credit fees include liquidity fees, restructuring
fees, letter of credit fees, and loan syndication
fees. Liquidity, restructuring,
and letter of credit fees are recognized
in
income over the period in which the service
is provided. Loan syndication fees are
generally recognized at a point in time
upon completion of the financing
placement.
Service charges
Service charges income is earned on personal
and commercial deposit accounts and
consists of account fees and transaction-based
service charges. Account
fees relate to account maintenance activities
and are recognized in income over the
period in which the service is provided. Transaction-based
service charges are
recognized as earned at a point in time
when the transaction is complete.
Card services
Card services income includes interchange
income as well as card fees such as annual
and transactional fees. Interchange income
is recognized at a point in time
when the transaction is authorized and funded.
Card fees are recognized as earned at the
transaction date with the exception of annual
fees, which are recognized
over a twelve-month period.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 18
FINANCIAL INSTRUMENTS
Classification and Measurement of Financial
Assets
The Bank classifies its financial assets into
the following categories:
●
Amortized cost;
●
Fair value through other comprehensive income
(FVOCI);
●
Held-for-trading;
●
Non-trading fair value through profit or loss
(FVTPL); and
●
Designated as measured at FVTPL.
The Bank recognizes financial assets on a
settlement date basis, except for derivatives
and securities, which are recognized on a
trade date basis.
Debt Instruments
The classification and measurement for debt
instruments is based on the Bank’s business
models for managing its financial assets
and whether the contractual
cash flows represent solely payments of principal
and interest (SPPI). Refer to Note 3 for judgment
with respect to the determination of the Bank’s
business
models and whether contractual cash flows represent
SPPI.
The Bank has determined its business
models as follows:
●
Held-to-collect: the objective is to collect
contractual cash flows;
●
Held-to-collect-and-sell: the objective is both
to collect contractual cash flows and
sell the financial assets; and
●
Held-for-sale and other business models: the
objective is neither of the above.
The Bank performs the SPPI test for
financial assets held within the held-to-collect
and held-to-collect-and-sell business models.
If these financial assets have
contractual cash flows which are inconsistent
with a basic lending arrangement that do
not pass the SPPI test,
they are classified as non-trading financial
assets
measured at FVTPL. In a basic lending arrangement,
interest includes consideration for time
value of money, credit risk, other basic lending risks, and a
reasonable profit margin.
Debt Securities and Loans Measured at Amortized
Cost
Debt securities and loans held within a held-to-collect
business model where their contractual
cash flows pass the SPPI test are measured
at amortized cost. The
carrying amount of these financial assets is
adjusted by an allowance for credit losses
recognized and measured as described in
the Impairment – Expected Credit
Loss Model
section of this Note, as well as any write-offs and unearned
income which includes prepaid interest,
loan origination fees and costs, commitment
fees,
loan syndication fees, and unamortized discounts
or premiums. Interest income is recognized
using EIRM. The effective interest rate (EIR) is
the rate that
discounts expected future cash flows for
the expected life of the financial instrument
to its carrying value. The calculation takes
into account the contractual interest
rate, along with any fees or incremental
costs that are directly attributable to the instrument
and all other premiums or discounts. Loan
origination fees and costs
are considered to be adjustments to the loan
yield and are recognized in interest income
over the term of the loan. Commitment fees are
recognized in credit fees
over the commitment period when it is
unlikely that the commitment will be
called upon; otherwise, they are recognized
in interest income over the term of the
resulting loan. Loan syndication fees are recognized
in credit fees upon completion of the
financing placement unless the yield on any loan
retained by the Bank is
less than that of other comparable lenders involved
in the financing syndicate. In such cases,
an appropriate portion of the fee is recognized
as a yield adjustment
in interest income over the term of the loan.
Debt Securities and Loans Measured at Fair
Value through Other Comprehensive Income
Debt securities and loans held within a held-to-collect-and-sell
business model where their contractual cash
flows pass the SPPI test are measured at
FVOCI. Fair
value changes are recognized in other
comprehensive income, except for impairment
gains or losses, interest income and
foreign exchange gains and losses on
the instrument’s amortized cost, which are recognized
in the Consolidated Statement of Income.
Interest income is recognized using EIRM.
The expected credit
loss (ECL) allowance is recognized and
measured as described in the Impairment
– Expected Credit Loss Model section of
this Note. When the financial asset is
derecognized, the cumulative gain or loss previously
recognized in other comprehensive income is
reclassified from equity to income and
recognized in other
income (loss).
Financial Assets Held-for-Trading
The held-for-sale business model includes
financial assets held within a trading portfolio,
which have been originated, acquired,
or incurred principally for the
purpose of selling in the near term, or if they
form part of a portfolio of identified financial
instruments that are managed together
and for which there is evidence of
short-term profit-taking. Financial assets
held within this business model consist of
trading securities, trading loans, as well
as certain securities purchased under
reverse repurchase agreements.
Trading portfolio assets are accounted for at fair value
with changes in fair value recognized in
trading income (loss). Transaction costs are expensed as
incurred. Dividends are recognized on
the ex-dividend date and interest is recognized
on an accrual basis. Both dividends and interest
are included in interest
income.
Non-Trading Financial Assets Measured at Fair Value through Profit or Loss
Non-trading financial assets measured at
FVTPL include financial assets held
within the held-for-sale and other business
models, for example debt securities and
loans managed on a fair value basis. Financial
assets held within the held-to-collect or held-to-collect-and-sell
business models that do not pass the SPPI
test are
also classified as non-trading financial assets
measured at FVTPL. Changes in fair value
as well as any gains or losses realized on
disposal are recognized in
other income (loss). Interest income from
debt instruments is included in interest
income on an accrual basis.
Financial Assets Designated at Fair Value through Profit
or Loss
Debt instruments in a held-to-collect
or held-to-collect-and-sell business model can be
designated at initial recognition as measured
at FVTPL, provided the
designation can eliminate or significantly reduce
an accounting mismatch that would
otherwise arise from measuring these
financial assets on a different basis.
The FVTPL designation is available only
for those financial instruments for which a
reliable estimate of fair value can be obtained.
Once financial assets are
designated at FVTPL,
the designation is irrevocable. Changes in
fair value as well as any gains or losses realized
on disposal are recognized in other income
(loss). Interest income from these financial
assets is included in interest income on an accrual
basis.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 19
Equity Instruments
Equity investments are required to be measured
at FVTPL, except where the Bank has
elected at initial recognition to irrevocably designate
an equity investment,
held for purposes other than trading, at FVOCI.
If such an election is made, the fair value
changes, including any associated foreign exchange
gains or losses, are
recognized in other comprehensive income
and are not subsequently reclassified
to net income, including upon disposal.
Realized gains and losses are
transferred directly to retained earnings
upon disposal. Consequently, there is no review required for impairment.
Dividends will normally be recognized in interest
income unless the dividends represent a recovery
of part of the cost of the investment. Gains and
losses on trading and non-trading equity investments
measured
at FVTPL are included in trading income (loss)
and other income (loss), respectively.
Classification and Measurement for
Financial Liabilities
The Bank classifies its financial liabilities into
the following categories:
●
Held-for-trading;
●
Designated at FVTPL; and
●
Other liabilities.
Financial Liabilities Held-for-Trading
Financial liabilities are held within a trading
portfolio if they have been incurred principally
for the purpose of repurchasing in the near
term, or form part of a
portfolio of identified financial instruments
that are managed together and for which
there is evidence of a recent actual pattern
of short-term profit-taking. Financial
liabilities held-for-trading are primarily trading
deposits, securitization liabilities at
fair value, obligations related to securities
sold short and certain obligations
related to securities sold under repurchase agreements.
Trading portfolio liabilities are accounted for at fair
value, with changes in fair value as well as any
gains or losses realized on disposal recognized
in trading
income (loss). Transaction costs are expensed as incurred.
Interest is recognized on an accrual basis
in interest expense.
Financial Liabilities Designated at Fair Value through
Profit or Loss
Certain financial liabilities may be designated
at FVTPL at initial recognition. To be designated at FVTPL, financial liabilities
must meet one of the following criteria:
(1) the designation eliminates or significantly
reduces a measurement or recognition
inconsistency; (2) the financial liabilities
or a group of financial assets and
financial liabilities are managed, and their performance
is evaluated, on a fair value basis in accordance
with a documented risk management or
investment
strategy; or (3) the instrument contains one
or more embedded derivatives unless
a) the embedded derivative does not significantly
modify the cash flows that
otherwise would be required by the contract,
or b) it is clear with little or no analysis
that separation of the embedded derivative
from the financial instrument is
prohibited. In addition, the FVTPL designation
is available only for those financial instruments
for which a reliable estimate of fair value can be
obtained. Once
financial liabilities are designated at FVTPL,
the designation is irrevocable.
Financial liabilities designated at FVTPL are
carried at fair value on the Consolidated Balance
Sheet, with changes in fair value as well as
any gains or losses
realized on disposal recognized in other income
(loss), except for the amount of change in
fair value attributable to changes in the Bank’s own
credit risk, which is
presented in other comprehensive income.
Amounts recognized in other comprehensive
income are not subsequently reclassified
to net income upon
derecognition of the financial liability;
instead,
they are transferred directly to retained
earnings.
Changes in fair value attributable to changes in
the Bank’s own credit risk are measured as
the difference between: (i) the period-over-period
change in the
present value of the expected cash flows
using an all-in discount curve reflecting both
the interest rate benchmark curve and
the Bank’s own credit curve; and (ii)
the period-over-period change in the present
value of the same expected cash flows using
a discount curve based solely on the interest
rate benchmark curve.
For loan commitments and financial guarantee
contracts that are designated at FVTPL,
the full change in fair value of the liability is recognized
in other income
(loss).
Interest is recognized on an accrual basis
in interest expense.
Other Financial Liabilities
Deposits
Deposits, other than deposits included in a
trading portfolio and deposits designated at
FVTPL, are accounted for at amortized cost.
Accrued interest on deposits
is included in Other liabilities on the Consolidated
Balance Sheet. Interest, including capitalized
transaction costs, is recognized on an accrual
basis using EIRM as
Interest expense on the Consolidated Statement
of Income.
Subordinated Notes and Debentures
Subordinated notes and debentures are
accounted for at amortized cost. Accrued
interest on subordinated notes and debentures
is included in Other liabilities on
the Consolidated Balance Sheet. Interest, including
capitalized transaction costs, is recognized
on an accrual basis using EIRM as Interest
expense on the
Consolidated Statement of Income.
Reclassification of Financial Assets and
Financial Liabilities
Financial assets and financial liabilities are
not reclassified subsequent to their initial
recognition, except for financial assets
for which the Bank changes its
business model for managing financial assets.
Such reclassifications of financial assets
are expected to be rare in practice.
Impairment – Expected Credit Loss Model
The ECL model applies to financial assets, including
loans and debt securities measured
at amortized cost, loans and debt securities
measured at FVOCI, loan
commitments, and financial guarantees
that are not measured at FVTPL.
The ECL model consists of three stages:
Stage 1 – Twelve-month ECLs for performing
financial assets, Stage 2 – Lifetime ECLs
for financial assets that have
experienced a significant increase in credit
risk since initial recognition, and Stage 3 – Lifetime
ECLs for financial assets that are credit-impaired.
ECLs are the
difference between all the contractual cash flows
that are due to the Bank in accordance
with the contract and all the cash flows the
Bank expects to receive,
discounted at the original EIR. If a significant
increase in credit risk has occurred
since initial recognition, impairment is
measured as lifetime ECLs. Otherwise,
impairment is measured as twelve-month ECLs
which represent the portion of lifetime ECLs
that are expected to occur based on default
events that are possible
within twelve months after the reporting date.
If credit quality improves in a subsequent
period such that the increase in credit risk
since initial recognition is no
longer considered significant, the loss allowance
reverts to being measured based on twelve-month
ECLs.
Significant Increase in Credit Risk
For retail exposures, significant increase in
credit risk is assessed based on changes in
the twelve-month probability of default (PD)
since initial recognition, using
a combination of individual and collective information
that incorporates borrower and account
specific attributes and relevant
forward-looking macroeconomic
variables.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 20
For non-retail exposures, significant increase
in credit risk is assessed based on
changes in the internal risk rating (borrower risk
ratings (BRR)) since initial
recognition. Refer to the shaded areas of
the “Managing Risk” section of the 2025
MD&A for further details on the Bank’s 21-point BRR
scale to risk levels.
For both retail and non-retail exposures,
delinquency backstop when contractual payments
are more than 30 days past due is also used
in assessing significant
increase in credit risk.
The Bank defines default as delinquency of 90
days or more for most retail products
and BRR of
9
for non-retail exposures. Exposures are considered
credit-
impaired and migrate to Stage 3 when the definition
of default is met or when there is objective
evidence that there has been a deterioration
of credit quality to the
extent the Bank no longer has reasonable
assurance as to the timely collection of
the full amount of principal and interest.
When assessing whether there has been a
significant increase in credit risk since
the initial recognition of a financial asset, the Bank
considers all reasonable
and supportable information that is available
without undue cost or effort about past events,
current conditions, and forecast of future economic
conditions. Refer to
Note 3 for additional details.
Measurement of Expected Credit Losses
ECLs are measured as the probability-weighted
present value of expected cash shortfalls over
the remaining expected life of the financial instrument
and consider
reasonable and supportable information about
past events, current conditions, and forecasts
of future events and economic conditions
that impact the Bank’s
credit risk assessment. Expected life is
the maximum contractual period the Bank is
exposed to credit risk, including extension
options for which the borrower has
the unilateral right to exercise. For certain
financial instruments that include both a loan
and an undrawn commitment,
and the Bank’s contractual ability to demand
repayment and cancel the undrawn commitment
does not limit the Bank’s exposure to credit losses
to the contractual notice period, ECLs are
measured over the
period the Bank is exposed to credit risk.
For example, ECLs for credit cards are
measured over the borrowers’ expected
behavioural life, incorporating
survivorship assumptions and borrower-specific
attributes.
The Bank leverages
its Advanced Internal Ratings-Based
models used for regulatory capital purposes
and incorporates adjustments where appropriate
to
calculate ECLs.
Forward-Looking Information and Expert
Credit Judgment
Forward-looking information is considered
when determining significant increase in
credit risk and measuring ECLs. Forward-looking
macroeconomic factors are
incorporated in the risk parameters as relevant.
Qualitative factors that are not already considered
in the quantitative models are incorporated
by applying expert credit judgment in determining
the final ECLs.
Refer to Note 3 for additional details.
Modified Loans
In cases where a borrower experiences financial
difficulties, the Bank may grant certain
modifications to the terms and conditions of
a loan. Modifications may
include payment deferrals, extension of amortization
periods, rate reductions, principal forgiveness,
debt consolidation, forbearance and other
modifications
intended to minimize the economic loss and
to avoid foreclosure or repossession
of collateral. The Bank has policies in place
to determine the appropriate
remediation strategy based on the individual
borrower.
If the Bank determines that a modification
results in expiry of cash flows, the original
asset is derecognized and a new asset
is recognized based on the new
contractual terms. Significant increase in
credit risk is assessed relative to the risk of
default on the date of modification.
If the Bank determines that a modification
does not result in derecognition, significant
increase in credit risk is assessed based
on the risk of default at initial
recognition of the original asset. Expected cash
flows arising from the modified contractual
terms are considered when calculating ECLs
for the modified asset. For
loans that were modified while having lifetime
ECLs, the loans can revert to having
twelve-month ECLs after a period of performance
and improvement in the
borrower’s financial condition.
Allowance for Loan Losses
The allowance for loan losses represents
management’s calculation of probability-weighted
ECLs in the lending portfolios, including
any off-balance sheet
exposures, at the balance sheet date. The
allowance for loan losses for lending portfolios
reported on the Consolidated Balance Sheet,
which includes credit-
related allowances for residential mortgages,
consumer instalment and other personal,
credit card, business and government loans, is deducted
from Loans on the
Consolidated Balance Sheet. The allowance
for loan losses for loans measured at
FVOCI is included in the Consolidated Statement
of Changes in Equity. The
allowance for loan losses for off-balance sheet instruments,
which relates to certain guarantees, letters of
credit, and undrawn lines of credit, is recognized
in Other
liabilities on the Consolidated Balance Sheet.
Allowances for lending portfolios reported
on the balance sheet and off-balance sheet exposures
are calculated
using the same methodology. The allowance is increased by the
provision for credit losses and decreased
by write-offs net of recoveries and disposals. Each
quarter, allowances are reassessed and adjusted based on
any changes in management’s estimate of
ECLs. Loan losses on impaired loans in
Stage 3 continue to
be recognized by means of an allowance
for loan losses until a loan is written off.
A loan is written off against the related allowance
for loan losses when there is no realistic
prospect of recovery. Non-retail loans are generally written off
when
all reasonable collection efforts have been exhausted,
such as when a loan is sold, when all security
has been realized, or when all security has
been resolved
with the receiver or bankruptcy court.
Non-real estate retail loans are generally
written off when contractual payments are
180 days past due, or when a loan is
sold. Real estate secured retail loans are generally
written off when the security is realized. The time period
over which the Bank performs collection
activities on
the contractual amount outstanding of financial
assets that are written off varies from one
jurisdiction to another and generally spans
between less than one year to
five years.
Allowance for Credit Losses on Debt Securities
The allowance for credit losses on debt securities
represents management’s calculation of probability-weighted
ECLs. Debt securities measured at amortized
cost
are presented net of the allowance for credit
losses on the Consolidated Balance Sheet.
The allowance for credit losses on debt securities
measured at FVOCI are
included in the Consolidated Statement of
Changes in Equity. The allowance for credit losses is increased
by the provision for credit losses and
decreased by
write-offs net of recoveries and disposals.
Acquired Performing Loans
Acquired performing loans are initially measured
at fair value, which considers incurred
and expected future credit losses estimated
at the acquisition date and
also reflects adjustments based on the acquired
loan’s interest rate in comparison to current
market rates. On acquisition, twelve-month
ECLs are recognized on
the acquired performing loans, resulting in
the carrying amount being lower than fair
value. Acquired performing loans are subsequently
accounted for at amortized
cost based on their contractual cash flows and
any acquisition related discount or premium,
including credit-related discounts, is
considered to be an adjustment to
the loan yield and is recognized in interest income
using EIRM over the term of the loan, or
the expected life of the loan for acquired
performing loans with
revolving terms.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 21
SHARE CAPITAL AND OTHER EQUITY INSTRUMENTS
The Bank classifies financial instruments
that it issues as either financial liabilities,
equity instruments, or compound instruments.
Issued instruments that are mandatorily redeemable
or convertible into a variable number of
the Bank’s common shares at the holder’s option
are classified as
liabilities on the Consolidated Balance Sheet.
Dividend or interest payments on these instruments
are recognized in Interest expense on the
Consolidated
Statement of Income.
Issued instruments are classified as
equity when there is no contractual obligation
to transfer cash or other financial assets
to redeem or convert these
instruments. Such instruments, if not
mandatorily redeemable or convertible into a
variable number of the Bank’s common shares at the
holder’s option, are
classified as equity on the Consolidated Balance
Sheet. Incremental costs directly attributable
to the issue of equity instruments are included
in equity as a
deduction from the proceeds, net of tax.
Dividends and distributions on these instruments
are recognized as a reduction in equity.
Compound instruments are comprised of
both liability and equity components in accordance
with the substance of the contractual
arrangement. The liability
component is initially measured at fair value
with any residual amount assigned to the equity
component. Issuance costs are allocated
proportionately to the
liability and equity components.
Common shares, preferred shares, and other
equity instruments issued and held by the Bank
are classified as treasury instruments
in equity, and the cost of
these instruments is recorded as a reduction in
equity. Upon the sale of treasury instruments, the difference between
the sale proceeds and the cost of the
instruments is recorded in or against contributed
surplus.
GUARANTEES
The Bank issues guarantee contracts that require
payments to be made to guaranteed parties
based on: (1) changes in the underlying
economic characteristics
relating to an asset or liability of the guaranteed
party; (2) failure of another party to perform
under an obligating agreement; or (3) failure of
another third party to
pay its indebtedness when due. Guarantees
are initially measured and recorded
at their fair value. The fair value of a
guarantee liability at initial recognition
is
normally equal to the present value of the guarantee
fees received over the life of the contract.
The Bank’s release from risk is recognized over
the term of the
guarantee using a systematic and rational amortization
method.
If a guarantee meets the definition of a derivative,
it is carried at fair value on the Consolidated
Balance Sheet and reported as a derivative asset
or derivative
liability at fair value. Guarantees that are
considered derivatives are over-the-counter
(OTC) credit derivative contracts designed
to transfer the credit risk in an
underlying financial instrument from one
counterparty to another.
DERIVATIVES
Derivatives are instruments that derive
their value from changes in underlying interest
rates, foreign exchange rates, credit spreads,
commodity prices, equities, or
other financial or non-financial measures.
Such instruments include interest rate, foreign
exchange, equity, commodity, and credit derivative contracts. The Bank
uses these instruments for trading and non-trading
purposes. Derivatives are carried at
their fair value on the Consolidated Balance
Sheet.
Derivatives Held for Trading Purposes
The Bank enters into trading derivative contracts
to meet the needs of its customers,
to provide liquidity and market-making
related activities, and in certain cases,
to manage risks related to its trading portfolios.
The realized and unrealized gains or losses
on trading derivatives are recognized
in trading income (loss).
Derivatives Held for Non-trading Purposes
Non-trading derivatives are primarily
used to manage interest rate, foreign exchange,
and other market risks of the Bank’s traditional banking
activities. When
derivatives are held for non-trading purposes
and when the transactions meet the hedge accounting
requirements of IAS 39,
Financial Instruments: Recognition
and Measurement
(IAS 39),
they are presented as non-trading derivatives
and receive hedge accounting treatment, as
appropriate. Certain derivative instruments
that are held for economic hedging purposes,
and do not meet the hedge accounting requirements
of IAS 39, are also presented as non-trading
derivatives with
the change in fair value of these derivatives recognized
in Non-interest income.
Hedging Relationships
Hedge Accounting
The Bank has an accounting policy choice
to apply the hedge accounting requirements
of IFRS 9,
Financial Instruments
(IFRS 9), or IAS 39. The Bank has
made
the decision to continue applying the IAS
39 hedge accounting requirements and complies
with the revised annual hedge accounting disclosures
as required by
the related amendments to IFRS 7,
Financial Instruments: Disclosures
(IFRS 7).
At the inception of a hedging relationship, there
is formal documentation of the relationship
between the hedging instrument and
the hedged item, its risk
management objective, and strategy for undertaking
the hedge. The Bank also requires a documented
assessment, both at hedge inception and
on an ongoing
basis, of whether or not the derivatives that
are used in hedging relationships are
highly effective in offsetting the changes attributable to
the hedged risks in the
fair values or cash flows of the hedged items.
In order to be considered highly effective, the
hedging instrument and the hedged item
must be highly and inversely
correlated such that the changes in the fair
value of the hedging instrument will substantially
offset the effects of the hedged exposure throughout
the term of the
hedging relationship. If a hedging relationship
becomes ineffective, it no longer qualifies
for hedge accounting and any subsequent change
in the fair value of the
hedging instrument is recognized in Non-interest
income on the Consolidated Statement
of Income.
Changes in fair value relating to the derivative
component excluded from the assessment
of hedge effectiveness are recognized in Net interest
income or Non-
interest income, as applicable, on the
Consolidated Statement of Income.
When derivatives are designated in hedge accounting
relationships, the Bank classifies them either
as: (1) hedges of the changes in
fair value of recognized
assets, liabilities or firm commitments (fair
value hedges); (2) hedges of the variability
in highly probable future cash flows
attributable to recognized assets,
liabilities or forecast transactions (cash
flow hedges); or (3) hedges of net investments
in foreign operations (net investment hedges).
Fair Value Hedges
The Bank’s fair value hedges principally consist of
interest rate swaps that are used to protect
against changes in the fair value of fixed-rate
financial instruments
due to movements in market interest rates.
The change in the fair value of the derivative
that is designated and qualifies as a fair value
hedge, as well as the change in the
fair value of the hedged item
attributable to the hedged risk, is recognized
in Net interest income to the extent that the hedging
relationship is effective. Any change in fair
value relating to the
ineffective portion of the hedging relationship
is recognized immediately in Non-interest income.
The cumulative adjustment to the carrying
amount of the hedged item (the basis adjustment)
is amortized to Net interest income on the
Consolidated Statement
of Income based on a recalculated EIR over
the remaining expected life of the hedged item,
with amortization beginning no later than
when the hedged item
ceases to be adjusted for changes in its fair
value attributable to the hedged risk. Where
the hedged item has been derecognized,
the basis adjustment is
immediately released to Net interest
income or Non-interest income, as applicable,
on the Consolidated Statement of Income.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 22
Cash Flow Hedges
The Bank is exposed to variability in
future cash flows attributable to interest rate,
foreign exchange rate, and equity price risks.
The amounts and timing of future
cash flows are projected for each hedged
exposure on the basis of their contractual
terms and other relevant factors, including estimates
of prepayments and
defaults.
The effective portion of the change in the fair value
of the derivative that is designated and qualifies
as a cash flow hedge is initially recognized in
other
comprehensive income. The change in fair
value of the derivative relating to the ineffective
portion is recognized immediately
in Non-interest income. Amounts
in
accumulated other comprehensive income
(AOCI) are reclassified to Net interest
income or Non-interest income, as applicable,
on the Consolidated Statement of
Income in the same period during which
the hedged item affects income.
When a hedging instrument expires or is sold,
or when a hedge no longer meets the
criteria for hedge accounting, any cumulative gain
or loss existing in AOCI
at that time remains in AOCI until the forecast
transaction impacts the Consolidated Statement
of Income. When a forecast transaction is no
longer expected to
occur, the cumulative gain or loss that was reported in AOCI
is immediately reclassified to Net interest
income or Non-interest income, as applicable,
on the
Consolidated Statement of Income.
Net Investment Hedges
Hedges of net investments in foreign operations
are accounted for similar to cash flow hedges.
The change in fair value on the hedging instrument
relating to the
effective portion is recognized in other comprehensive
income. The change in fair value of the
hedging instrument relating to the ineffective portion
is recognized
immediately in Non-interest income. Gains
and losses in AOCI are reclassified as
Non-interest income in the Consolidated
Statement of Income upon the disposal
or partial disposal of the investment in
the foreign operation. The Bank designates derivatives
and non-derivatives (such as foreign currency
deposit liabilities) as
hedging instruments in net investment hedges
of spot or forward exchange risk.
Embedded Derivatives
Derivatives may be embedded in financial liabilities
or other host contracts. Embedded derivatives
are treated as separate derivatives when
their economic
characteristics and risks are not closely
related to those of the host instrument,
a separate instrument with the same terms
as the embedded derivative would
meet
the definition of a derivative, and the combined
contract is not measured at fair value
with changes in fair value recognized in income,
such as held-for-trading or
designated at FVTPL.
These embedded derivatives, which are bifurcated
from the host contract, are recognized as
Derivatives on the Consolidated Balance Sheet
and measured at fair value with subsequent
changes in fair value recognized in
Non-interest income on the Consolidated Statement
of Income.
TRANSLATION AND PRESENTATION OF FOREIGN CURRENCIES
The Bank’s Consolidated Financial Statements
are
presented in Canadian dollars. Items included
in the financial statements of each of
the Bank’s entities are
measured using their functional currency, which is the currency
of the primary economic environment in
which they operate.
Monetary assets and liabilities denominated
in a currency that differs from an entity’s functional
currency are translated into the functional
currency of the entity
at exchange rates prevailing at the balance
sheet date. Non-monetary assets and liabilities
carried at cost are translated at historical
exchange rates. Non-
monetary assets and liabilities carried at
fair value are translated at the exchange
rate in effect at the balance sheet date. Revenue
and expenses are translated
into an entity’s functional currency at average
exchange rates for the period, except
for depreciation and amortization. Depreciation
and amortization are translated
at historical exchange rates. Translation gains and losses
are included in Non-interest income except
for equity investments designated at
FVOCI where
unrealized translation gains and losses are
recorded in other comprehensive income.
Foreign operations are those with a functional
currency other than Canadian dollars. For
the purpose of translation into the Bank’s presentation
currency, all
assets and liabilities are first measured in
the functional currency of the foreign operation
and subsequently, translated at exchange rates prevailing at
the balance
sheet date. Income and expenses are
translated at average exchange rates for
the period. Unrealized translation gains
and losses relating to these foreign
operations, net of gains or losses arising
from net investment hedges and applicable
income taxes, are included in other
comprehensive income. Translation gains
and losses in AOCI are recognized on
the Consolidated Statement of Income upon
the disposal or partial disposal of the foreign
operation. The investment
balance of foreign entities accounted for
by the equity method, including the Bank’s investment
in The Charles Schwab Corporation (“Schwab”)
prior to the sale, is
translated into Canadian dollars using exchange
rates prevailing at the balance sheet date
with exchange gains or losses recognized in
other comprehensive
income.
OFFSETTING OF FINANCIAL INSTRUMENTS
Financial assets and liabilities are offset, with
the net amount presented on the Consolidated
Balance Sheet, only if the Bank currently has
a legally enforceable
right to set off the recognized amounts, and intends
either to settle on a net basis or to realize
the asset and settle the liability simultaneously. In all other
situations,
assets and liabilities are presented on
a gross basis.
DETERMINATION OF FAIR VALUE
The fair value of a financial instrument on
initial recognition is normally the transaction
price, as evidenced by the fair value of the
consideration given or received.
The best evidence of fair value is quoted prices
in active markets. When there is no
active market for the instrument, the
fair value may be based on other
observable current market transactions
involving the same or similar instruments,
without modification or repackaging, or based
on a valuation technique which
maximizes the use of observable market
inputs.
When financial assets and liabilities have offsetting
market risks or credit risks, the Bank applies
a measurement exception, as described
in Note 5 under
Portfolio Exception
. The value determined from application
of the portfolio exception must be allocated
to the individual financial instruments
within the group to
arrive at the fair value of an individual financial
instrument. Balance sheet offsetting presentation
requirements, as described above under
the Offsetting of
Financial Instruments section of this Note, are
then applied, if applicable.
Valuation adjustments reflect the Bank’s assessment of factors that market participants
would use in pricing the asset or liability. The Bank recognizes
various
types of valuation adjustments including, but
not limited to, adjustments for bid-offer spreads,
adjustments for the unobservability of inputs
used in pricing models,
and adjustments for assumptions about risk,
such as the creditworthiness of either counterparty
and market implied unsecured funding
costs and benefits for OTC
derivatives.
If there is a difference between the initial transaction
price and the value based on a valuation
technique, the difference is referred to as inception
profit or loss.
Inception profit or loss is recognized
upon initial recognition of the instrument only
if the fair value is based on observable inputs.
When an instrument is measured
using a valuation technique that utilizes significant
non-observable inputs, it is initially valued at
the transaction price, which is considered
the best estimate of fair
value. Subsequent to initial recognition, any
difference between the transaction price and
the value determined by the valuation technique
at initial recognition is
recognized as non-observable inputs become
observable.
If the fair value of a financial asset measured
at fair value becomes negative, it is recognized
as a financial liability until either its fair
value becomes positive, at
which time it is recognized as a financial asset,
or until it is extinguished.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 23
DERECOGNITION OF FINANCIAL INSTRUMENTS
Financial Assets
The Bank derecognizes a financial asset
when the contractual rights to that asset have
expired. Derecognition may also be appropriate
where the contractual right
to receive future cash flows from the
asset have been transferred, or where
the Bank retains the rights to future cash
flows from the asset, but assumes an
obligation to pay those cash flows to a third party
subject to certain criteria.
When the Bank transfers a financial asset,
it is necessary to assess the extent
to which the Bank has retained the risks and rewards
of ownership of the
transferred asset. If substantially all the risks
and rewards of ownership of the financial
asset have been retained, the Bank continues
to recognize the financial
asset and also recognizes a financial liability
for the consideration received. Certain transaction
costs incurred are also capitalized and amortized
using EIRM. If
substantially all the risks and rewards of ownership
of the financial asset have been transferred,
the Bank will derecognize the financial asset
and recognize
separately as assets or liabilities any rights
and obligations created or retained in the
transfer. The Bank determines whether substantially all the risks
and rewards
have been transferred by quantitatively comparing
the variability in cash flows before and
after the transfer. If the variability in cash flows does not
change
significantly as a result of the transfer, the Bank has retained
substantially all of the risks and rewards of ownership.
If the Bank neither transfers nor retains
substantially all the risks and rewards of
ownership of the financial asset, the Bank
derecognizes the financial asset
where it has relinquished control of the financial
asset. The Bank is considered to have
relinquished control of the financial asset
where the transferee has the
practical ability to sell the transferred financial
asset. Where the Bank has retained control
of the financial asset, it continues to recognize
the financial asset to the
extent of its continuing involvement in
the financial asset. Under these circumstances,
the Bank usually retains the rights to future
cash flows relating to the asset
through a residual interest and is exposed
to some degree of risk associated with the
financial asset.
The derecognition criteria are also applied
to the transfer of part of an asset, rather
than the asset as a whole, or to a group of
similar financial assets in their
entirety, when applicable. If transferring a part of an asset, it
must be a specifically identified cash flow, a fully proportionate
share of the asset, or a fully
proportionate share of a specifically identified
cash flow.
Securitization
Securitization is the process by which
financial assets are transformed into
securities. The Bank securitizes financial
assets by transferring those financial assets
to a third party and as part of the securitization,
certain financial assets may be retained and
may consist of an interest-only strip and, in
some cases, a cash
reserve account (collectively referred to as
“retained interests”). If the transfer qualifies
for derecognition, a gain or loss on sale
of the financial assets is recognized
immediately in other income (loss) after considering
the effect of hedge accounting on the assets
sold, if applicable. The amount of the gain
or loss is calculated as
the difference between the carrying amount of the
asset transferred and the sum of any cash
proceeds received, the fair value of any financial
asset received or
financial liability assumed, and any cumulative
gain or loss allocated to the transferred
asset that had been recognized in AOCI.
To determine the value of the
retained interest initially recorded, the previous
carrying value of the transferred asset is allocated
between the amount derecognized from the balance
sheet and
the retained interest recorded, in proportion
to their relative fair values on the date of transfer. Subsequent
to initial recognition, as market prices are generally
not
available for retained interests, fair value
is determined by estimating the present
value of future expected cash flows using management’s
best estimates of key
assumptions that market participants would
use in determining such fair value. Refer
to Note 3 for assumptions used by management
in determining the fair value
of retained interests. Retained interest is classified
as trading securities with subsequent
changes in fair value recorded in trading income
(loss).
Where the Bank retains the servicing rights,
the benefits of servicing are assessed
against market expectations. When the benefits
of servicing are more than
adequate, a servicing asset is recognized.
Similarly, when the benefits of servicing are less than adequate,
a servicing liability is recognized. Servicing
assets and
servicing liabilities are initially recognized
at fair value and subsequently carried
at amortized cost.
Financial Liabilities
The Bank derecognizes a financial liability when
the obligation under the liability is discharged,
cancelled,
or expires. If an existing financial
liability is replaced by
another financial liability from the same lender
on substantially different terms or where
the terms of the existing liability are substantially
modified, the original
liability is derecognized and a new liability is
recognized with the difference in the respective
carrying amounts recognized on the Consolidated
Statement of
Income.
Securities Purchased Under Reverse
Repurchase Agreements, Securities Sold
Under Repurchase Agreements, and Securities
Borrowing and Lending
Securities purchased under reverse repurchase
agreements involve the purchase of
securities by the Bank under agreements
to resell the securities at a future
date. These agreements are treated as collateralized
lending transactions whereby the Bank
takes possession of the purchased securities, but
does not acquire
the risks and rewards of ownership. The Bank
monitors the market value of the purchased
securities relative to the amounts due under the
reverse repurchase
agreements, and when necessary, requires transfer of additional
collateral. In the event of counterparty default,
the agreements provide the Bank with the right
to
liquidate the collateral held and offset the proceeds
against the amount owing from the counterparty.
Obligations related to securities sold
under repurchase agreements involve the sale
of securities by the Bank to counterparties
under agreements to repurchase
the securities at a future date. These agreements
do not result in the risks and rewards of
ownership being relinquished and are treated
as collateralized borrowing
transactions. The Bank monitors the market
value of the securities sold relative to
the amounts due under the repurchase agreements,
and when necessary,
transfers additional collateral or may require
counterparties to return the collateral pledged.
Certain transactions that do not meet
derecognition criteria are also
included in obligations related to securities
sold under repurchase agreements. Refer to
Note 9 for further details.
Securities purchased under reverse repurchase
agreements and obligations related to
securities sold under repurchase agreements
are initially recorded on the
Consolidated Balance Sheet at the respective
prices at which the securities were originally
acquired or sold, plus accrued interest.
Subsequently, the agreements
are measured at amortized cost on the Consolidated
Balance Sheet, plus accrued interest, except
when they are held-for-trading or are designated
at FVTPL.
Interest earned on reverse repurchase agreements
and interest incurred on repurchase agreements
is determined using EIRM for agreements
measured at
amortized cost and recognized on an accrual
basis for agreements measured at fair value,
and is included in Interest income and Interest
expense, respectively,
on the Consolidated Statement of Income.
Changes in fair value on reverse repurchase
agreements and repurchase agreements
that are held-for-trading or are
designated at FVTPL are included in Trading income
(loss) or in Other income (loss) on the Consolidated
Statement of Income.
In securities lending transactions,
the Bank lends securities to a counterparty
and receives collateral in the form of
cash or securities. If cash collateral is
received, the Bank records the cash along
with an obligation to return the cash as Obligations
related to securities sold under repurchase
agreements on the
Consolidated Balance Sheet. Where securities
are received as collateral, the Bank does
not record the collateral on the Consolidated
Balance Sheet.
In securities borrowing transactions,
the Bank borrows securities from a counterparty
and pledges either cash or securities as
collateral. If cash is pledged as
collateral, the Bank records the transaction
as Securities purchased under reverse repurchase
agreements on the Consolidated Balance
Sheet. If securities are
pledged as collateral,
the securities remain on the Bank’s Consolidated
Balance Sheet.
Where securities are received or pledged as
collateral, securities lending income and
securities borrowing fees are recorded
in Non-interest income and Non-
interest expenses, respectively, on the Consolidated Statement of
Income over the term of the transaction.
Where cash is pledged or received as
collateral,
interest received or incurred is included in
Interest income and Interest expense, respectively, on the Consolidated
Statement of Income.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 24
Physical commodities purchased or sold
with an agreement to sell or repurchase the physical
commodities at a later date at a fixed price,
are also included in
securities purchased under reverse repurchase
agreements and obligations related to securities
sold under repurchase agreements, respectively, if the
derecognition criteria are not met. These
instruments are measured at fair value.
GOODWILL
Goodwill represents the excess purchase
price paid over the net fair value of identifiable
assets and liabilities acquired in a business
combination. Goodwill is
carried at its initial cost less accumulated impairment
losses.
Goodwill is allocated to a cash-generating
unit (CGU) or a group of CGUs that is
expected to benefit from the synergies of
the business combination, regardless
of whether any assets acquired and liabilities
assumed are assigned to the CGU or group
of CGUs. A CGU is the smallest identifiable group
of assets that
generates cash flows largely independent of
the cash inflows from other assets or groups
of assets. Each CGU or group of CGUs,
to which goodwill is allocated,
represents the lowest level within the Bank
at which the goodwill is monitored
for internal management purposes and is
not larger than an operating segment. If
the composition of a CGU or group of CGUs
to which goodwill has been allocated
changes as a result of the sale of a business,
restructuring or other changes, the
goodwill is reallocated to the units affected using a
relative value approach, unless the Bank
can demonstrate that some other method better
reflects the goodwill
associated with the units affected.
Goodwill is assessed for impairment at least
annually and when an event or change
in circumstances indicates that the carrying amount
may be impaired.
When impairment indicators are present,
the recoverable amount of the CGU or group
of CGUs, which is the higher of its
estimated fair value less costs of
disposal and its value-in-use, is determined.
If the carrying amount of the CGU or group
of CGUs is higher than its recoverable amount,
an impairment loss exists.
The impairment loss is recognized on the Consolidated
Statement of Income and cannot be reversed
in future periods.
INTANGIBLE ASSETS
Intangible assets represent identifiable non-monetary
assets and are acquired either separately
or through a business combination, or
internally generated
software. The Bank’s intangible assets consist primarily
of credit card related intangibles,
software intangibles,
and other intangibles. Intangible assets are
initially
recognized at cost, or at fair value if acquired
through a business combination, and are
amortized over their estimated useful lives
(
4
to
15
years) proportionate to
their expected economic benefits, except for
software which is amortized over its estimated
useful life (
3
to
7
years) on a straight-line basis. In respect of internally
generated software, development costs are
capitalized only if the costs can be measured
reliably, the asset is technically feasible, future economic benefits
are
probable, and the Bank intends to and has
sufficient resources to complete development
of the asset. Research costs are expensed
as incurred.
The Bank assesses its intangible assets
for impairment indicators on a quarterly basis.
When impairment indicators are present, the recoverable
amount of the
asset, which is the higher of its estimated
fair value less costs of disposal and its value-in-use,
is determined. If the carrying amount
of the asset is higher than its
recoverable amount, the asset is written down
to its recoverable amount. Where it is not possible
to estimate the recoverable amount of an individual
asset, the
Bank estimates the recoverable amount
of the CGU to which the asset belongs.
If the CGU is not impaired, the useful
life of the intangible asset is assessed with
any changes applied on a prospective basis.
An impairment loss is recognized on
the Consolidated Statement of Income in
the period in which the impairment is
identified. Impairment losses recognized
previously are assessed and reversed if
the circumstances leading to the impairment
are no longer present. Reversal of
any impairment loss will not exceed the
carrying amount of the intangible asset
that would have been determined had no
impairment loss been recognized for the
asset in prior periods.
LAND, BUILDINGS, EQUIPMENT, AND OTHER DEPRECIABLE ASSETS
Land is recognized at cost. Buildings, computer
equipment, furniture and fixtures, other equipment,
and leasehold improvements are recognized
at cost less
accumulated depreciation and provisions
for impairment, if any. Gains or losses on disposal are included in
Non-interest income on the Consolidated
Statement of
Income.
The Bank records the obligation associated
with the retirement of a long-lived asset
at fair value in the period in which it is incurred
and can be reasonably
estimated, and records a corresponding increase
to the carrying amount of the asset. The asset
is depreciated on a straight-line
basis over its remaining useful life
while the liability is accreted to reflect the passage
of time until the eventual settlement of the
obligation.
Depreciation is recognized on a straight-line
basis over the useful lives of the assets
estimated by asset category, as follows:
Asset
Useful Life
Buildings
15
to
40
years
Computer equipment
2
to
8
years
Furniture and fixtures
3
to
15
years
Other equipment
5
to
15
years
Leasehold improvements
Lesser of the remaining lease term and
the remaining useful life of the asset
The Bank assesses its depreciable assets
for changes in useful life or impairment
on a quarterly basis. Where an impairment
indicator exists and the depreciable
asset does not generate separate cash flows
on a stand-alone basis, impairment is assessed
based on the recoverable amount of the
CGU to which the
depreciable asset belongs. If the CGU is not
impaired, the useful life of the depreciable
asset is assessed with any changes applied
on a prospective basis. Any
impairment loss is recognized on the Consolidated
Statement of Income in the period in which
the impairment is identified. Impairment
losses previously
recognized are assessed and reversed if the
circumstances leading to their impairment
are no longer present. Reversal of any impairment
loss will not exceed the
carrying amount of the depreciable asset
that would have been determined had no impairment
loss been recognized for the asset in prior periods.
NON-CURRENT ASSETS HELD-FOR-SALE
Individual non-current assets or disposal groups
are classified as held-for-sale if they are
available for immediate sale in their present
condition subject only to
terms that are usual and customary for
sales of such assets or disposal groups, and
their sale must be highly probable to occur
within one year. For a sale to be
highly probable, management must be committed
to a sales plan and initiate an active program
to market the sale of the non-current assets
or disposal groups.
Non-current assets or disposal groups classified
as held-for-sale are measured at the lower
of their carrying amount and fair value
less costs to sell on the
Consolidated Balance Sheet. Write-downs on premises
related non-current assets and write-downs
on equipment on initial classification
as held-for-sale are
included in Non-interest expenses on the Consolidated
Statement of Income. Subsequently, a non-current asset or disposal
group that is held-for-sale is no longer
depreciated or amortized, and any subsequent
write-downs in fair value less costs to sell or
such increases not in excess of cumulative
write-downs, are
recognized in Other income on the Consolidated
Statement of Income.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 25
SHARE-BASED COMPENSATION
The Bank grants share options to certain
key employees as compensation for services
provided to the Bank. The Bank uses
a binomial tree-based valuation
option pricing model to estimate fair value
for all share option compensation awards.
The cost of the share options is based on the fair value estimated at the grant
date and is recognized as compensation expense and contributed surplus over the service period required for employees to become fully entitled to the awards.
This period is generally equal to the vesting period in addition to a period prior to the grant date. For the Bank’s share options, this period is generally equal to five
years. When options are exercised, the amount initially recognized in the contributed surplus balance is reduced, with a corresponding increase in common
shares.
The Bank has various other share-based
compensation plans where certain employees
of the Bank are awarded share units equivalent
to the Bank’s common
shares as compensation for services provided
to the Bank. The obligation related to share
units is included in other liabilities on the
Consolidated Balance Sheet.
Compensation expense is recognized based on
the fair value of the share units at the grant
date adjusted for changes in fair value
between the grant date and the
vesting date, net of hedging activities,
over the service period required for
employees to become fully entitled
to the awards. This period is generally
equal to the
vesting period,
in addition to a period prior to the grant
date. For the Bank’s share units, this period is
generally equal to four years.
EMPLOYEE BENEFITS
Defined Benefit Plans
Actuarial valuations are prepared at least
every three years to determine the present
value of the projected benefit obligation
related to the Bank’s defined benefit
plans. In periods between actuarial valuations,
an extrapolation is performed based
on the most recent valuation completed. All
remeasurement gains and losses
are recognized immediately in other comprehensive
income, with cumulative gains and losses
reclassified to retained earnings. Pension
and post-retirement
defined benefit plan expenses are determined
based upon separate actuarial valuations
using the projected benefit method pro-rated
on service and
management’s best estimates of discount rate,
compensation increases, health care
cost trend rate, and mortality rates, which are
reviewed annually with the
Bank’s actuaries. The discount rate used to value liabilities
is determined by reference to market
yields on high-quality corporate bonds with terms
matching the
plans’ specific cash flows
.
The expense recognized includes the cost of
benefits for employee service provided in
the current year, net interest expense or income
on the net defined benefit liability or asset, past
service costs related to plan amendments,
curtailments or settlements, and administrative
costs. Plan amendment
costs are recognized in the period of a plan amendment,
irrespective of its vested status. Curtailments
and settlements are recognized by the
Bank when the
curtailment or settlement occurs. A curtailment
occurs when there is a significant reduction
in the number of employees covered by
the plan. A settlement occurs
when the Bank enters into a transaction that
eliminates all further legal or constructive
obligation for part or all of the benefits
provided under a defined benefit plan.
The fair value of plan assets and the present
value of the projected benefit obligation are
measured as at October 31. The net defined
benefit asset or liability
represents the difference between the cumulative remeasurement
gains and losses, expenses,
and recognized contributions and is reported
in other assets or
other liabilities.
Net defined benefit assets recognized by
the Bank are subject to a ceiling which limits
the asset recognized on the Consolidated
Balance Sheet to the amount
that is recoverable through refunds of contributions
or future contribution holidays. In addition,
where a regulatory funding deficit exists related
to a defined benefit
plan, the Bank is required to record a liability
equal to the present value of all future
cash payments required to eliminate that
deficit.
Defined Contribution Plans
For defined contribution plans, annual pension
expense is equal to the Bank’s contributions
to those plans.
INSURANCE
Insurance contracts are aggregated into groups
which are measured at the risk-adjusted present
value of cash flows in fulfilling the contracts.
Insurance revenue is
recognized on the Consolidated Statement of
Income as insurance services are provided
over the coverage period of the contracts
within the groups. Insurance
service expenses are reported on the
Consolidated Statement of Income as insurance
claims and related expenses are recognized and
when contract groups are
expected to be onerous.
Contract groups are onerous if their fulfilment
cash flows are expected to result in a net outflow. The liabilities
from insurance groups are
comprised of the liability for remaining
coverage (LRC) and the liability for incurred
claims (LIC) and are reported as Insurance
contract liabilities on the
Consolidated Balance Sheet. The LRC is
the obligation to investigate and pay claims
that have not yet occurred and includes a loss
component related to onerous
contract groups. The LIC is the estimate
of claims incurred, including claims that
have occurred but have not been reported,
and related insurance costs.
The Bank measures its insurance contract
groups using one of two measurement models,
the premium allocation approach (PAA) or the general measurement
model (GMM). The majority of insurance
contract groups are measured using the PAA, which includes
the Bank’s property and casualty insurance contracts
and
short-term life and health insurance contracts.
The PAA is a simplified model applied to insurance contracts
that are either one year or less or where the PAA
approximates the GMM. Contracts using
the GMM are longer-term life and health
contracts.
The LRC for insurance contract groups using
the PAA is measured as the premiums received less insurance
acquisition cash flows paid. The LRC is adjusted
for the recognition of insurance revenue
and amortization of acquisition cash flows reported
in insurance service expenses on a straight-line
basis over the
contractual terms of the underlying insurance
contracts, usually twelve months. The
LRC for longer term contracts using the GMM
model is measured using
estimates and assumptions that reflect
the timing and uncertainty of insurance
cash flows. Under both the PAA and GMM, when a group of contracts
is expected
to be onerous, a loss component (expected
loss related to fulfilling the group’s insurance
contracts) is established which increases
the LRC and insurance service
expenses. The loss component of the LRC
is subsequently recognized as a reduction
to insurance service expenses over
the contractual term of the underlying
insurance contracts to offset claims incurred
and related expenses.
The Bank measures the LIC at the present
value of current estimates of claims and related
costs for insurable events occurring at or before
the Consolidated
Balance Sheet date. The LIC includes a risk
adjustment, which represents the compensation
the Bank requires for bearing the uncertainty
related to non-financial
risks in its fulfilment of insurance contracts.
Expenses related to claims incurred, including
claims arising from catastrophes, and related
costs are reported in
insurance service expenses while changes
related to discounting the liability are recorded
as insurance finance income or expenses in
other income (loss).
Estimates used in the measurement
of insurance contract liabilities are determined
in accordance with accepted actuarial practices.
Current estimates of claims
and related expenses are determined on a
case-by-case basis and consider such
variables as past loss experience, current
claims trends and changes in the
prevailing social, economic, and legal environment.
These estimates are continually reviewed,
and as experience develops and new information
becomes known,
the estimates are adjusted as necessary. In addition to reported
claims information, the Bank’s insurance
contract liabilities include a provision to
account for the
future development of insurance claims, including
insurance claims incurred but not reported
by policyholders (IBNR). IBNR liabilities are
evaluated based on
historical development trends and actuarial
methodologies for groups of claims
with similar attributes.
Reinsurance contracts held are recognized
and measured using the same principles
as insurance contracts. Reinsurance contract assets
are presented in
Other assets on the Consolidated Balance
Sheet and the net results from reinsurance
contracts held are presented in Other income
(loss) on the Consolidated
Statement of Income. Refer to Note 20 for further
detail on the balances and results of insurance
and reinsurance contracts.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 26
PROVISIONS & CONTINGENT LIABILITIES
Provisions are recognized when the Bank has
a present obligation (legal or constructive)
as a result of a past event, the amount of
which can be reliably estimated,
and it is probable that an outflow of resources
will be required to settle the obligation.
Provisions are measured based on management’s
best estimate of the consideration required
to settle the obligation at the end of the reporting
period, taking
into account the risks and uncertainties surrounding
the obligation. If the effect of the time value of
money is material, provisions are measured
at the present value
of the expenditure expected to be required
to settle the obligation, using a discount rate
that reflects
the current market assessment of the time
value of money and
the risks specific to the obligation.
Contingent liabilities exist when there is a possible
obligation which is yet to be confirmed
or a present obligation which has been confirmed
but the outflow of
future resources is not probable or is not
reliably measurable. Contingent liabilities
are not recorded in the Bank’s Consolidated
Financial Statements and are
disclosed if material unless there is a remote
chance that it will result in a future outflow
of resources to settle.
INCOME TAXES
Income tax is comprised of current and deferred
tax. Income tax is recognized in the Provision
for (recovery of) income taxes on the
Consolidated Statement of
Income, except to the extent that it relates to items
recognized in other comprehensive income or
directly in equity, in which case the related taxes are also
recognized in other comprehensive income
or directly in equity, respectively.
Deferred tax is recognized on temporary differences
between the carrying amounts of assets
and liabilities on the Consolidated Balance Sheet
and the amounts
attributed to such assets and liabilities for
tax purposes. Deferred tax assets and liabilities
are determined based on the tax rates
that are expected to apply when
the assets or liabilities are reported for
tax purposes. Deferred tax assets are recognized
only when it is probable that sufficient taxable
profit will be available in
future periods against which deductible
temporary differences may be utilized. Deferred
tax liabilities are not recognized on temporary
differences arising on
investments in subsidiaries, branches,
and associates, and interests in joint
ventures if the Bank controls the timing of
the reversal of the temporary difference and
it is probable that the temporary difference will not
reverse in the foreseeable future.
The Bank records a provision for uncertain
tax positions if it is probable that the Bank
will have to make a payment to tax authorities
upon their examination of a
tax position. This provision is measured
at the Bank’s best estimate of the amount expected
to be paid. Provisions are reversed in provision
for (recovery of)
income taxes in the period in which management
determines they are no longer required or
as determined by statute.
LEASES
An arrangement contains a lease if there is an
identified asset and the Bank has a right
to control that asset for a period of time in exchange
for consideration. A
right-of-use (ROU) asset and lease liability
is recognized for all leases except for
short-term leases and low value leases, as
described below. At the lease
commencement date, the lease liability is initially
recognized at the present value of the
future lease payments over the remaining lease
term and is discounted
using the Bank’s incremental borrowing rate.
The right-of-use asset is recognized
at cost, comprising an amount equal
to the lease liability, subject to certain
adjustments. Subsequently, the right-of-use asset is measured at
cost less accumulated depreciation and impairment
and adjusted for any remeasurement
of
lease liabilities, while the lease liability is accreted
using the Bank’s incremental borrowing rate.
The lease liability is remeasured when there is a
modification, a
change in the lease term, a change in the lease
payments (e.g., changes to future payments
resulting from a change in an index or rate used
to determine such
lease payments) or changes in the Bank’s assumptions
or strategies relating to the exercise
of purchase, extension, or termination options.
The Bank’s leases consist primarily of real estate,
equipment and other asset leases. Right-of-use
assets are recorded in Land, buildings,
equipment, other
depreciable assets and right-of-use assets
on the Consolidated Balance Sheet and
lease liabilities are included in Other liabilities
on the Consolidated Balance
Sheet. Interest expense on lease liabilities is
included in Net interest income and depreciation
expense on the right-of-use assets
is recognized in Non-interest
expenses on the Consolidated Statement
of Income.
Short-term leases, which have a lease term of
twelve months
or less, and leases of low-value assets
are exempt, and their payments are recognized
in Non-
interest expenses on a straight-line basis
within the Bank’s Consolidated Statement of
Income.
NOTE 3: SIGNIFICANT ACCOUNTING
JUDGMENTS, ESTIMATES, AND ASSUMPTIONS
The estimates used in the Bank’s accounting policies
are essential to understanding its results
of operations and financial condition. Some
of the Bank’s policies
require subjective, complex judgments and
estimates as they relate to matters
that are inherently uncertain. Changes in these judgments
or estimates and
changes to accounting standards and policies
could have a materially adverse impact
on the Bank’s Consolidated Financial Statements.
The Bank has established
procedures to ensure that accounting policies
are applied consistently and that the processes
for changing methodologies, determining
estimates,
and adopting
new accounting standards are well-controlled
and occur in an appropriate and systematic
manner.
CLASSIFICATION AND MEASUREMENT OF FINANCIAL ASSETS
Business Model Assessment
The Bank determines its business models
based on the objective under which its
portfolios of financial assets are managed.
Refer to Note 2 for details on the
Bank’s business models. In determining its
business models, the Bank considers
the following:
●
Management’s intent and strategic objectives
and the operation of the stated policies in practice;
●
The primary risks that affect the performance
of the portfolio of assets and how these risks
are managed;
●
How the performance of the portfolio is evaluated
and reported to management; and
●
The frequency and significance of financial
asset sales in prior periods, the reasons
for such sales and the expected future sales activities.
Sales in themselves do not determine the business
model and are not considered in isolation.
Instead, sales provide evidence about
how cash flows are realized.
A held-to-collect business model will be reassessed
by the Bank to determine whether
any sales are consistent with an objective
of collecting contractual cash
flows if the sales are more than insignificant
in value or more than infrequent.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 27
Solely Payments of Principal and Interest
Test
In assessing whether contractual cash flows
represent SPPI, the Bank considers the
contractual terms of the instrument. This
includes assessing whether the
financial asset contains contractual terms
that could change the timing or amount
of contractual cash flows such that
they would not be consistent with a basic
lending arrangement. In making the assessment,
the Bank considers the primary terms
as follows and assesses if the contractual
cash flows of the instrument
continue to meet the SPPI test:
●
Performance-linked features;
●
Terms that limit the Bank’s claim to cash flows
from specified assets (non-recourse terms);
●
Prepayment and extension terms;
●
Leverage features;
●
Features that modify elements of the time
value of money; and
●
Sustainability-linked features.
IMPAIRMENT OF FINANCIAL ASSETS
Significant Increase in Credit Risk
For retail exposures, criteria for assessing
significant increase in credit risk are
defined at the appropriate product or
portfolio level and vary based on the
exposure’s credit risk at origination. The criteria
include relative changes in PD, absolute
PD backstop, and delinquency backstop
when contractual payments are
more than 30 days past due. Significant increase
in credit risk since initial recognition
has occurred when one of the criteria is
met.
For non-retail exposures, BRR is determined
on an individual borrower basis using industry
and sector specific credit risk models that are
based on historical
data. Current and forward-looking information
that is specific to the borrower, industry, and sector is considered based on
expert credit judgment. Criteria for
assessing significant increase in credit risk
are defined at the appropriate segmentation
level and vary based on the BRR of the exposure
at origination. Criteria
include relative changes in BRR, absolute
BRR backstop, and delinquency backstop
when contractual payments are more than 30
days past due. Significant
increase in credit risk since initial recognition
has occurred when one of the criteria is
met.
Measurement of Expected Credit Loss
ECLs are recognized on the initial recognition
of financial assets. Allowance for credit losses
represents management’s unbiased estimate
of the risk of default and
ECLs on the financial assets, including any off-balance
sheet exposures, at the balance sheet date.
For retail exposures, ECLs are calculated as
the product of PD, loss given default (LGD),
and exposure at default (EAD) at each time
step over the remaining
expected life of the financial asset and discounted
to the reporting date based on the EIR. PD
estimates represent the forward-looking
PD, updated quarterly
based on the Bank’s historical experience, current
conditions, and relevant forward-looking expectations
over the expected life of the exposure
to determine the
lifetime PD curve. LGD estimates are determined
based on historical charge-off events and recovery
payments, current information about attributes
specific to the
borrower, and direct costs. Expected cash flows from
collateral, guarantees, and other credit enhancements
are incorporated in LGD if integral to the contractual
terms. Relevant macroeconomic variables
are incorporated in determining expected
LGD. EAD represents the expected balance
at default across the remaining
expected life of the exposure. EAD incorporates
forward-looking expectations about repayments
of drawn balances and future draws
where applicable.
For non-retail exposures, ECLs are calculated
based on the present value of cash shortfalls
determined as the difference between contractual
cash flows and
expected cash flows over the remaining expected
life of the financial instrument. Lifetime
PD is determined by mapping the exposure’s
BRR to forward-looking PD
over the expected life. LGD estimates are
determined by mapping the exposure’s facility
risk rating (FRR) to expected LGD which
takes into account facility-
specific characteristics such as collateral,
seniority ranking of debt, and loan structure.
Relevant macroeconomic variables are incorporated
in determining
expected PD and LGD. Expected cash flows
are determined by applying the PD and LGD
estimates to the contractual cash flows
to calculate cash shortfalls over
the expected life of the exposure.
Forward-Looking Information
In calculating ECLs, the Bank employs internally
developed models that utilize parameters
for PD, LGD, and EAD. Forward-looking
macroeconomic factors
including at the regional level are incorporated
in the risk parameters as relevant.
Additional risk factors that are industry or
segment specific are also incorporated,
where relevant. Forward-looking macroeconomic
forecasts are generated by TD Economics
as part of the ECL process: A base economic
forecast is accompanied
with upside and downside estimates of realistically
possible economic conditions by considering
the sources of uncertainty around the base
forecast. All
macroeconomic forecasts are updated quarterly
for each variable on a regional basis where
applicable and incorporated as relevant
into the quarterly modelling of
base, upside and downside risk parameters
used in the calculation of ECL scenarios and
probability-weighted ECLs. TD Economics
will apply judgment to
recommend probability weights to each forecast
on a quarterly basis. The proposed
macroeconomic forecasts and probability
weightings are subject to a robust
management review and challenge process
by a cross-functional committee that
includes representation from TD Economics,
Risk, Finance, and Business. ECLs
calculated under each of the three forecasts are
applied against the respective probability
weightings to determine the probability-weighted
ECLs. Refer to Note 8
for further details on the macroeconomic
variables and ECL sensitivity.
Expert Credit Judgment
Management’s expert credit judgment is used
to determine the best estimate for the qualitative
component contributing to ECLs, based on an assessment
of
business and economic conditions, historical
loss experience, loan portfolio composition,
and other relevant indicators and forward-looking
information that are not
fully incorporated into the model calculation.
There remains elevated economic uncertainty, and management continues
to exercise expert credit judgment in
assessing if an exposure has experienced
significant increase in credit risk since initial
recognition and in determining the amount
of ECLs at each reporting date. To the extent that certain effects are not
fully incorporated into the model calculations,
temporary quantitative and qualitative adjustments
have been applied, including for risks related
to elevated
uncertainty associated with policy and trade,
and such adjustments will be updated as appropriate
in future periods.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 28
LEASES
The Bank applies judgment in determining
the appropriate lease term on a lease-by-lease
basis. All facts and circumstances that
create an economic incentive to
exercise a renewal option or not to exercise
a termination option including investments
in major leaseholds, branch performance
and past business practice are
considered. The periods covered by renewal
or termination options are only included
in the lease term if it is reasonably certain
that the Bank will exercise the
options; management considers “reasonably
certain”
to be a high threshold. Changes in the economic
environment or changes in the industry
may impact the
Bank’s assessment of lease term, and any
changes in the Bank’s estimate of lease terms
may have a material impact on the Bank’s
Consolidated Balance Sheet
and Consolidated Statement of Income.
In determining the carrying amount of right-of-use
(ROU) assets and lease liabilities,
the Bank is required to estimate the incremental
borrowing rate specific to
each leased asset or portfolio of leased assets
if the interest rate implicit in the lease
is not readily determinable. The Bank determines
the incremental borrowing
rate of each leased asset or portfolio of leased
assets by incorporating the Bank’s creditworthiness,
the security, term, and value of the ROU asset, and the
economic environment in which the leased
asset operates. The incremental borrowing
rates are subject to change mainly due
to changes in the macroeconomic
environment.
FAIR VALUE MEASUREMENTS
The fair value of financial instruments traded
in active markets at the balance
sheet date is based on their quoted market
prices. For all other financial instruments
not traded in an active market, fair value may
be based on other observable current
market transactions involving the same
or similar instruments, without
modification or repackaging, or is based on
a valuation technique which maximizes
the use of observable market inputs. Observable
market inputs may include
interest rate yield curves, foreign exchange
rates, and option volatilities. Valuation techniques include comparisons
with similar instruments where observable
market prices exist, discounted cash flow
analysis, option pricing models, and
other valuation techniques commonly
used by market participants.
For certain complex or illiquid financial instruments,
fair value is determined using valuation
techniques in which current market transactions
or observable
market inputs are not available. Judgment is used
when determining which valuation techniques
to apply, liquidity considerations, and model inputs such as
volatilities, correlations, spreads, discount rates,
pre-payment rates, and prices of underlying
instruments. Any imprecision in these estimates
can affect the
resulting fair value.
Judgment is also used in recording valuation
adjustments to model fair values to account
for system limitations or measurement uncertainty, such as when
valuing complex and less actively traded
financial instruments. If the market for a
complex financial instrument develops,
the pricing for this instrument may
become more transparent, resulting in refinement
of valuation models.
An analysis of the fair value of financial instruments
and further details as to how they are
measured are provided in Note 5.
DERECOGNITION OF FINANCIAL ASSETS
Certain financial assets transferred may
qualify for derecognition from the Bank’s
Consolidated Balance Sheet. To qualify for derecognition, certain key
determinations must be made, including
whether the Bank’s rights to receive cash flows
from the financial asset have been retained
or transferred and the extent
to which the risks and rewards of ownership
of the financial assets have been retained
or transferred. If the Bank neither transfers nor
retains substantially all of
the risks and rewards of ownership of the
financial asset, a decision must be made
as to whether the Bank has retained control
of the financial asset.
Upon derecognition, the Bank will record a gain
or loss on sale of those assets which is
calculated as the difference between the carrying amount
of the asset
transferred and the sum of any cash proceeds
received, including any financial assets received
or financial liabilities assumed, and any
cumulative gains or losses
allocated to the transferred asset that had been
recognized in AOCI. In determining the
fair value of any financial assets received, the
Bank estimates future cash
flows by relying on estimates of the amount
of interest that will be collected on the
securitized assets, the yield to be paid to investors,
the portion of the securitized
assets that will be prepaid before their
scheduled maturity, ECLs, the cost of servicing the assets, and the
rate at which to discount these expected
future cash
flows. Actual cash flows may differ significantly
from those estimated by the Bank.
Retained interests are financial interests in
transferred assets retained by the Bank.
They are classified as trading securities and
are initially recognized at
relative fair value on the Bank’s Consolidated Balance
Sheet. Subsequently, the fair value of retained interests is
determined by estimating the present value
of
future expected cash flows. Differences between
the actual cash flows and the Bank’s estimated
future cash flows are recognized in trading income
(loss). These
assumptions are subject to periodic reviews
and may change due to significant changes
in the economic environment.
GOODWILL
The recoverable amount of the Bank’s CGUs
or groups of CGUs is determined from
internally developed valuation models
that consider various factors and
assumptions such as forecasted earnings, growth
rates, discount rates, and terminal
growth rates. Management is required
to use judgment in estimating the
recoverable amount of the CGUs or groups
of CGUs, and the use of different assumptions and
estimates in the calculations could influence
the determination of
the existence of impairment and the valuation
of goodwill. Management believes that the assumptions
and estimates used are reasonable and
supportable. Where
possible, assumptions generated internally
are compared to relevant market information.
The carrying amounts of the Bank’s CGUs or groups
of CGUs are
determined by management using risk-based
capital models to adjust net assets and liabilities
by CGU. These models consider various
factors including market
risk, credit risk, and operational risk,
including investment capital (comprised of
goodwill and other intangibles). Any capital
not directly attributable to the CGUs is
held within the Corporate segment. The Bank’s
capital oversight committees provide oversight
to the Bank’s capital allocation methodologies.
EMPLOYEE BENEFITS
The projected benefit obligation and expense
related to the Bank’s pension and post-retirement
defined benefit plans are determined using
multiple assumptions
that may significantly influence the value of
these amounts. Actuarial assumptions including
discount rates, compensation increases,
health care cost trend rates,
and mortality rates are management’s best estimates
and are reviewed annually with the Bank’s actuaries.
The Bank develops each assumption using
relevant
historical experience of the Bank in conjunction
with market-related data and considers
if the market-related data indicates
there is any prolonged or significant
impact on the assumptions. The discount
rate used to value the projected benefit
obligation is determined by reference
to market yields on high-quality corporate
bonds with terms matching the plans’ specific
cash flows. The other assumptions are also long-term
estimates. All assumptions are subject to
a degree of
uncertainty. Differences between actual experiences and the assumptions,
as well as changes in the assumptions
resulting from changes in future expectations,
result in remeasurement gains and losses
which are recognized in other comprehensive
income (OCI)
during the year and also impact expenses
in future periods.
INCOME TAXES
The Bank is subject to taxation in numerous
jurisdictions. There are many transactions
and calculations in the ordinary course of business
for which the ultimate
tax determination is uncertain. The Bank
maintains provisions for uncertain tax positions
that it believes appropriately reflect the risk of
tax positions under
discussion, audit, dispute, or appeal with
tax authorities, or which are otherwise
considered to involve uncertainty. These provisions are made using
the Bank’s
best estimate of the amount expected to be
paid based on an assessment of all relevant
factors, which are reviewed at the end of each
reporting period. However,
it is possible that at some future date, changes
in these liabilities could result from audits by
the relevant taxing authorities.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 29
Deferred tax assets are recognized only
when it is probable that sufficient taxable profit
will be available in future periods against which
deductible temporary
differences may be utilized. The amount of
the deferred tax asset recognized and considered
realizable could, however, be reduced if projected income is
not
achieved due to various factors, such as
unfavourable business conditions. If projected
income is not expected to be achieved, the
Bank would decrease its
deferred tax assets to the amount that it believes
can be realized. The magnitude of the decrease
is significantly influenced by the Bank’s forecast
of future profit
generation, which determines the extent to
which it will be able to utilize the deferred
tax assets.
PROVISIONS
Provisions arise when there is some uncertainty
in the timing or amount of a loss in the
future. Provisions are based on the Bank’s best estimate
of all
expenditures required to settle its present obligations,
considering all relevant risks and uncertainties,
as well as, when material, the effect of the time
value of
money.
Many of the Bank’s provisions relate to various
legal and regulatory actions that the Bank
is involved in during the ordinary course
of business. Legal and
regulatory provisions require the involvement
of both the Bank’s management and legal counsel
when assessing the probability of a loss and estimating
any
monetary impact. Throughout the life of a provision,
the Bank’s management or legal counsel
may learn of additional information that may impact
its assessments
about the probability of loss or about the estimates
of amounts involved. Changes in these assessments
may lead to changes in the amount recorded
for
provisions. In addition, the actual costs of resolving
these claims may be substantially higher
or lower than the amounts recognized.
The Bank reviews its legal and
regulatory provisions on a case-by-case basis
after considering, among other factors, the
progress of each case, the Bank’s experience,
the experience of others
in similar cases, and the opinions and views of
legal counsel.
Certain of the Bank’s provisions relate to restructuring
initiatives initiated by the Bank. Restructuring
provisions require management’s best estimate,
including
forecasts of economic conditions. Throughout
the life of a provision, the Bank may become
aware of additional information that may impact
the assessment of
amounts to be incurred. Changes in these assessments
may lead to changes in the amount recorded
for restructuring provisions.
INSURANCE
The assumptions used in establishing the Bank’s
insurance contract liabilities are based on best
estimates of possible outcomes.
For property and casualty insurance
contracts, the ultimate cost of LIC is
estimated using a range of standard actuarial
claims projection techniques by the
appointed actuary in accordance with
Canadian accepted actuarial practices. Additional
qualitative judgment is used to assess
the extent to which past trends may
or may not apply in the future, in order to arrive
at the estimated ultimate claims cost
amounts that present the most likely outcome
taking into account all the
uncertainties involved.
For life and health insurance contracts, insurance
contract liabilities consider all future policy
cash flows, including premiums, claims, and
expenses required to
administer the policies. Critical assumptions
used in the measurement of life and health
insurance contract liabilities are determined
by the appointed actuary.
Further information on insurance risk assumptions
is provided in Note 20.
CONSOLIDATION OF STRUCTURED ENTITIES
Management judgment is required when
assessing whether the Bank should consolidate
an entity. For instance, it may not be feasible to determine if the Bank
controls an entity solely through an assessment
of voting rights for certain structured entities.
In these cases, judgment is required
to establish whether the Bank
has decision-making power over the key
relevant activities of the entity and
whether the Bank has the ability to use that power
to absorb significant variable returns
from the entity. If it is determined that the Bank has both decision-making
power and significant variable returns
from the entity, judgment is also used to determine
whether any such power is exercised by
the Bank as principal, on its own behalf,
or as agent, on behalf of another counterparty.
Assessing whether the Bank has decision-making
power includes understanding the purpose
and design of the entity in order to determine
its key economic
activities. In this context, an entity’s key economic
activities are those which predominantly
impact the economic performance of the
entity. When the Bank has the
current ability to direct the entity’s key economic
activities, it is considered to have decision-making
power over the entity.
The Bank also evaluates its exposure
to the variable returns of a structured entity in
order to determine if it absorbs a significant
proportion of the variable
returns the entity is designed to create. As part
of this evaluation, the Bank considers the purpose
and design of the entity in order to determine
whether it absorbs
variable returns from the structured entity
through its contractual holdings, which
may take the form of securities issued by
the entity, derivatives with the entity, or
other arrangements such as guarantees, liquidity
facilities, or lending commitments.
If the Bank has decision-making power over
the entity and absorbs significant variable returns
from the entity, it then determines if it is acting as principal or
agent when exercising its decision-making power. Key factors
considered include the scope of its decision-making
power; the rights of other parties involved
with
the entity, including any rights to remove the Bank as decision-maker
or rights to participate in key decisions;
whether the rights of other parties are exercisable
in
practice; and the variable returns absorbed
by the Bank and by other parties involved
with the entity. When assessing consolidation, a presumption exists
that the
Bank exercises decision-making power as principal
if it is also exposed to significant variable
returns, unless an analysis of the
factors above indicates otherwise.
The decisions above are made with reference
to the specific facts and circumstances relevant
for the structured entity and related transaction(s)
under
consideration.
REVENUE FROM CONTRACTS WITH
CUSTOMERS
The Bank applies judgment to determine
the timing of satisfaction of performance
obligations which affects the timing of revenue recognition,
by evaluating the
pattern in which the Bank transfers control
of services promised to the customer. A performance obligation
is satisfied over time when the customer
simultaneously
receives and consumes the benefits as the
Bank performs the service. For performance
obligations satisfied over time, revenue is generally
recognized using the
time-elapsed method which is based on time
elapsed in proportion to the period over
which the service is provided, for example,
personal deposit account bundle
fees. The time-elapsed method is a faithful
depiction of the transfer of control
for these services as control is transferred
evenly to the customer when the Bank
provides a stand-ready service or effort is expended
evenly by the Bank to provide a service
over the contract period. In contracts
where the Bank has a right to
consideration from a customer in an amount
that corresponds directly with the value to
the customer of the Bank’s performance completed
to date, the Bank
recognizes revenue in the amount to which
it has a right to invoice.
The Bank satisfies a performance obligation
at a point in time if the customer obtains
control of the promised services at that date.
Determining when control is
transferred requires the use of judgment.
For transaction-based services, the Bank determines
that control is transferred to the customer
at a point in time when
the customer obtains substantially all of
the benefits from the service rendered
and the Bank has a present right to payment,
which generally coincides with the
moment the transaction is executed.
The Bank exercises judgment in determining
whether costs incurred in connection with acquiring
new revenue contracts would meet the requirement
to be
capitalized as incremental costs to obtain or
fulfil a contract with customers.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 30
NOTE 4: CURRENT AND FUTURE
CHANGES IN ACCOUNTING POLICIES
CURRENT CHANGES IN ACCOUNTING
POLICIES
There were no new accounting policies adopted
by the Bank for the fiscal year ended October
31, 2025.
FUTURE CHANGES IN ACCOUNTING
POLICIES
The following standard and amendments
have been issued but are not yet effective
on the date of issuance of the Bank’s Consolidated
Financial Statements.
Presentation and Disclosure in Financial
Statements
In April 2024, the IASB issued IFRS 18,
Presentation and Disclosure in Financial
Statements
(IFRS 18), which replaces the guidance
in IAS 1,
Presentation of
Financial Statements
and sets out requirements for presentation
and disclosure of information, focusing
on providing relevant information to users
of the financial
statements. IFRS 18 introduces changes
to the structure of the statement of profit
or loss, aggregation and disaggregation of
financial information, and
management-defined performance
measures to be disclosed in the notes to
the financial statements. It will be effective for the Bank’s annual
period beginning
November 1, 2027. Early application is permitted.
The standard will be applied retrospectively
with restatement of comparatives.
The Bank is currently assessing
the impact of adopting this standard.
Amendments to the Classification and Measurement
of Financial Instruments
In May 2024, the IASB issued
Amendments to the Classification
and Measurement of Financial Instruments,
which amended IFRS 9 and IFRS 7
.
The
amendments address matters identified during
the post-implementation review of the
classification and measurement requirements
of IFRS 9. The amendments
clarify how to assess the contractual
cash flow characteristics of financial assets
that include environmental, social, and governance
linked features and other
similar contingent features. The amendments
also clarify the treatment of non-recourse
assets and contractually linked instruments.
Furthermore, the amendments
clarify that a financial liability is derecognized
on the settlement date and provide an accounting
policy choice to derecognize a financial liability
settled using an
electronic payment system before the
settlement date if certain conditions are
met. Finally, the amendments introduce additional disclosure requirements
for
financial instruments with contingent
features and equity instruments classified at
FVOCI.
The amendments will be effective for the Bank’s annual
period beginning November 1, 2026. Early
adoption is permitted, with an option to early
adopt the
amendments related to the classification
of financial assets and associated disclosures
only. The Bank is required to apply the amendments retrospectively, but is
not required to restate prior periods. The Bank
is currently assessing the impact of adopting
these amendments.
NOTE 5: FAIR VALUE MEASUREMENTS
Certain assets and liabilities, primarily
financial instruments, are carried on
the balance sheet at their fair value on a recurring
basis. These financial instruments
include trading loans and securities, non-trading
financial assets at FVTPL, financial assets
and liabilities designated at FVTPL, financial
assets at FVOCI,
derivatives, certain securities purchased under
reverse repurchase agreements, trading
deposits, securitization liabilities at fair value,
obligations related to
securities sold short, and certain obligations
related to securities sold under repurchase
agreements. All other financial assets
and financial liabilities are carried at
amortized cost.
(a)
VALUATION GOVERNANCE
Valuation processes are guided by policies and procedures
that are approved by senior management
and subject matter experts. Senior Executive
oversight over
the valuation process is provided through various
valuation committees. Further, the Bank has a number of
additional controls in place, including an independent
price verification process to ensure the accuracy
of fair value measurements reported in
the financial statements. The sources used
for independent pricing comply
with the standards set out in the approved
valuation-related policies, which include
consideration of the reliability, relevancy, and timeliness of data.
(b)
METHODS AND ASSUMPTIONS
The Bank calculates fair value for measurement
and disclosure purposes based on the following
methods of valuation and assumptions:
Government and Government-Related Securities
The fair value of Canadian government debt
securities is determined by quoted prices in
active markets, reference to recent transaction
prices, or third-party
vendor prices. In cases where external and
independent prices are not readily available,
alternate techniques based on the risk
metrics and unique characteristics
of the security are utilized.
The fair value of Canadian residential mortgage-backed
securities (MBS) is based on third-party vendor
prices, reference to recent transaction prices,
or
valuation techniques that utilize observable
inputs such as benchmark government bond
prices, government bond yield curves, quoted
yield spreads and
prepayment rate assumptions related
to the underlying collateral.
The fair value of U.S. government and agency
debt securities is determined by reference
to recent transaction prices, broker quotes,
or third-party vendor
prices. For U.S. agency MBS pricing, brokers
or third-party vendors may use a pool-specific
valuation model to value these securities, using
observable market
inputs.
The fair value of other Organisation for Economic
Co-operation and Development (OECD)
government-guaranteed debt is based
on broker quotes and third-
party vendor prices, or where external and independent
prices are not readily available, alternate
techniques based on the risk metrics and unique
characteristics
of the security are utilized.
Other Debt Securities
The fair value of corporate and other debt
securities is based on broker quotes, third-party
vendor prices, or alternate techniques
utilizing the risk metrics and
unique characteristics of the security. Asset-backed securities are
primarily fair valued using third-party
vendor prices, including those generated by issue-specific
valuation models using observable market
inputs.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 31
Equity Securities
The fair value of equity securities is based
on quoted prices in active markets, where available.
Where quoted prices in active markets are not readily
available,
such as for private equity securities, or
where there is a wide bid-ask spread, fair
value is determined based on quoted
market prices for similar securities or
through valuation techniques, including discounted
cash flow analysis, multiples of earnings
before taxes, depreciation and amortization,
and other relevant
valuation techniques.
If there are trading restrictions on the equity
security held, a valuation adjustment is
recognized against available prices to reflect
the nature of the restriction.
However, restrictions that are not part of the security held
and represent a separate contractual arrangement
that has been entered into by the Bank and a third
party do not impact the fair value of the original
instrument.
The cost of Federal Reserve stock and
Federal Home Loan Bank (FHLB) stock
approximates fair value.
Retained Interests
Retained interests are classified as trading
securities and are initially recognized at their relative
fair market value. Subsequently, the fair value of retained interests
recognized by the Bank is determined by
estimating the present value of future expected
cash flows.
Differences between the actual cash flows and
the Bank’s
estimate of future cash flows are recognized
in income. These assumptions are subject
to periodic review and may change due
to significant changes in the
economic environment.
Loans
The estimated fair value of loans carried at amortized
cost reflects changes in market price that
have occurred since the loans were originated
or purchased.
Estimated fair value is determined by discounting
the expected future cash flows related
to these loans at current market interest rates
for loans with similar credit
risks. Changes in interest rates have
minimal impact on the fair value of floating-rate
loans since they reprice to the market
frequently, and therefore their carrying
value approximates their fair value. The
fair value of loans is not adjusted for the value
of any credit protection the Bank has purchased
to mitigate credit risk.
The fair value of loans carried at FVTPL,
which includes trading loans and non-trading
loans at FVTPL, is determined using observable
market prices, where
available. Where the Bank is a market maker
for loans traded in the secondary market,
fair value is determined using executed prices,
or prices for comparable
trades. For those loans where the Bank is
not a market maker, the Bank obtains broker quotes from other
reputable dealers, or uses valuation techniques
to
determine fair value.
The fair value of loans carried at FVOCI is assumed
to approximate amortized cost as they are
generally floating rate performing loans
that are short term in
nature.
Commodities
The fair value of commodities is based on quoted
prices in active markets, where available.
The Bank also transacts commodity derivative
contracts which can be
traded on an exchange or in OTC markets.
Derivative Financial Instruments
The fair value of exchange-traded derivative financial
instruments is based on quoted market prices.
The fair value of OTC derivative financial
instruments is
estimated using well established valuation
techniques, such as discounted cash flow
techniques, the Black-Scholes model,
and Monte Carlo simulation. The
valuation models incorporate inputs that are
observable in the market or can be derived
from observable market data.
Prices derived by using models are recognized
net of valuation adjustments. The inputs
used in the valuation models depend on
the type of derivative and the
nature of the underlying instrument and are
specific to the instrument being valued.
Inputs can include, but are not limited to, interest
rate yield curves, foreign
exchange rates, dividend yield projections,
commodity spot and forward prices, recovery
rates, volatilities, spot prices, and correlation.
A credit valuation adjustment (CVA) is recognized against the
model value of OTC derivatives to account
for the uncertainty that the counterparty in a derivative
transaction may not be able to fulfil its obligations
under the transaction to the Bank. In determining
CVA, the Bank takes into account master netting agreements
and collateral, and considers the creditworthiness
of the counterparty, using market observed or proxy credit
spreads, in assessing potential future amounts
owed
to the Bank.
The fair value of a derivative is partly a function
of collateralization. The Bank uses relevant
overnight borrowing curves to discount
the cash flows for
collateralized derivatives as most collateral
is posted in cash and can be funded at the
overnight rate.
A funding valuation adjustment (FVA) is recognized against the
model value of OTC derivatives to recognize
the market implied unsecured funding costs
and
benefits considered in the pricing and fair value
determination. Some of the key drivers
of FVA include the market implied funding spread and the expected
average exposure by counterparty.
The Bank will continue to monitor industry
practice on valuation adjustments and
may refine the methodology as market practices
evolve.
Deposits
The estimated fair value of term deposits is
determined by discounting the expected future
cash flows using interest rates currently offered
for deposits with similar
terms.
For deposits with no defined maturities,
the Bank considers fair value to equal carrying
value, which is equivalent to the amount payable
on the balance sheet
date.
For trading deposits and deposits designated
at FVTPL, which is included in financial liabilities
designated at FVTPL, fair value is determined
using discounted
cash flow valuation techniques which
maximize the use of observable market inputs
such as benchmark yield curves and foreign
exchange rates. The Bank
considers the impact of its own creditworthiness
in the valuation of these deposits by reference
to observable market inputs.
Securitization Liabilities
The fair value of securitization liabilities is based
on quoted market prices or quoted market
prices for similar financial instruments,
where available. Where quoted
prices are not available, fair value is determined
using valuation techniques, which maximize
the use of observable inputs, such as
Canada Mortgage Bond (CMB)
curves and MBS curves.
Obligations Related to Securities Sold
Short
The fair value of these obligations is based
on the fair value of the underlying securities,
which can include equity or debt securities.
As these obligations are fully
collateralized, the method used to determine
fair value would be the same as that of
the relevant underlying equity or debt securities.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 32
Securities Purchased Under Reverse
Repurchase Agreements and Obligations
Related to Securities Sold Under Repurchase
Agreements
Commodities and certain bonds and equities
purchased or sold with an agreement
to sell or repurchase them at a later
date at a fixed price are carried at fair
value. The fair value of these agreements
is based on valuation techniques such as discounted
cash flow models which maximize the use of observable
market
inputs such as interest rate swap curves
and commodity forward prices.
Subordinated Notes and Debentures
The fair value of subordinated notes and debentures
are based on quoted market prices.
Portfolio Exception
IFRS 13,
Fair Value Measurement
provides a measurement exception
that allows an entity to determine the fair
value of a group of financial assets and liabilities
with offsetting risks based on the sale or transfer
of its net exposure to a particular risk or
risks. The Bank manages certain financial
assets and financial liabilities,
such as derivative assets and derivative liabilities,
on the basis of net exposure to a particular risk,
or risks; and uses mid-market prices as a basis
for establishing
fair values for the offsetting risk positions and
applies the most representative price
within the bid-ask spread to the net open position,
as appropriate. Refer to
Note 2 for further details on the use of the portfolio
exception to establish fair value.
(c)
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES NOT CARRIED AT FAIR VALUE
The carrying value and fair value of financial
assets and liabilities not carried at fair
value are disclosed in the table below. For these instruments,
fair values are
calculated for disclosure purposes only, using the valuation techniques
used by the Bank. In addition, the Bank
has determined that the carrying value of
certain
financial assets and liabilities approximates
their fair value, which include: cash and
due from banks, interest-bearing deposits
with banks, amounts receivable
from brokers, dealers, and clients, other
assets, amounts payable to brokers, dealers,
and clients, and other liabilities. Substantially
all securities purchased under
reverse repurchase agreements and obligations
related to securities sold under repurchase
agreements are measured at amortized cost
where the carrying value
approximates their fair value.
Financial Assets and Liabilities not carried
at Fair Value
1
(millions of Canadian dollars)
As at
October 31, 2025
October 31, 2024
Carrying
Fair
Carrying
Fair
value
value
value
value
FINANCIAL ASSETS
Debt securities at amortized cost, net of allowance
for credit losses
Government and government-related
securities
$
183,593
$
182,478
$
206,815
$
202,667
Other debt securities
56,846
56,679
64,800
63,509
Total debt securities at amortized cost, net of allowance for credit losses
240,439
239,157
271,615
266,176
Total loans, net of allowance for loan losses
953,012
956,424
949,549
949,227
Total financial assets not carried at fair value
$
1,193,451
$
1,195,581
$
1,221,164
$
1,215,403
FINANCIAL LIABILITIES
Deposits
$
1,267,104
$
1,267,466
$
1,268,680
$
1,266,562
Securitization liabilities at amortized
cost
14,841
14,805
12,365
12,123
Subordinated notes and debentures
10,733
10,929
11,473
11,628
Total financial liabilities not carried at fair value
$
1,292,678
$
1,293,200
$
1,292,518
$
1,290,313
1
This table excludes financial assets and liabilities where the carrying value approximates their fair value.
(d)
FAIR VALUE HIERARCHY
IFRS requires disclosure of a three-level hierarchy
for fair value measurements based upon
the observability of inputs to the valuation of
an asset or liability as of
the measurement date. The three levels are
defined as follows:
Level 1
: Fair value is based on quoted market prices
for identical assets or liabilities that are
traded in an active exchange market
or highly liquid and actively
traded in OTC markets.
Level 2
: Fair value is based on observable inputs other
than Level 1 prices, such as quoted
market prices for similar (but not identical) assets
or liabilities in active
markets, quoted market prices for identical
assets or liabilities in markets that are
not active, and other inputs that are observable
or can be corroborated by
observable market data for substantially the
full term of the assets or liabilities. Level
2 assets and liabilities include debt securities
with quoted prices that are
traded less frequently than exchange-traded
instruments and derivative contracts
whose value is determined using valuation
techniques with inputs that are
observable in the market or can be derived
principally from or corroborated by observable
market data.
Level 3
: Fair value is based on non-observable inputs
that are supported by little or no market
activity and that are significant to the
fair value of the assets or
liabilities. Financial instruments classified
within Level 3 of the fair value hierarchy are
initially recognized at their transaction price,
which is considered the best
estimate of fair value. After initial measurement,
the fair value of Level 3 assets and liabilities
is determined using valuation models, discounted
cash flow
methodologies, or similar techniques.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 33
Fair Value Hierarchy for Assets and Liabilities not carried
at Fair Value
The following table presents the levels within
the fair value hierarchy for each of the
financial assets and liabilities not carried at fair
value as at October 31, 2025
and October 31, 2024, but for which fair
value is disclosed.
Fair Value Hierarchy for Assets and
Liabilities not carried at Fair Value
1
(millions of Canadian dollars)
As at
October 31, 2025
October 31, 2024
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
ASSETS
Debt securities at amortized cost, net of allowance for
credit losses
Government and government-related securities
$
–
$
182,478
$
–
$
182,478
$
–
$
202,667
$
–
$
202,667
Other debt securities
–
56,679
–
56,679
–
63,509
–
63,509
Total debt securities
at amortized cost, net of allowance
for credit losses
–
239,157
–
239,157
–
266,176
–
266,176
Total loans, net
of allowance for loan losses
–
280,842
675,582
956,424
–
285,070
664,157
949,227
Total assets with
fair value disclosures
$
–
$
519,999
$
675,582
$
1,195,581
$
–
$
551,246
$
664,157
$
1,215,403
LIABILITIES
Deposits
$
–
$
1,267,466
$
–
$
1,267,466
$
–
$
1,266,562
$
–
$
1,266,562
Securitization liabilities at amortized cost
–
14,805
–
14,805
–
12,123
–
12,123
Subordinated notes and debentures
–
10,929
–
10,929
–
11,628
–
11,628
Total liabilities with
fair value disclosures
$
–
$
1,293,200
$
–
$
1,293,200
$
–
$
1,290,313
$
–
$
1,290,313
1
This table excludes financial assets and liabilities where the carrying value approximates their fair value.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 34
The following table presents
the levels
within the fair value hierarchy for each
of the assets and liabilities measured
at fair value on a recurring basis as at
October 31, 2025
and October 31, 2024.
Fair Value Hierarchy for Assets and
Liabilities Measured at Fair Value
on a Recurring Basis
(millions of Canadian dollars)
As at
October 31, 2025
October 31, 2024
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
FINANCIAL ASSETS AND COMMODITIES
Trading loans, securities, and other
1
Government and government-related securities
Canadian government debt
Federal
$
4,892
$
3,875
$
–
$
8,767
$
691
$
9,551
$
–
$
10,242
Provinces
–
4,537
–
4,537
–
6,398
–
6,398
U.S. federal, state, municipal governments,
and agencies debt
2,973
20,811
–
23,784
–
18,861
–
18,861
Other OECD government-guaranteed debt
283
5,818
–
6,101
–
9,722
–
9,722
Mortgage-backed securities
–
768
–
768
–
1,352
–
1,352
Other debt securities
Canadian issuers
–
6,695
67
6,762
–
6,611
12
6,623
Other issuers
–
16,508
–
16,508
–
15,845
14
15,859
Equity securities
87,713
171
25
87,909
68,682
34
12
68,728
Trading loans
–
30,032
–
30,032
–
23,518
–
23,518
Commodities
33,446
1,521
–
34,967
13,504
962
–
14,466
Retained interests
–
1
–
1
–
1
–
1
129,307
90,737
92
220,136
82,877
92,855
38
175,770
Non-trading financial assets at fair value through
profit or loss
Securities
465
5,019
1,567
7,051
391
1,188
1,233
2,812
Loans
–
344
–
344
–
3,057
–
3,057
465
5,363
1,567
7,395
391
4,245
1,233
5,869
Derivatives
Interest rate contracts
6
10,990
8
11,004
2
15,440
–
15,442
Foreign exchange contracts
30
53,576
3
53,609
47
51,001
13
51,061
Credit contracts
–
44
–
44
–
6
–
6
Equity contracts
162
12,534
–
12,696
64
6,167
–
6,231
Commodity and other contracts
752
4,867
–
5,619
548
4,756
17
5,321
950
82,011
11
82,972
661
77,370
30
78,061
Financial assets designated at
fair value through profit or loss
Securities
1
–
6,986
–
6,986
–
6,417
–
6,417
–
6,986
–
6,986
–
6,417
–
6,417
Financial assets at fair value through other
comprehensive income
Government and government-related securities
Canadian government debt
Federal
100
15,791
–
15,891
–
18,139
–
18,139
Provinces
–
21,080
–
21,080
–
21,270
–
21,270
U.S. federal, state, municipal governments,
and agencies debt
851
53,641
–
54,492
–
35,197
–
35,197
Other OECD government-guaranteed debt
–
7,875
–
7,875
–
1,679
–
1,679
Mortgage-backed securities
–
1,896
–
1,896
–
2,137
–
2,137
Other debt securities
Asset-backed securities
–
8,709
–
8,709
–
1,384
–
1,384
Corporate and other debt
–
13,091
–
13,091
–
9,439
7
9,446
Equity securities
1,136
–
1,911
3,047
1,058
2
3,355
4,415
Loans
–
288
–
288
–
230
–
230
2,087
122,371
1,911
126,369
1,058
89,477
3,362
93,897
Securities purchased under reverse
repurchase agreements
–
7,574
–
7,574
–
10,488
–
10,488
FINANCIAL LIABILITIES
Trading deposits
–
37,609
273
37,882
–
29,907
505
30,412
Derivatives
Interest rate contracts
6
9,572
76
9,654
3
13,283
158
13,444
Foreign exchange contracts
24
42,496
5
42,525
30
40,936
12
40,978
Credit contracts
–
440
–
440
–
403
–
403
Equity contracts
–
19,528
155
19,683
–
7,974
24
7,998
Commodity and other contracts
806
6,193
55
7,054
673
4,845
27
5,545
836
78,229
291
79,356
706
67,441
221
68,368
Securitization liabilities at fair value
–
25,283
–
25,283
–
20,319
–
20,319
Financial liabilities designated
at fair value through profit or loss
–
197,633
2
197,635
–
207,890
24
207,914
Obligations related to securities sold short
1
15,342
28,453
–
43,795
1,783
37,732
–
39,515
Obligations related to securities sold
under repurchase agreements
–
11,557
–
11,557
–
9,736
–
9,736
1
Balances reflect the reduction of securities owned (long positions) by the amount of identical securities sold but
not yet purchased (short positions).
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 35
(e)
TRANSFERS BETWEEN FAIR VALUE HIERARCHY LEVELS FOR ASSETS
AND LIABILITIES MEASURED AT FAIR VALUE ON A RECURRING BASIS
The Bank’s policy is to record transfers of assets
and liabilities between the different levels of
the fair value hierarchy using the fair values as
at the end of each
reporting period. Assets and liabilities are
transferred between Level 1 and Level 2
depending on whether there is sufficient frequency
and volume in an active
market.
During the year ended October 31, 2025,
the Bank transferred $
810
million of trading loans, securities, and other, and $
561
million of obligations related to
securities sold short from Level 2 to Level 1.
During the year ended October 31, 2025, there
were no significant transfers from Level 1
to Level 2. There were no
significant transfers between Level 1 and Level
2 during the year ended October
31, 2024.
Movements of Level 3 instruments
Significant transfers into and out of Level 3 occur
mainly due to the following reasons:
●
Transfers from Level 3 to Level 2 occur when techniques
used for valuing the instrument incorporate
significant observable market inputs or broker-dealer
quotes which were previously not observable.
●
Transfers from Level 2 to Level 3 occur when an instrument’s
fair value, which was previously determined
using valuation techniques with significant
observable
market inputs, is now determined using
valuation techniques with significant unobservable
inputs.
Due to the unobservable nature of the inputs
used to value Level 3 financial instruments,
there may be uncertainty about the valuation
of these instruments. The
fair value of Level 3 instruments may be drawn
from a range of reasonably possible alternatives.
In determining the appropriate levels for these
unobservable
inputs, parameters are chosen so that they
are consistent with prevailing market evidence
and management judgment.
There were no significant transfers between
Level 2 and Level 3 during the years ended
October 31, 2025 and October 31, 2024.
There were no other significant changes to
the unobservable inputs and sensitivities
for assets and liabilities classified as Level
3 during the years ended
October 31, 2025
and October 31, 2024.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 36
(f)
RECONCILIATION OF CHANGES IN FAIR VALUE FOR LEVEL 3 ASSETS AND LIABILITIES
The following tables set out changes in fair
value of all assets and liabilities measured
at fair value using significant Level 3 unobservable
inputs for the years
ended October 31, 2025
and October 31, 2024.
Reconciliation of Changes in Fair Value for Level 3 Assets and Liabilities
(millions of Canadian dollars)
Change in
unrealized
Fair
Total realized and
Fair
gains
value as at
unrealized gains (losses)
Movements
1
Transfers
value as at
(losses) on
November 1
Included
Included
Purchases/
Sales/
Into
Out of
October 31
instruments
2024
in income
2
in OCI
3,4
Issuances
Settlements
Level 3
Level 3
2025
still held
5
FINANCIAL ASSETS
Trading loans, securities,
and other
Government and government-related
securities
$
–
$
–
$
–
$
–
$
–
$
–
$
–
$
–
$
–
Other debt securities
26
(1)
–
–
(26)
70
(2)
67
(2)
Equity securities
12
1
–
21
(9)
–
–
25
–
38
–
–
21
(35)
70
(2)
92
(2)
Non-trading financial assets at
fair value through profit or loss
Securities
1,233
33
–
385
(74)
–
(10)
1,567
(5)
1,233
33
–
385
(74)
–
(10)
1,567
(5)
Financial assets at fair value
through other comprehensive
income
Other debt securities
7
–
–
–
(7)
–
–
–
–
Equity securities
3,355
3
15
13
(1,472)
–
(3)
1,911
13
$
3,362
$
3
$
15
$
13
$
(1,479)
$
–
$
(3)
$
1,911
$
13
FINANCIAL LIABILITIES
Trading deposits
6
$
(505)
$
33
$
–
$
(191)
$
350
$
–
$
40
$
(273)
$
32
Derivatives
7
Interest rate contracts
(158)
80
–
–
10
–
–
(68)
83
Foreign exchange contracts
1
(18)
–
–
4
8
3
(2)
(3)
Equity contracts
(24)
(108)
–
–
(24)
(2)
3
(155)
(108)
Commodity and other contracts
(10)
(45)
–
–
–
–
–
(55)
(48)
(191)
(91)
–
–
(10)
6
6
(280)
(76)
Financial liabilities designated
at fair value through profit or loss
(24)
10
–
(24)
36
–
–
(2)
1
Change in
unrealized
Fair
Total realized and
Fair
gains
value as at
unrealized gains (losses)
Movements
1
Transfers
value as at
(losses) on
November 1
Included
Included
Purchases/
Sales/
Into
Out of
October 31
instruments
2023
in income
2
in OCI
3,4
Issuances
Settlements
Level 3
Level 3
2024
still held
5
FINANCIAL ASSETS
Trading loans, securities,
and other
Government and government-related
securities
$
67
$
–
$
–
$
–
$
(67)
$
–
$
–
$
–
$
–
Other debt securities
65
1
–
91
(88)
33
(76)
26
–
Equity securities
10
(1)
–
11
(8)
–
–
12
–
142
–
–
102
(163)
33
(76)
38
–
Non-trading financial assets at
fair value through profit or loss
Securities
980
98
–
232
(76)
–
(1)
1,233
80
980
98
–
232
(76)
–
(1)
1,233
80
Financial assets at fair value
through other comprehensive
income
Other debt securities
27
–
(3)
3
(20)
–
–
7
–
Equity securities
2,377
–
(7)
1,171
(205)
19
–
3,355
3
$
2,404
$
–
$
(10)
$
1,174
$
(225)
$
19
$
–
$
3,362
$
3
FINANCIAL LIABILITIES
Trading deposits
6
$
(985)
$
(13)
$
–
$
(122)
$
540
$
–
$
75
$
(505)
$
(6)
Derivatives
7
Interest rate contracts
(126)
(70)
–
–
38
–
–
(158)
(34)
Foreign exchange contracts
(6)
14
–
–
2
(14)
5
1
4
Equity contracts
(21)
(5)
–
–
(2)
3
1
(24)
(6)
Commodity and other contracts
(1)
(5)
–
–
(4)
–
–
(10)
(9)
(154)
(66)
–
–
34
(11)
6
(191)
(45)
Financial liabilities designated
at fair value through profit or loss
(22)
127
–
(260)
131
–
–
(24)
127
1
Includes foreign exchange.
2
Gains/losses on financial assets and liabilities are recognized within Non-interest income on the Consolidated Statement
of Income.
3
Other comprehensive income.
4
Includes realized gains/losses transferred to retained earnings on disposal of equities designated at FVOCI. Refer
to Note 7 for further details.
5
Changes in unrealized gains/losses on financial assets at FVOCI are recognized in AOCI.
6
Issuances and repurchases of trading deposits are reported on a gross basis.
7
Consists of derivative assets of $
11
million (October 31, 2024/November 1, 2024 – $
30
million; November 1, 2023 – $
22
million) and derivative liabilities of $
291
million
(October 31, 2024/November 1, 2024 – $
221
million; November 1, 2023 – $
176
million), which have been netted in this table for presentation purposes only.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 37
(g)
VALUATION OF ASSETS AND LIABILITIES CLASSIFIED AS LEVEL 3
Significant unobservable inputs in Level
3 positions
The following section discusses the significant
unobservable inputs for Level 3 positions
and assesses the potential effect that a change
in each unobservable
input may have on the fair value measurement.
Price Equivalent
Certain financial instruments, mainly
debt and equity securities, are valued using price
equivalents when market prices are
not available,
with fair value measured
by comparison with observable pricing data
from instruments with similar characteristics.
For debt securities, the price equivalent is
expressed in ‘basis points’, and
represents a percentage of the par amount.
For equity securities, the price equivalent
is based on a percentage of a proxy price.
There may be wide ranges
depending on the liquidity of the securities.
New issuances of debt and equity securities
are priced at 100% of the issue price.
Correlation
The movements of inputs are not necessarily
independent from other inputs. Such relationships,
where material to the fair value of a given instrument,
are
captured via correlation inputs into the pricing
models. The Bank includes correlation
between the asset class,
as well as across asset classes. For
example, price
correlation is the relationship between prices
of equity securities in equity basket
derivatives, and quanto correlation is the relationship
between instruments which
settle in one currency and the underlying
securities which are denominated in another
currency.
Implied Volatility
Implied volatility is the value of the volatility
of the underlying instrument which, when
input in an option pricing model, such as Black-Scholes,
will return a
theoretical value equal to the current
market price of the option. Implied volatility
is a forward-looking and subjective measure,
and differs from historical volatility
because the latter is calculated from known
past returns of a security.
Funding Ratio
The funding ratio is a significant unobservable
input required to value loan commitments issued
by the Bank. The funding ratio represents
an estimate of the
percentage of commitments that are ultimately
funded by the Bank. The funding ratio is
based on a number of factors such as observed
historical funding
percentages within the various lending channels
and the future economic outlook, considering
factors including, but not limited to, competitive
pricing and
fixed/variable mortgage rate gap. An increase/decrease
in the funding ratio will increase/decrease
loan commitment liability values in relationship
to prevailing
interest rates.
Earnings Multiple, Discount Rate, and Liquidity
Discount
Earnings multiple, discount rate, and liquidity
discount are significant inputs used when
valuing certain equity securities. Earnings multiples
are selected based on
comparable entities and a higher multiple
will result in a higher fair value. Discount
rates are applied to cash flow forecasts to reflect
time value of money and the
risks associated with the cash flows.
A higher discount rate will result in a lower
fair value. Liquidity discounts may be applied
as a result of the difference in
liquidity between the comparable entity and
the equity securities being valued.
Inflation Rate Swap Curve
Inflation rate swap contracts valuation reflects
spread between interest rate curves and
the inflation rates. The inflation rates are not
observable and are
determined using proxy inputs such as inflation
indices (e.g., Consumer Price Index).
Net Asset Value
The fair value of certain private funds is based
on the net asset value determined by the
fund managers based on valuation methodologies,
as there are no
observable prices for these instruments.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 38
Valuation techniques and inputs used in the fair value measurement
of Level 3 assets and liabilities
The following table presents
the Bank’s assets and liabilities recognized
at fair value and classified as Level 3, together
with the valuation techniques used to
measure fair value, the significant inputs
used in the valuation technique that are considered
unobservable,
and a range of values for those unobservable
inputs.
The range of values represents
the highest and lowest inputs
used in calculating the fair value.
Valuation Techniques and Inputs
Used in the Fair Value Measurement of Level 3 Assets and Liabilities
As at
October 31, 2025
October 31, 2024
Significant
Valuation
unobservable
Lower
Upper
Lower
Upper
technique
inputs (Level 3)
range
range
range
range
Unit
Other debt securities
Market comparable
Bond price equivalent
–
108
–
102
points
Equity securities
1
Market comparable
New issue price
100
100
100
100
%
Non-trading financial assets
at fair value through profit or loss
Market comparable
New issue price
100
100
100
100
%
Discounted cash flow
Discount rates
11
11
9
9
%
EBITDA multiple
Earnings multiple
n/a
2
n/a
–
20.0
times
Price-based
Net Asset Value
3
n/a
n/a
n/a
n/a
Derivatives
Interest rate contracts
Discounted cash flow
Inflation rate swap curve
n/a
n/a
2
2
%
Option model
Funding ratio
n/a
n/a
75
75
%
Swaption Model
Currency-specific volatility
46
277
56
319
%
Foreign exchange contracts
Option model
Currency-specific volatility
3
26
5
26
%
Equity contracts
Option model
Price correlation
29
81
16
67
%
Dividend yield
–
8
2
7
%
Equity volatility
12
111
13
27
%
Commodity and other contracts
Option model
Quanto correlation
(67)
(47)
(67)
(47)
%
Market comparable
Price equivalent
90
95
n/a
n/a
points
Trading deposits
Swaption model
Currency-specific volatility
46
277
53
319
%
Financial liabilities designated
at fair value through profit or loss
Option model
Funding ratio
56
66
2
70
%
1
Equity securities exclude the fair value of Federal Reserve stock and FHLB stock of $
1.7
billion (October 31, 2024 – $
3.2
billion) which are redeemable by the issuer at cost which
approximates fair value. These securities cannot be traded in the market, hence, these securities have not been
subjected to the sensitivity analysis.
2
Not applicable.
3
Net asset value information for private funds has not been disclosed due to the wide range in prices for these instruments.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 39
The following table summarizes the potential
effect of using reasonably possible alternative
assumptions for financial assets and
financial liabilities held, that are
classified in Level 3 of the fair value hierarchy
as at October 31, 2025 and October 31, 2024.
For trading securities, non-trading securities
at FVTPL and equity
securities at FVOCI, the sensitivity was
calculated based on an upward and downward
shock of the fair value reported. For interest rate
derivatives, the Bank
performed a sensitivity analysis on the mortgage
spreads and unobservable inflation curve.
For equity derivatives, the sensitivity was
calculated based on an
upward and downward shock of fair value.
For financial liabilities designated at FVTPL,
the sensitivity was calculated based on an
upward and downward shock of
the funding ratio.
Sensitivity Analysis of Level 3 Financial
Assets and Liabilities
(millions of Canadian dollars)
As at
October 31, 2025
October 31, 2024
Impact to net assets
Impact to net assets
Decrease in
Increase in
Decrease in
Increase in
fair value
fair value
fair value
fair value
FINANCIAL ASSETS
Trading loans, securities, and other
Securities
$
5
$
1
$
3
$
1
Non-trading financial assets at fair
value through profit or loss
Securities
189
63
155
39
Financial assets at fair value through other
comprehensive income
Equity securities
31
11
30
12
FINANCIAL LIABILITIES
Trading deposits
–
–
–
–
Derivatives
Interest rate contracts
35
18
28
17
Equity contracts
2
1
1
–
37
19
29
17
Financial liabilities designated at fair value
through profit or loss
–
–
2
4
Total
$
262
$
94
$
219
$
73
For the years ended October 31, 2025
and 2024, the aggregate difference yet
to be recognized in net income due to the difference
between the transaction price
and the amount determined using valuation
techniques with significant non-observable inputs
at initial recognition were immaterial.
(h)
FINANCIAL INSTRUMENTS DESIGNATED AT FAIR VALUE
Securities Designated at Fair Value through Profit
or Loss
Certain securities supporting insurance
contract liabilities within the Bank’s insurance
underwriting subsidiaries have been designated
at FVTPL to eliminate or
significantly reduce an accounting mismatch.
Insurance contract liabilities are measured
using a discount factor and changes in the discount
factor are recognized
on the Consolidated Statement of Income.
The unrealized gains or losses on securities
designated at FVTPL are recognized
on the Consolidated Statement of
Income in the same period as gains or losses
resulting from changes to the discount rate
used to value the insurance contract liabilities.
In addition, certain debt securities have been designated
at FVTPL as they are economically hedged
with derivatives and the designation eliminates
or
significantly reduces an accounting mismatch.
Financial Liabilities Designated at Fair Value through
Profit or Loss
Certain deposits have been designated at FVTPL
to reduce an accounting mismatch from
related economic hedges, and are included
in Financial liabilities
designated at FVTPL on the Consolidated
Balance Sheet. In addition, certain obligations
related to securities sold under repurchase
agreements have been
designated at FVTPL as the instruments
are part of a portfolio that is managed on a
fair value basis and have been included in Obligations
related to securities
sold under repurchase agreements on the Consolidated
Balance Sheet. The fair value of obligations
related to securities sold under repurchase
agreements
designated at FVTPL was $
8,738
million as at October 31, 2025 (October
31, 2024 – $
9,736
million).
For financial liabilities designated at FVTPL,
the estimated amount that the Bank
would be contractually required to pay at
maturity, which is based on notional
amounts, was $
1,708
million less than its fair value as at October
31, 2025 (October 31, 2024 – $
2,744
million).
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 40
NOTE 6: OFFSETTING FINANCIAL ASSETS
AND FINANCIAL LIABILITIES
The Bank enters into netting agreements
with counterparties (such as clearing houses)
to manage the credit risks associated primarily
with repurchase and
reverse repurchase transactions, securities
borrowing and lending transactions, and
OTC and exchange-traded derivatives.
These netting agreements and similar
arrangements generally allow the counterparties
to set-off liabilities against available assets received.
The right to set-off is a legal right to settle or otherwise
eliminate all or a portion of an amount due by
applying against that amount an amount receivable
from the other party. These agreements effectively reduce the
Bank’s credit exposure by what it would have
been if those same counterparties were liable
for the gross exposure on the same underlying
contracts.
Netting arrangements are typically constituted
by a master netting agreement which
specifies the general terms of the agreement
between the counterparties,
including information on the basis of the netting
calculation, types of collateral, and the definition
of default and other termination events for
transactions executed
under the agreement. The master netting
agreements contain the terms and conditions
by which all (or as many as possible) relevant
transactions between the
counterparties are governed. Multiple individual
transactions are subsumed under this general
master netting agreement, forming a single legal
contract under
which the counterparties conduct their relevant
mutual business. In addition to the mitigation
of credit risk, placing individual transactions
under a single master
netting agreement that provides for netting of
transactions in scope also helps to mitigate
settlement risks associated with transacting
in multiple jurisdictions or
across multiple contracts. These arrangements
include clearing agreements, global
master repurchase agreements, and global
master securities lending
agreements.
In the normal course of business, the Bank
enters into contracts to buy and sell goods
and services from various suppliers. Some
of these contracts may have
netting provisions that allow for the offset of various
trade payables and receivables in the event
of default of one of the parties. While these
are not disclosed in
the following table, the gross amount of all payables
and receivables to and from the Bank’s vendors
is disclosed in Note 15 in accounts receivable
and other
items, and in Note 17 in accounts payable,
accrued expenses, and other items.
The Bank also enters into regular way purchases
and sales of stocks and bonds. Some of
these transactions may have netting provisions
that allow for the
offset of broker payables and broker receivables
related to these purchases and sales.
While these are not disclosed in the following
table, the amount of
receivables are presented in amounts receivable
from brokers, dealers, and clients, and payables
are disclosed in amounts payable to brokers,
dealers, and
clients.
The following table provides a summary
of the financial assets and liabilities which
are subject to enforceable master netting
agreements and similar
arrangements, including amounts not otherwise
set-off on the Consolidated Balance Sheet, as
well as financial collateral received to mitigate
credit exposures for
these financial assets and liabilities. The gross
financial assets and liabilities are reconciled
to net amounts and are presented within the
associated line on the
Consolidated Balance Sheet, after transactions
with the same counterparties have been offset.
Related amounts and collateral received that
are not offset on the
Consolidated Balance Sheet but are otherwise
subject to the same enforceable netting agreements
and similar arrangements, are then presented
to arrive at a net
amount.
Offsetting Financial Assets and Financial Liabilities
(millions of Canadian dollars)
As at
October 31, 2025
Amounts subject to an enforceable
master netting agreement or similar
arrangement that are not offset in
the Consolidated Balance Sheet
1,2
Gross amounts
Gross amounts
of recognized
of recognized
Net amount
financial
financial
of financial
Amounts
instruments
instruments
instruments
subject to an
before
offset in the
presented in the
enforceable
balance sheet
Consolidated
Consolidated
master netting
netting
Balance Sheet
Balance Sheet
agreement
Collateral
Net Amount
Financial Assets
Derivatives
$
84,781
$
1,809
$
82,972
$
45,857
$
15,132
$
21,983
Securities purchased under
reverse repurchase agreements
266,189
19,111
247,078
21,509
216,312
9,257
Total
350,970
20,920
330,050
67,366
231,444
31,240
Financial Liabilities
Derivatives
81,165
1,809
79,356
45,857
28,537
4,962
Obligations related to securities sold
under repurchase agreements
240,261
19,111
221,150
21,509
198,524
1,117
Total
$
321,426
$
20,920
$
300,506
$
67,366
$
227,061
$
6,079
October 31, 2024
Financial Assets
Derivatives
$
79,949
$
1,888
$
78,061
$
42,849
$
14,214
$
20,998
Securities purchased under
reverse repurchase agreements
225,475
17,258
208,217
20,904
184,116
3,197
Total
305,424
19,146
286,278
63,753
198,330
24,195
Financial Liabilities
Derivatives
70,256
1,888
68,368
42,849
19,903
5,616
Obligations related to securities sold
under repurchase agreements
219,158
17,258
201,900
20,904
179,318
1,678
Total
$
289,414
$
19,146
$
270,268
$
63,753
$
199,221
$
7,294
1
Excess collateral as a result of overcollateralization has not been reflected in the table.
2
Includes amounts where the contractual set-off rights are subject to uncertainty under the laws of the
relevant jurisdiction.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 41
NOTE 7: SECURITIES
Securities are held by the Bank for both trading
and non-trading activities. Trading securities are included
in Trading loans, securities, and other on the
Consolidated Balance Sheet. Non-trading
securities are included in Non-trading financial
assets at FVTPL, Financial assets designated
at FVTPL, Financial assets
at FVOCI, or Debt securities at amortized
cost, net of allowance for credit losses on
the Consolidated Balance Sheet.
(a)
REMAINING TERMS TO MATURITIES OF SECURITIES
The remaining terms to contractual maturities
of the securities held by the Bank are
shown on the following table.
Securities Maturity Schedule
(millions of Canadian dollars)
As at
October 31
October 31
2025
2024
Remaining terms to maturities
1
Over 1
Over 3
Over 5
With no
Within
year to
years to
years to
Over 10
specific
1 year
3 years
5 years
10 years
years
maturity
Total
Total
Trading securities
Government and government-related securities
Canadian government debt
Federal
$
2,508
$
917
$
1,012
$
2,723
$
1,607
$
–
$
8,767
$
10,242
Provinces
1,184
251
457
972
1,673
–
4,537
6,398
U.S. federal, state, municipal governments, and
agencies debt
5,689
3,383
1,943
2,466
10,303
–
23,784
18,861
Other OECD government-guaranteed debt
4,575
652
456
318
100
–
6,101
9,722
Mortgage-backed securities
Residential
250
248
51
3
–
–
552
1,040
Commercial
11
95
101
9
–
–
216
312
14,217
5,546
4,020
6,491
13,683
–
43,957
46,575
Other debt securities
Canadian issuers
598
2,653
1,406
1,474
631
–
6,762
6,623
Other issuers
4,794
6,601
3,243
1,456
293
121
16,508
15,859
5,392
9,254
4,649
2,930
924
121
23,270
22,482
Equity securities
Common shares
–
–
–
–
–
87,790
87,790
68,670
Preferred shares
–
–
–
–
–
119
119
58
–
–
–
–
–
87,909
87,909
68,728
Retained interests
–
1
–
–
–
–
1
1
Total trading securities
$
19,609
$
14,801
$
8,669
$
9,421
$
14,607
$
88,030
$
155,137
$
137,786
Non-trading financial assets at fair value through
profit or loss
Government and government-related securities
U.S. federal, state, municipal governments, and
agencies debt
$
–
$
–
$
–
$
–
$
333
$
–
$
333
$
271
–
–
–
–
333
–
333
271
Other debt securities
Canadian issuers
27
122
110
31
–
689
979
912
Asset-backed securities
–
2,261
778
507
704
–
4,250
414
Other issuers
–
–
–
–
–
117
117
50
27
2,383
888
538
704
806
5,346
1,376
Equity securities
Common shares
–
–
–
–
–
1,314
1,314
1,105
Preferred shares
–
–
–
–
–
58
58
60
–
–
–
–
–
1,372
1,372
1,165
Total non-trading financial
assets at fair value
through profit or loss
$
27
$
2,383
$
888
$
538
$
1,037
$
2,178
$
7,051
$
2,812
Financial assets designated at fair value through profit
or loss
Government and government-related securities
Canadian government debt
Federal
$
182
$
5
$
–
$
2
$
1
$
1
$
191
$
294
Provinces
525
376
1,055
737
51
7
2,751
2,443
U.S. federal, state, municipal governments, and
agencies debt
18
–
–
–
–
–
18
9
Other OECD government-guaranteed debt
400
90
23
–
–
–
513
310
1,125
471
1,078
739
52
8
3,473
3,056
Other debt securities
Canadian issuers
742
1,484
352
91
–
8
2,677
2,395
Other issuers
72
571
155
38
–
–
836
966
814
2,055
507
129
–
8
3,513
3,361
Total financial assets designated
at fair value
through profit or loss
$
1,939
$
2,526
$
1,585
$
868
$
52
$
16
$
6,986
$
6,417
1
Represents contractual maturities. Actual maturities may differ due to prepayment privileges in the applicable
contract.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 42
Securities Maturity Schedule
(Continued)
(millions of Canadian dollars)
As at
October 31
October 31
2025
2024
Remaining terms to maturities
1
Over 1
Over 3
Over 5
With no
Within
year to
years to
years to
Over 10
specific
1 year
3 years
5 years
10 years
years
maturity
Total
Total
Securities at fair value through other comprehensive
income
Government and government-related securities
Canadian government debt
Federal
$
1,878
$
1,619
$
5,108
$
7,175
$
111
$
–
$
15,891
$
18,139
Provinces
1,050
3,253
5,973
10,372
432
–
21,080
21,270
U.S. federal, state, municipal governments, and
agencies debt
12,005
1,501
16,504
21,648
2,834
–
54,492
35,197
Other OECD government-guaranteed debt
273
1,612
5,932
58
–
–
7,875
1,679
Mortgage-backed securities
436
1,460
–
–
–
–
1,896
2,137
15,642
9,445
33,517
39,253
3,377
–
101,234
78,422
Other debt securities
Asset-backed securities
914
274
2,932
1,615
2,974
–
8,709
1,384
Corporate and other debt
2,681
3,280
2,212
1,643
3,275
–
13,091
9,446
3,595
3,554
5,144
3,258
6,249
–
21,800
10,830
Equity securities
Common shares
–
–
–
–
–
2,536
2,536
3,914
Preferred shares
–
–
–
–
–
511
511
501
–
–
–
–
–
3,047
3,047
4,415
Total securities at fair value
through other
comprehensive income
$
19,237
$
12,999
$
38,661
$
42,511
$
9,626
$
3,047
$
126,081
$
93,667
Debt securities at amortized cost, net of allowance for
credit losses
Government and government-related securities
Canadian government debt
Federal
$
12,267
$
12,206
$
2,784
$
9,368
$
1,293
$
–
$
37,918
$
22,991
Provinces
934
3,370
7,811
6,395
326
–
18,836
18,614
U.S. federal, state, municipal governments, and
agencies debt
1,922
23,631
11,061
24,181
33,732
–
94,527
124,099
Other OECD government-guaranteed debt
8,006
13,428
6,882
2,891
–
–
31,207
39,394
23,129
52,635
28,538
42,835
35,351
–
182,488
205,098
Other debt securities
Asset-backed securities
10
1,140
4,509
5,981
15,407
–
27,047
29,708
Non-agency collateralized mortgage obligation
portfolio
–
–
–
–
13,274
–
13,274
15,362
Canadian issuers
105
1,051
867
532
9
–
2,564
4,722
Other issuers
2,188
6,775
4,392
1,711
–
–
15,066
16,725
2,303
8,966
9,768
8,224
28,690
–
57,951
66,517
Total debt securities at amortized
cost, net of
allowance for credit losses
25,432
61,601
38,306
51,059
64,041
–
240,439
271,615
Total securities
$
66,244
$
94,310
$
88,109
$
104,397
$
89,363
$
93,271
$
535,694
$
512,297
1
Represents contractual maturities. Actual maturities may differ due to prepayment privileges in the applicable
contract.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 43
(b)
UNREALIZED SECURITIES GAINS (LOSSES)
The following table summarizes the unrealized
gains and losses as at October 31, 2025
and October 31, 2024.
Unrealized Securities Gains (Losses) for
Securities at Fair Value Through Other Comprehensive
Income
(millions of Canadian dollars)
As at
October 31, 2025
October 31, 2024
Cost/
Gross
Gross
Cost/
Gross
Gross
amortized
unrealized
unrealized
Fair
amortized
unrealized
unrealized
Fair
cost
1
gains
(losses)
value
cost
1
gains
(losses)
value
Government and government-related
securities
Canadian government debt
Federal
$
15,956
$
23
$
(88)
$
15,891
$
18,281
$
17
$
(159)
$
18,139
Provinces
20,971
120
(11)
21,080
21,263
77
(70)
21,270
U.S. federal, state, municipal governments, and
agencies debt
54,279
267
(54)
54,492
35,371
22
(196)
35,197
Other OECD government-guaranteed debt
7,864
15
(4)
7,875
1,687
1
(9)
1,679
Mortgage-backed securities
1,869
29
(2)
1,896
2,125
17
(5)
2,137
100,939
454
(159)
101,234
78,727
134
(439)
78,422
Other debt securities
Asset-backed securities
8,713
11
(15)
8,709
1,397
1
(14)
1,384
Corporate and other debt
13,011
106
(26)
13,091
9,419
77
(50)
9,446
21,724
117
(41)
21,800
10,816
78
(64)
10,830
Total debt securities
122,663
571
(200)
123,034
89,543
212
(503)
89,252
Equity securities
Common shares
2,332
226
(22)
2,536
3,810
176
(72)
3,914
Preferred shares
523
67
(79)
511
632
29
(160)
501
2,855
293
(101)
3,047
4,442
205
(232)
4,415
Total securities at fair value through other
comprehensive income
$
125,518
$
864
$
(301)
$
126,081
$
93,985
$
417
$
(735)
$
93,667
1
Includes the foreign exchange translation of amortized cost balances at the period-end spot rate.
(c)
EQUITY SECURITIES DESIGNATED AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
The Bank designated certain equity securities
at FVOCI.
The following table summarizes the fair
value of equity securities designated at
FVOCI as at
October 31, 2025 and October 31, 2024, and
dividend income recognized on these securities
for the years ended October 31, 2025 and
October 31, 2024.
Equity Securities Designated at Fair Value Through
Other Comprehensive Income
(millions of Canadian dollars)
As at
For the years ended
October 31, 2025
October 31, 2024
October 31, 2025
October 31, 2024
Fair value
Dividend income recognized
Common shares
$
2,536
$
3,914
$
201
$
153
Preferred shares
511
501
141
155
Total
$
3,047
$
4,415
$
342
$
308
The Bank disposed of certain equity securities
in line with the Bank’s investment strategy
and disposed of FHLB stocks in accordance
with FHLB member
stockholding requirements, as follows:
Equity Securities Net Realized Gains
(Losses)
(millions of Canadian dollars)
For the years ended
October 31
October 31
2025
2024
Equity Securities
1
Fair value
$
273
$
643
Cumulative realized gain/(loss)
13
121
FHLB Stock
Fair value
1,483
187
Cumulative realized gain/(loss)
–
–
1
Includes disposal of the Bank’s holdings in First Horizon Corporation (“First Horizon”) common shares
in the third quarter of fiscal 2024.
(d)
DEBT SECURITIES NET REALIZED GAINS
(LOSSES)
The Bank disposed of certain debt securities
measured at amortized cost and FVOCI
during the year.
The following table summarizes the net realized
gains and
losses on securities disposed of during
the years ended October 31, 2025 and October
31, 2024, which are included in Other income
(loss) on the Consolidated
Statement of Income.
Debt Securities Net Realized Gains (Losses)
1
(millions of Canadian dollars)
For the years ended
October 31
October 31
2025
2024
Debt securities at amortized cost
$
(1,880)
$
(381)
Debt securities at fair value through other
comprehensive income
(71)
23
Total
$
(1,951)
$
(358)
1
Includes $
1,929
million (US$
1,366
million) (October 31, 2024 – $
311
million (US$
226
million)) of pre-tax losses on debt securities related to balance sheet restructuring activities
undertaken in the U.S. Retail segment. Refer to Note 25 for additional information regarding the asset limitation
on TD’s two U.S. bank subsidiaries.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 44
(e)
CREDIT QUALITY OF DEBT SECURITIES
The Bank evaluates non-retail credit risk
on an individual borrower basis, using both
a BRR and FRR, as detailed in the
shaded area of the “Managing Risk”
section of the 2025
MD&A. This system is used to assess all
non-retail exposures, including debt securities.
The following table provides the gross carrying
amounts of debt securities measured
at amortized cost and debt securities at FVOCI
by internal risk rating for credit
risk management purposes, presenting
separately those debt securities that are
subject to Stage 1, Stage 2, and Stage 3
allowances. Refer to the “Allowance for
Credit Losses” table in Note 8 for details regarding
the allowance and provision for credit losses
on debt securities.
Debt Securities by Risk Rating
(millions of Canadian dollars)
As at
October 31, 2025
October 31, 2024
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Debt securities
1
Investment grade
$
362,521
$
–
$
n/a
$
362,521
$
360,272
$
–
$
n/a
$
360,272
Non-investment grade
738
167
n/a
905
439
91
n/a
530
Watch and classified
n/a
49
n/a
49
n/a
68
n/a
68
Default
n/a
n/a
–
–
n/a
n/a
–
–
Total debt securities
363,259
216
–
363,475
360,711
159
–
360,870
Allowance for credit losses on debt
securities at amortized cost
2
–
–
2
3
–
–
3
Total debt securities, net of allowance
$
363,257
$
216
$
–
$
363,473
$
360,708
$
159
$
–
$
360,867
1
Includes debt securities backed by government-guaranteed loans of $
94
million (October 31, 2024 – $
113
million), which are reported in Non-investment grade or a lower risk rating
based on the issuer’s credit risk.
As at October 31, 2025, total debt securities,
net of allowance, in the table above, include
debt securities measured at amortized
cost, net of allowance, of
$
240,439
million (October 31, 2024 – $
271,615
million), and debt securities measured at
FVOCI of $
123,034
million (October 31, 2024 – $
89,252
million).
The difference between probability-weighted ECLs
and base ECLs on debt securities at FVOCI
and at amortized cost as at both October 31, 2025
and
October 31, 2024, was insignificant. Refer to
Note 3 for further details.
NOTE 8: LOANS, IMPAIRED LOANS, AND ALLOWANCE FOR CREDIT LOSSES
(a)
LOANS
The following table provides details regarding
the Bank’s loans as at October 31, 2025
and October 31, 2024.
Loans
(millions of Canadian dollars)
As at October 31
2025
2024
Residential mortgages
$
315,063
$
331,649
Consumer instalment and other personal
259,033
228,382
Credit card
41,662
40,639
Business and government
345,943
356,973
961,701
957,643
Loans at FVOCI
1
288
230
Total loans
961,989
957,873
Total allowance for loan losses
8,689
8,094
Total loans, net of allowance
$
953,300
$
949,779
1
Included in Financial assets at fair value through other comprehensive income on the Consolidated Balance Sheet.
Business and government loans and loans
at FVOCI are grouped together as reflected
below for presentation in the “Loans by
Risk Rating” table.
Loans – Business and Government
(millions of Canadian dollars)
As at October 31
2025
2024
Loans at amortized cost
$
345,943
$
356,973
Loans at FVOCI
(Note 5)
288
230
Loans
346,231
357,203
Allowance for loan losses
3,847
3,583
Loans, net of allowance
$
342,384
$
353,620
(b)
CREDIT QUALITY OF LOANS
In the retail portfolio, including individuals and
small businesses, the Bank manages exposures
on a pooled basis, using predictive credit
scoring techniques. For
non-retail exposures, each borrower is assigned
a BRR that reflects the PD of the borrower
using proprietary industry and sector specific
risk models and expert
judgment. Refer to the shaded areas of the “Managing
Risk”
section of the 2025 MD&A for further details,
including the mapping of PD ranges
to risk levels for
retail exposures as well as the Bank’s 21-point
BRR scale to risk levels and external
ratings for non-retail exposures.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 45
The following tables provide the gross carrying
amounts of loans and credit risk exposures
on loan commitments and financial guarantee
contracts by internal risk
rating for credit risk management purposes,
presenting separately those that are
subject to Stage 1, Stage 2, and Stage 3
allowances.
Loans by Risk Rating
(millions of Canadian dollars)
As at
October 31, 2025
October 31, 2024
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Residential mortgages
1,2,3
Low Risk
$
221,168
$
765
$
n/a
$
221,933
$
238,101
$
655
$
n/a
$
238,756
Normal Risk
70,217
8,391
n/a
78,608
65,318
13,620
n/a
78,938
Medium Risk
351
9,490
n/a
9,841
370
9,614
n/a
9,984
High Risk
3
3,700
391
4,094
5
3,201
347
3,553
Default
n/a
n/a
587
587
n/a
n/a
418
418
Total loans
291,739
22,346
978
315,063
303,794
27,090
765
331,649
Allowance for loan losses
102
175
80
357
116
189
60
365
Loans, net of allowance
291,637
22,171
898
314,706
303,678
26,901
705
331,284
Consumer instalment and other personal
4
Low Risk
110,513
2,588
n/a
113,101
101,171
2,624
n/a
103,795
Normal Risk
75,881
19,812
n/a
95,693
66,105
12,054
n/a
78,159
Medium Risk
29,757
6,792
n/a
36,549
27,188
6,352
n/a
33,540
High Risk
5,407
7,209
448
13,064
4,017
7,881
412
12,310
Default
n/a
n/a
626
626
n/a
n/a
578
578
Total loans
221,558
36,401
1,074
259,033
198,481
28,911
990
228,382
Allowance for loan losses
699
1,220
274
2,193
667
1,120
262
2,049
Loans, net of allowance
220,859
35,181
800
256,840
197,814
27,791
728
226,333
Credit card
Low Risk
8,011
4
n/a
8,015
6,902
16
n/a
6,918
Normal Risk
12,222
119
n/a
12,341
11,714
188
n/a
11,902
Medium Risk
12,780
902
n/a
13,682
12,908
1,122
n/a
14,030
High Risk
2,727
4,329
419
7,475
2,832
4,382
437
7,651
Default
n/a
n/a
149
149
n/a
n/a
138
138
Total loans
35,740
5,354
568
41,662
34,356
5,708
575
40,639
Allowance for loan losses
743
1,089
460
2,292
704
1,015
378
2,097
Loans, net of allowance
34,997
4,265
108
39,370
33,652
4,693
197
38,542
Business and government
1,2,3,5
Investment grade or Low/Normal Risk
139,518
152
n/a
139,670
158,425
102
n/a
158,527
Non-investment grade or Medium Risk
173,836
13,289
n/a
187,125
166,892
11,851
n/a
178,743
Watch and classified or High Risk
538
16,098
77
16,713
704
16,610
89
17,403
Default
n/a
n/a
2,723
2,723
n/a
n/a
2,530
2,530
Total loans
313,892
29,539
2,800
346,231
326,021
28,563
2,619
357,203
Allowance for loan losses
1,195
1,878
774
3,847
983
1,758
842
3,583
Loans, net of allowance
312,697
27,661
2,026
342,384
325,038
26,805
1,777
353,620
Total loans
862,929
93,640
5,420
961,989
862,652
90,272
4,949
957,873
Total allowance for loan losses
2,739
4,362
1,588
8,689
2,470
4,082
1,542
8,094
Total loans, net of allowance
$
860,190
$
89,278
$
3,832
$
953,300
$
860,182
$
86,190
$
3,407
$
949,779
1
Includes impaired loans with a balance of $
273
million (October 31, 2024 – $
259
million) which did not have a related allowance for loan losses as the realizable value of the collateral
exceeded the loan amount.
2
Excludes trading loans and non-trading loans at FVTPL with a fair value of $
30
billion (October 31, 2024 – $
24
billion) and $
0.3
billion (October 31, 2024 – $
3
billion), respectively.
3
Includes insured mortgages of $
69
billion (October 31, 2024 – $
71
billion).
4
Includes Canadian government-insured real estate personal loans of $
5
billion (October 31, 2024 – $
6
billion).
5
Includes loans guaranteed by government agencies of $
24
billion (October 31, 2024 – $
24
billion), which are primarily reported in non-investment grade or a lower risk rating based on the
borrowers’ credit risk.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 46
Loans by Risk Rating
(Continued)
– Off-Balance Sheet Credit Instruments
1
(millions of Canadian dollars)
As at
October 31, 2025
October 31, 2024
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Retail Exposures
2
Low Risk
$
318,759
$
1,464
$
n/a
$
320,223
$
268,234
$
1,365
$
n/a
$
269,599
Normal Risk
62,564
1,147
n/a
63,711
93,576
1,332
n/a
94,908
Medium Risk
16,381
1,295
n/a
17,676
18,562
1,247
n/a
19,809
High Risk
1,282
1,092
–
2,374
1,126
1,181
–
2,307
Default
n/a
n/a
–
–
n/a
n/a
–
–
Non-Retail Exposures
3
Investment grade
319,274
–
n/a
319,274
287,830
–
n/a
287,830
Non-investment grade
103,936
5,710
n/a
109,646
99,866
6,968
n/a
106,834
Watch and classified
150
4,905
–
5,055
328
5,418
–
5,746
Default
n/a
n/a
343
343
n/a
n/a
252
252
Total off-balance sheet credit
instruments
822,346
15,613
343
838,302
769,522
17,511
252
787,285
Allowance for off-balance sheet credit
instruments
470
566
16
1,052
439
593
11
1,043
Total off-balance sheet credit
instruments, net of allowance
$
821,876
$
15,047
$
327
$
837,250
$
769,083
$
16,918
$
241
$
786,242
1
Excludes mortgage commitments.
2
Includes
$
401
billion (October 31, 2024 – $
384
billion) of personal lines of credit and credit card lines, which are unconditionally cancellable at the Bank’s
discretion at any time.
3
Includes $
67
billion (October 31, 2024 – $
66
billion) of the undrawn component of uncommitted credit and liquidity facilities.
(c)
IMPAIRED LOANS
The following table presents information related
to the Bank’s impaired loans as at October 31, 2025
and October 31, 2024.
Impaired Loans
(millions of Canadian dollars)
As at
October 31, 2025
October 31, 2024
Related
Average
Related
Average
Unpaid
allowance
gross
Unpaid
allowance
gross
principal
Carrying
for credit
impaired
principal
Carrying
for credit
impaired
balance
1
value
losses
loans
balance
1
value
losses
loans
Residential mortgages
$
1,033
$
978
$
80
$
886
$
827
$
765
$
60
$
685
Consumer instalment and
other personal
1,114
1,074
274
1,054
1,045
990
262
894
Credit card
569
568
460
568
575
575
378
544
Business and government
3,096
2,800
774
2,791
2,812
2,619
842
1,875
Total
$
5,812
$
5,420
$
1,588
$
5,299
$
5,259
$
4,949
$
1,542
$
3,998
1
Represents contractual amount of principal owed.
(d)
ALLOWANCE FOR CREDIT LOSSES
The following table provides details on
the Bank’s allowance for credit losses as at and
for the years ended October 31, 2025
and October 31, 2024, including
allowance for off-balance sheet instruments in the
applicable categories.
Allowance for Credit Losses
(millions of Canadian dollars)
Foreign
Foreign
exchange,
exchange,
Balance at
Provision
Write-offs,
disposals,
Balance
Balance at
Provision
Write-offs,
disposals,
Balance
beginning
for credit
net of
and other
at end of
beginning
for credit
net of
and other
at end of
of year
losses
recoveries
adjustments
year
of year
losses
recoveries
adjustments
year
For the years ended
October 31, 2025
October 31, 2024
Residential mortgages
$
365
$
(5)
$
(4)
$
1
$
357
$
403
$
(34)
$
(7)
$
3
$
365
Consumer instalment and other
personal
2,133
1,385
(1,250)
5
2,273
1,895
1,407
(1,173)
4
2,133
Credit card
2,699
1,763
(1,685)
13
2,790
2,577
1,676
(1,561)
7
2,699
Business and government
3,940
1,362
(954)
(27)
4,321
3,310
1,204
(536)
(38)
3,940
Total allowance for loan losses,
including off-balance sheet
instruments
9,137
4,505
(3,893)
(8)
9,741
8,185
4,253
(3,277)
(24)
9,137
Debt securities at amortized cost
3
–
–
(1)
2
2
1
–
–
3
Debt securities at FVOCI
1
1
–
–
2
2
(1)
–
–
1
Total allowance for credit
losses on debt securities
4
1
–
(1)
4
4
–
–
–
4
Total allowance for credit losses
$
9,141
$
4,506
$
(3,893)
$
(9)
$
9,745
$
8,189
$
4,253
$
(3,277)
$
(24)
$
9,141
Comprising:
Allowance for credit losses on
loans at amortized cost
$
8,094
$
8,689
$
7,136
$
8,094
Allowance for credit losses on
loans at FVOCI
–
–
–
–
Allowance for loan losses
8,094
8,689
7,136
8,094
Allowance for off-balance sheet
instruments
1,043
1,052
1,049
1,043
Allowance for credit losses on
debt securities
4
4
4
4
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 47
(e)
ALLOWANCE FOR LOAN LOSSES BY STAGE
The following table provides details on
the Bank’s allowance for loan losses by stage
as at and for the years ended October 31,
2025
and October 31, 2024.
Allowance for Loan Losses by Stage
(millions of Canadian dollars)
For the years ended
October 31, 2025
October 31, 2024
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Residential Mortgages
Balance at beginning of period
$
116
$
189
$
60
$
365
$
154
$
192
$
57
$
403
Provision for credit losses
Transfer to Stage 1
1
108
(103)
(5)
–
137
(133)
(4)
–
Transfer to Stage 2
(26)
56
(30)
–
(30)
52
(22)
–
Transfer to Stage 3
–
(42)
42
–
–
(32)
32
–
Net remeasurement due to transfers into stage
2
(24)
15
–
(9)
(30)
22
–
(8)
New originations or purchases
3
25
n/a
n/a
25
32
n/a
n/a
32
Net repayments
4
(4)
(4)
–
(8)
(4)
–
–
(4)
Derecognition of financial assets (excluding
disposals and write-offs)
5
(14)
(20)
(28)
(62)
(7)
(27)
(35)
(69)
Changes to risk, parameters, and models
6
(80)
84
45
49
(135)
114
36
15
Disposals
–
–
–
–
–
–
–
–
Write-offs
–
–
(11)
(11)
–
–
(8)
(8)
Recoveries
–
–
7
7
–
–
1
1
Foreign exchange and other adjustments
1
–
–
1
(1)
1
3
3
Balance at end of period
$
102
$
175
$
80
$
357
$
116
$
189
$
60
$
365
Consumer Instalment and Other Personal
Balance, including off-balance sheet instruments,
at beginning of period
$
696
$
1,175
$
262
$
2,133
$
688
$
1,010
$
197
$
1,895
Provision for credit losses
Transfer to Stage 1
1
696
(691)
(5)
–
607
(603)
(4)
–
Transfer to Stage 2
(239)
329
(90)
–
(246)
329
(83)
–
Transfer to Stage 3
(10)
(298)
308
–
(11)
(254)
265
–
Net remeasurement due to transfers into stage
2
(297)
282
9
(6)
(267)
300
9
42
New originations or purchases
3
345
n/a
n/a
345
359
n/a
n/a
359
Net repayments
4
(87)
(107)
(17)
(211)
(76)
(95)
(16)
(187)
Derecognition of financial assets (excluding
disposals and write-offs)
5
(87)
(115)
(49)
(251)
(74)
(104)
(50)
(228)
Changes to risk, parameters, and models
6
(295)
698
1,105
1,508
(286)
590
1,117
1,421
Disposals
–
–
–
–
–
–
–
–
Write-offs
–
–
(1,597)
(1,597)
–
–
(1,496)
(1,496)
Recoveries
–
–
347
347
–
–
323
323
Foreign exchange and other adjustments
2
2
1
5
2
2
–
4
Balance, including off-balance sheet instruments,
at end of period
724
1,275
274
2,273
696
1,175
262
2,133
Less: Allowance for off-balance sheet instruments
7
25
55
–
80
29
55
–
84
Balance at end of period
$
699
$
1,220
$
274
$
2,193
$
667
$
1,120
$
262
$
2,049
Credit Card
8
Balance, including off-balance sheet instruments,
at beginning of period
$
947
$
1,374
$
378
$
2,699
$
988
$
1,277
$
312
$
2,577
Provision for credit losses
Transfer to Stage 1
1
1,299
(1,257)
(42)
–
1,087
(1,051)
(36)
–
Transfer to Stage 2
(352)
441
(89)
–
(323)
404
(81)
–
Transfer to Stage 3
(25)
(1,047)
1,072
–
(21)
(881)
902
–
Net remeasurement due to transfers into stage
2
(503)
461
26
(16)
(476)
477
25
26
New originations or purchases
3
160
n/a
n/a
160
153
n/a
n/a
153
Net repayments
4
(5)
8
74
77
25
11
65
101
Derecognition of financial assets (excluding
disposals and write-offs)
5
(60)
(97)
(310)
(467)
(55)
(71)
(367)
(493)
Changes to risk, parameters, and models
6
(521)
1,495
1,035
2,009
(432)
1,204
1,117
1,889
Disposals
–
–
–
–
–
–
–
–
Write-offs
–
–
(2,078)
(2,078)
–
–
(1,880)
(1,880)
Recoveries
–
–
393
393
–
–
319
319
Foreign exchange and other adjustments
4
8
1
13
1
4
2
7
Balance, including off-balance sheet instruments,
at end of period
944
1,386
460
2,790
947
1,374
378
2,699
Less: Allowance for off-balance sheet instruments
7
201
297
–
498
243
359
–
602
Balance at end of period
$
743
$
1,089
$
460
$
2,292
$
704
$
1,015
$
378
$
2,097
1
Transfers represent stage transfer movements prior to ECL remeasurement.
2
Represents the mechanical remeasurement between twelve-month (i.e., Stage 1) and lifetime ECLs (i.e., Stage 2
or 3) due to stage transfers necessitated by credit risk migration, as
described in the “Significant Increase in Credit Risk” section of Note 2 and Note 3, holding all other factors impacting
the change in ECLs constant.
3
Represents the increase in the allowance resulting from loans that were newly originated, purchased, or renewed.
4
Represents the changes in the allowance related to cash flow changes associated with new draws or repayments
on loans outstanding.
5
Represents the decrease in the allowance resulting from loans that were fully repaid and excludes the decrease
associated with loans that were disposed or fully written off.
6
Represents the changes in the allowance related to current period changes in risk (e.g.,
PD) caused by changes to macroeconomic factors, level of risk, parameters, and/or models,
subsequent to stage migration. Refer to the “Measurement of Expected Credit Losses”, “Forward-Looking
Information” and “Expert Credit Judgment” sections of Note 2 and Note 3 for
further details.
7
The allowance for loan losses for off-balance sheet instruments is recorded in Other liabilities
on the Consolidated Balance Sheet.
8
Credit cards are considered impaired and migrate to Stage 3 when they are 90 days past due and written off
at 180 days past due. Refer to Note 2 for further details.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 48
Allowance for Loan Losses by Stage
(Continued)
(millions of Canadian dollars)
For the years ended
October 31, 2025
October 31, 2024
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Business and Government
Balance, including off-balance sheet instruments,
at beginning of period
$
1,150
$
1,937
$
853
$
3,940
$
1,319
$
1,521
$
470
$
3,310
Provision for credit losses
Transfer to Stage 1
1
356
(352)
(4)
–
266
(265)
(1)
–
Transfer to Stage 2
(727)
766
(39)
–
(568)
584
(16)
–
Transfer to Stage 3
(10)
(482)
492
–
(19)
(350)
369
–
Net remeasurement due to transfers into stage
1
(103)
193
3
93
(86)
158
13
85
New originations or purchases
1
1,458
n/a
n/a
1,458
1,165
n/a
n/a
1,165
Net repayments
1
13
(44)
(209)
(240)
20
(60)
(77)
(117)
Derecognition of financial assets (excluding
disposals and write-offs)
1
(804)
(940)
(368)
(2,112)
(683)
(611)
(297)
(1,591)
Changes to risk, parameters, and models
1
82
998
1,083
2,163
(271)
917
1,016
1,662
Disposals
–
–
(22)
(22)
–
–
(39)
(39)
Write-offs
–
–
(1,039)
(1,039)
–
–
(600)
(600)
Recoveries
–
–
85
85
–
–
64
64
Foreign exchange and other adjustments
24
16
(45)
(5)
7
43
(49)
1
Balance, including off-balance sheet instruments,
at end of period
1,439
2,092
790
4,321
1,150
1,937
853
3,940
Less: Allowance for off-balance sheet instruments
2
244
214
16
474
167
179
11
357
Balance at end of period
1,195
1,878
774
3,847
983
1,758
842
3,583
Total Allowance, including
off-balance sheet
instruments, at end of period
3,209
4,928
1,604
9,741
2,909
4,675
1,553
9,137
Less: Total Allowance for
off-balance sheet
instruments
2
470
566
16
1,052
439
593
11
1,043
Total Allowance for Loan Losses
at end of period
$
2,739
$
4,362
$
1,588
$
8,689
$
2,470
$
4,082
$
1,542
$
8,094
1
For explanations regarding this line item, refer to the “Allowance for Loan Losses by Stage” table on the previous
page in this Note.
2
The allowance for loan losses for off-balance sheet instruments is recorded in Other liabilities on the
Consolidated Balance Sheet.
The allowance for credit losses on all remaining
financial assets is not significant.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 49
(f)
FORWARD-LOOKING INFORMATION
Relevant macroeconomic factors are incorporated
in risk parameters as appropriate. Additional
risk factors that are industry or segment
specific are also
incorporated, where relevant. The key macroeconomic
variables used in determining ECLs include
regional unemployment rates for all retail exposures
and
regional housing price indices for residential
mortgages and home equity lines of credit.
For business and government loans, the key
macroeconomic variables
include gross domestic product (GDP), unemployment
rates, interest rates, and credit spreads.
Refer to Note 3 for a discussion
of how forward-looking information
is generated and considered in determining
whether there has been a significant increase
in credit risk and in measuring ECLs.
Macroeconomic Variables
Select macroeconomic variables are projected
over the forecast period.
The following table sets out average values
of the macroeconomic variables over the
four
calendar quarters starting with the current
quarter, and the remaining 4-year forecast period for the base
forecast and upside and downside scenarios
used in
determining the Bank’s ECLs as at October
31, 2025. As the forecast period increases, information
about the future becomes less readily
available and projections
are anchored on assumptions around structural
relationships between economic parameters
that are inherently much less certain.
The baseline forecast reflects
some tempering in growth and higher unemployment
as a result of tariffs. While trade tensions have
eased in recent months, uncertainty about
the economic
outlook remains elevated. Any further escalation
in trade tensions would pose a downside
risk to the economic outlook.
However, the Bank’s Canadian and U.S.
downside scenarios reflect a recession and
help capture these risks accordingly through
its allowance process.
Macroeconomic Variables
As at
October 31, 2025
Base Forecast
Upside Scenario
Downside Scenario
Average
Remaining
Average
Remaining
Average
Remaining
Q4 2025-
4-year
Q4 2025-
4-year
Q4 2025-
4-year
Q3 2026
1
period
1
Q3 2026
1
period
1
Q3 2026
1
period
1
Unemployment rate
Canada
7.1
%
6.0
%
6.4
%
5.7
%
7.8
%
7.2
%
United States
4.3
4.0
4.1
3.8
5.5
5.4
Real GDP
Canada
0.9
1.7
1.0
1.9
(1.0)
2.0
United States
1.7
2.1
1.8
2.2
(0.4)
2.4
Home prices
Canada (average existing price)
2
4.1
4.0
4.3
4.5
(5.5)
3.7
United States (CoreLogic HPI)
3
(0.1)
3.5
0.6
4.1
(7.5)
4.0
Central bank policy interest rate
Canada
2.25
2.25
2.50
2.50
1.13
1.42
United States
3.50
3.25
3.75
3.50
2.06
2.30
U.S. 10-year treasury yield
4.02
4.00
4.34
4.24
3.60
3.60
U.S. 10-year BBB spread (%-pts)
1.38
1.60
1.24
1.53
2.27
1.90
Exchange rate (U.S. dollar/Canadian dollar)
$
0.74
$
0.75
$
0.74
$
0.76
$
0.68
$
0.71
Macroeconomic Variables
As at
October 31, 2024
Base Forecast
Upside Scenario
Downside Scenario
Average
Remaining
Average
Remaining
Average
Remaining
Q4 2024-
4-year
Q4 2024-
4-year
Q4 2024-
4-year
Q3 2025
1
period
1
Q3 2025
1
period
1
Q3 2025
1
period
1
Unemployment rate
Canada
6.7
%
6.0
%
5.7
%
5.6
%
7.7
%
7.3
%
United States
4.3
4.0
3.8
3.7
5.4
5.4
Real GDP
Canada
1.7
2.0
2.1
2.2
(0.4)
2.3
United States
1.9
2.1
2.7
2.4
(0.2)
2.4
Home prices
Canada (average existing price)
2
6.0
3.0
8.2
3.4
(7.1)
3.7
United States (CoreLogic HPI)
3
1.3
3.0
4.2
3.8
(8.5)
4.1
Central bank policy interest rate
Canada
3.19
2.27
4.19
2.61
1.69
1.81
United States
3.69
3.00
5.00
3.39
2.81
2.06
U.S. 10-year treasury yield
3.52
3.45
4.49
3.81
3.40
3.34
U.S. 10-year BBB spread (%-pts)
1.75
1.80
1.59
1.76
2.51
2.10
Exchange rate (U.S. dollar/Canadian dollar)
$
0.74
$
0.75
$
0.75
$
0.76
$
0.71
$
0.71
1
The numbers represent average values for the quoted periods, and average of year-on-year growth for real GDP
and home prices.
2
The average home price is the average transacted sale price of homes sold via the Multiple Listing Service; data
is collected by the Canadian Real Estate Association.
3
The CoreLogic home price index (HPI) is a repeat-sales index which tracks increases and decreases in the same
home’s sales price over time.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 50
(g)
SENSITIVITY OF ALLOWANCE FOR CREDIT LOSSES
ECLs are sensitive to the inputs used in internally
developed models, the macroeconomic variables
in the forward-looking forecasts and respective
probability
weightings in determining the probability-weighted
ECLs, and other factors considered when
applying expert credit judgment. Changes
in these inputs,
assumptions, models, and judgments would
affect the assessment of significant increase in
credit risk and the measurement of ECLs.
The following table presents the base ECL
scenario compared to the probability-weighted
ECLs,
with the latter derived from three ECL
scenarios for performing
loans and off-balance sheet instruments. The difference
reflects the impact of deriving multiple
scenarios around the base ECLs
and resultant change in ECLs due
to non-linearity and sensitivity to using
macroeconomic forecasts.
Change from Base to Probability-Weighted
ECLs
(millions of Canadian dollars, except
as noted)
As at
October 31, 2025
October 31, 2024
Probability-weighted ECLs
$
8,137
$
7,584
Base ECLs
7,737
7,185
Difference – in amount
$
400
$
399
Difference – in percentage
5.2
%
5.6
%
ECLs for performing loans and off-balance sheet
instruments consist of an aggregate amount
of Stage 1 and Stage 2 probability-weighted
ECLs which are twelve-
month ECLs and lifetime ECLs,
respectively. Transfers from Stage 1 to Stage 2 ECLs result from a
significant increase in credit risk since initial
recognition of the
loan.
The following table shows the estimated
impact of staging on ECLs by presenting
all performing loans and off-balance sheet instruments
calculated using
twelve-month ECLs compared to the current
aggregate probability-weighted ECLs, holding
all risk profiles constant.
Incremental Lifetime ECLs Impact
(millions of Canadian dollars)
As at
October 31, 2025
October 31, 2024
Probability-weighted ECLs
$
8,137
$
7,584
All performing loans and off-balance sheet instruments
using 12-month ECLs
6,435
5,631
Incremental lifetime ECLs impact
$
1,702
$
1,953
(h)
FORECLOSED ASSETS
Foreclosed assets are repossessed non-financial
assets where the Bank gains title, ownership,
or possession of individual properties,
such as real estate
properties, which are managed for sale in an
orderly manner with the proceeds used
to reduce or repay any outstanding debt.
The Bank does not generally occupy
foreclosed properties for its business use.
The Bank predominantly relies on third-party
appraisals to determine the carrying value of
foreclosed assets. Foreclosed
assets held for sale were $
101
million as at October 31, 2025 (October 31, 2024
– $
126
million) and were recorded in Other assets
on the Consolidated Balance
Sheet.
(i)
LOANS PAST DUE BUT NOT IMPAIRED
A loan is classified as past due when a borrower
has failed to make a payment by the
contractual due date.
The following table summarizes loans that are
past
due but not impaired. Loans less than 31 days
contractually past due are excluded as
they do not generally reflect a borrower’s ability
to meet their payment
obligations.
Loans Past Due but not Impaired
1
(millions of Canadian dollars)
As at
October 31, 2025
October 31, 2024
31-60
61-89
31-60
61-89
days
days
Total
days
days
Total
Residential mortgages
$
407
$
129
$
536
$
443
$
111
$
554
Consumer instalment and other personal
930
301
1,231
983
335
1,318
Credit card
373
253
626
375
269
644
Business and government
247
85
332
244
83
327
Total
$
1,957
$
768
$
2,725
$
2,045
$
798
$
2,843
1
Includes loans that are measured at FVOCI.
(j)
MODIFIED FINANCIAL ASSETS
The amortized cost of financial assets
with lifetime allowance that were modified
during the year ended October 31, 2025,
was $
210
million (October 31, 2024 –
$
214
million) before modification, with insignificant
modification gain or loss. The gross carrying
amount of modified financial assets
for which the loss allowance
changed from lifetime to twelve-month ECLs
during the years ended October 31, 2025
and October 31, 2024 were insignificant.
(k)
COLLATERAL
As at October 31, 2025, the collateral held against
total gross impaired loans represents
84
% (October 31, 2024 –
82
%) of total gross impaired loans. The fair
value of non-financial collateral is determined
at the origination date of the loan. A revaluation
of non-financial collateral is performed if
there has been a significant
change in the terms and conditions of the loan
and/or the loan is considered impaired.
Management considers the nature of the collateral,
seniority ranking of the
debt, and loan structure in assessing the
value of collateral. These estimated cash
flows are reviewed at least annually, or more frequently when new information
indicates a change in the timing or amount expected
to be received.
(l)
SALE OF U.S. RESIDENTIAL MORTGAGE
LOANS
On March 26, 2025, the Bank sold US$
8.6
billion of certain U.S. residential mortgage
loans (correspondent loans) which resulted
in the recognition of a pre-tax
loss including transaction costs of US$
507
million in Other income (loss) on the
Consolidated Statement of Income. The
sale related to balance sheet restructuring
activities undertaken in the U.S. Retail segment.
Refer to Note 25 for additional information
regarding the asset limitation on TD’s two
U.S. bank subsidiaries.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 51
NOTE 9: TRANSFERS OF FINANCIAL
ASSETS
LOAN SECURITIZATIONS
The Bank securitizes loans through structured
entity or non-structured entity third parties.
Most loan securitizations do not qualify for
derecognition since in most
circumstances, the Bank continues to be exposed
to substantially all of the prepayment, interest
rate, and/or credit risk associated with
the securitized financial
assets and has not transferred substantially
all of the risk and rewards of ownership
of the securitized assets. Where loans do not
qualify for derecognition, they
are not derecognized from the Bank’s Consolidated
Balance Sheet, retained interests are not
recognized, and a securitization liability is recognized
for the cash
proceeds received. Certain transaction costs
incurred are also capitalized and amortized
using EIRM.
The Bank securitizes insured residential
mortgages under the National Housing Act
Mortgage-Backed Securities (NHA
MBS) program sponsored by the
Canada Mortgage and Housing Corporation
(CMHC). The MBS that are created through
the NHA MBS program are sold to the
Canada Housing Trust (CHT) as
part of the CMB program,
sold to third-party investors,
or are held by the Bank. The CHT issues
CMB to third-party investors and uses resulting
proceeds to
purchase NHA MBS from the Bank and other
mortgage issuers in the Canadian market. Assets
purchased by the CHT are commingled
in a single trust from which
CMB are issued. The Bank continues to be exposed
to substantially all of the risks of the underlying
mortgages, through the retention of a seller
swap which
transfers principal and interest payment
risk on the NHA MBS back to the Bank
in return for coupon paid on the CMB
issuance and as such, the sales do not
qualify for derecognition.
The Bank securitizes U.S. originated residential
mortgages with U.S. government agencies
which qualify for derecognition from the Bank’s Consolidated
Balance Sheet. As part of the securitization,
the Bank retains the right to service the
transferred mortgage loans. The MBS
that are created through the
securitization are typically sold to third-party
investors.
The Bank also securitizes business and government
loans to entities which may be structured
entities. These securitizations may give
rise to derecognition of
the financial assets depending on the individual
arrangement of each transaction.
In addition, the Bank transfers credit card receivables
to structured entities that the Bank consolidates.
Refer to Note 10 for further details.
The following table summarizes the securitized
asset types that did not qualify for derecognition,
along with their associated
securitization liabilities as at
October 31, 2025
and October 31, 2024.
Financial Assets Not Qualifying for Derecognition
Treatment as Part of the Bank’s Securitization Programs
(millions of Canadian dollars)
As at
October 31, 2025
October 31, 2024
Fair
Carrying
Fair
Carrying
value
amount
value
amount
Nature of transaction
Securitization of residential mortgage loans
$
38,674
$
38,704
$
30,543
$
30,787
Other financial assets transferred related
to securitization
1
1,968
1,966
2,623
2,619
Total
40,642
40,670
33,166
33,406
Associated liabilities
2
$
40,088
$
40,124
$
32,442
$
32,684
1
Includes asset-backed securities, asset-backed commercial paper (ABCP),
cash, repurchase agreements, and Government of Canada securities used to fulfil funding requirements
of the
Bank’s securitization structures after the initial securitization of mortgage loans.
2
Includes securitization liabilities carried at amortized cost of $
15
billion as at October 31, 2025 (October 31, 2024 – $
12
billion), and securitization liabilities carried at fair value of
$
25
billion as at October 31, 2025 (October 31, 2024 – $
20
billion).
Other Financial Assets Not Qualifying for
Derecognition
The Bank enters into certain transactions
where it transfers previously recognized commodities
and financial assets, such as debt and equity
securities, but retains
substantially all of the risks and rewards of
those assets. These transferred assets are
not derecognized and the transfers are accounted
for as financing
transactions. The most common transactions
of this nature are repurchase agreements
and securities lending agreements, in which
the Bank retains substantially
all of the associated credit, price, interest rate,
and foreign exchange risks and rewards
associated with the assets.
The following table summarizes the carrying
amount of financial assets and the associated
transactions that did not qualify for derecognition,
as well as their
associated financial liabilities as at October
31, 2025 and October 31, 2024.
Other Financial Assets Not Qualifying for
Derecognition
(millions of Canadian dollars)
As at
October 31
October 31
2025
2024
Carrying amount of assets
Nature of transaction
Repurchase agreements
1,2
$
36,074
$
40,725
Securities lending agreements
56,316
52,781
Total
92,390
93,506
Carrying amount of associated liabilities
2
$
35,364
$
40,450
1
Includes $
2.1
billion, as at October 31, 2025 (October 31, 2024 – $
2.8
billion) of assets related to repurchase agreements or swaps that are collateralized by physical precious
metals.
2
Associated liabilities are all related to repurchase agreements.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 52
TRANSFERS OF FINANCIAL ASSETS QUALIFYING
FOR DERECOGNITION
Transferred financial assets that are derecognized
in their entirety where the Bank has a
continuing involvement
Continuing involvement may arise if the Bank
retains any contractual rights or obligations
subsequent to the transfer of financial assets.
Certain business and
government loans securitized by the Bank are
derecognized from the Bank’s Consolidated Balance
Sheet. In instances where the Bank fully derecognizes
business and government loans, the Bank
may be exposed to the risks of transferred loans
through a retained interest. As at October
31, 2025, the fair value of
retained interests was $
1
million (October 31, 2024 – $
1
million). A gain or loss on sale of the loans
is recognized immediately in other income
(loss) after
considering the effect of hedge accounting on
the assets sold, if applicable. The amount
of the gain or loss recognized depends on
the previous carrying values of
the loans involved in the transfer, allocated between the assets
sold and the retained interests based on their
relative fair values at the date of transfer.
Certain portfolios of U.S. residential mortgages
originated by the Bank are sold and derecognized
from the Bank’s Consolidated
Balance Sheet. In certain
instances, the Bank has a continuing involvement
to service those loans. As at October 31, 2025,
the carrying value of these servicing
rights was $
75
million
(October 31, 2024 – $
81
million) and the fair value was $
139
million (October 31, 2024 – $
133
million). A gain or loss on sale of the loans
is recognized
immediately in other income (loss). The gain
(loss) on sale of the loans for the year ended
October 31, 2025 was ($
25
) million (October 31, 2024 – ($
3
) million).
NOTE 10: STRUCTURED ENTITIES
The Bank uses structured entities for a variety
of purposes including:
(1) to facilitate the transfer of specified risks
to clients; (2) as financing vehicles for itself or
for
clients; or (3)
to segregate assets on behalf of investors.
The Bank is typically restricted from accessing
the assets of the structured entity under the relevant
arrangements.
The Bank is involved with structured entities
that it sponsors,
as well as entities sponsored by third parties.
Factors assessed when determining if the Bank
is
the sponsor of a structured entity include
whether the Bank is the predominant user
of the entity; whether the entity’s branding or
marketing identity is linked with
the Bank; and whether the Bank provides
an implicit or explicit guarantee of
the entity’s performance to investors or other
third parties. The Bank is not considered
to be the sponsor of a structured entity if
it only provides arm’s-length services to the entity, for example, by acting
as administrator, distributor, custodian, asset
manager, or loan servicer. Sponsorship of a structured entity may indicate
that the Bank had power over the entity at
inception; however, this is not sufficient to
determine if the Bank consolidates the entity. Regardless of
whether or not the Bank sponsors an entity, consolidation is determined
on a case-by-case basis.
(a)
SPONSORED STRUCTURED ENTITIES
The following section outlines the Bank’s involvement
with key sponsored structured entities.
Securitizations
The Bank securitizes its own assets
and facilitates the securitization of client
assets through structured entities, such
as conduits, which issue ABCP or other
securitization entities which issue longer-dated
term securities. Securitizations are an important
source of liquidity for the Bank, allowing
it to diversify its funding
sources and to optimize its balance sheet
management approach.
The Bank sponsors both single-seller and
multi-seller securitization conduits. Depending
on the specifics of the entity, the variable returns absorbed through
ABCP may be significantly mitigated
by variable returns retained by the sellers.
The Bank provides liquidity facilities to certain
conduits for the benefit of ABCP
investors which are structured as loan
facilities between the Bank, as the sole liquidity
lender, and the Bank-sponsored entity.
If an entity experiences difficulty
issuing ABCP due to illiquidity in the commercial
market, the entity may draw on the loan facility, and use the proceeds
to pay maturing ABCP. The ABCP issued
by each multi-seller conduit is in the conduit’s own
name with recourse to the financial assets
owned by the multi-seller conduit, and is non-recourse
to the Bank
except through our participation in liquidity facilities.
The Bank’s exposure to the variable returns
of these conduits from its provision of liquidity
facilities and any
related commitments is mitigated by
the sellers’ continued exposure to variable returns
through the provision of first loss protection,
as described below. The Bank
provides administration and securities
distribution services to its sponsored
securitization conduits, which may result
in it holding an investment in the ABCP issued
by these entities. In some cases, the Bank
may also provide credit enhancements or
may transact derivatives with securitization
conduits. The Bank earns fees
from the conduits which are recognized
when earned.
The Bank sells assets to single-seller
conduits which it controls and consolidates.
Control results from the Bank’s power over the entity’s
key economic
decisions, predominantly, the mix of assets sold into the conduit
and exposure to the variable returns of
the transferred assets, usually through a
derivative or the
provision of credit mitigation in the form
of cash reserves, over-collateralization,
or guarantees over the performance of
the entity’s portfolio of assets.
Multi-seller conduits provide sellers with
alternate sources of financing through the
securitization of their assets. These
conduits are similar to single-seller
conduits except that financial assets are
purchased from more than one seller and
commingled into a single portfolio of assets. Each
transaction is structured with
transaction-specific first loss protection provided
by the third-party seller. This enhancement can take
various forms, including but not limited
to
overcollateralization, excess spread, subordinated
classes of financial assets, guarantees or
letters of credit. The Bank is typically deemed
to have power over the
entity’s key economic decisions, namely,
the selection of sellers and related assets
sold as well as other decisions related
to the management of risk in the vehicle.
Where the Bank has power over multi-seller
conduits, but is not exposed to significant
variable returns it does not consolidate
such entities.
Investment Funds and Other Asset Management
Entities
As part of its asset management business,
the Bank creates investment funds and
trusts (including mutual funds), enabling it
to provide its clients with a broad
range of diversified exposure to different risk profiles,
in accordance with the client’s risk appetite.
Such entities may be actively managed or
may be passively
directed, for example, through the tracking
of a specified index, depending on
the entity’s investment strategy. Financing for these entities is obtained through
the
issuance of securities to investors, typically
in the form of fund units. Based on each
entity’s specific strategy and risk profile, the
proceeds from this issuance are
used by the entity to purchase a portfolio of
assets. An entity’s portfolio may contain investments
in securities, derivatives, or other assets, including
cash. At the
inception of a new investment fund or trust,
the Bank will typically invest an amount of
seed capital in the entity, allowing it to establish a performance
history in the
market. Over time, the Bank sells its seed
capital holdings to third-party investors, as the entity’s
AUM increases. As a result, the Bank’s holding
of seed capital
investment in its own sponsored investment
funds and trusts is typically not significant
to the Consolidated Financial Statements. Aside
from any seed capital
investments, the Bank’s interest in these entities
is generally limited to fees earned for
the provision of asset management services.
The Bank does not typically
provide guarantees over the performance of
these funds.
The Bank is typically considered to have
power over the key economic decisions
of sponsored asset management entities;
however, it does not consolidate an
entity unless it is also exposed to significant
variable returns of the entity. This determination is made on
a case-by-case basis, in accordance
with the Bank’s
consolidation policy.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 53
Financing Vehicles
The Bank may use structured entities to provide
a cost-effective means of financing its operations,
including raising capital or obtaining
funding. These structured
entities include TD Covered Bond (Legislative)
Guarantor Limited Partnership (the “Covered
Bond Entity”).
The Bank issues, or has issued, debt under its
covered bond program where the principal
and interest payments of the notes are guaranteed
by the Covered
Bond Entity. The Bank sold a portfolio of assets to the Covered Bond
Entity and provided a loan to the Covered
Bond Entity to facilitate the purchase. The Bank
is
restricted from accessing the Covered Bond
Entity’s assets under the relevant agreement.
Investors in the Bank’s covered bonds may have recourse
to the Bank
should the assets of the Covered Bond Entity
be insufficient to satisfy the covered bond liabilities.
The Bank consolidates the Covered Bond
Entity as it has power
over the key economic activities and
retains all the variable returns in this entity.
(b)
THIRD-PARTY SPONSORED STRUCTURED ENTITIES
In addition to structured entities sponsored
by the Bank, the Bank is also involved
with structured entities sponsored by third parties.
Key involvement with
third-party sponsored structured entities
is described in the following section.
Third-party Sponsored Securitization
Programs
The Bank participates in the securitization
programs
of government-sponsored structured
entities, including the CMHC, a Crown
corporation of the Government of
Canada, and similar U.S. government-sponsored
entities. CMHC guarantees both NHA
MBS and CMB which are issued through
the CHT.
The Bank is exposed to the variable returns
in the CHT, through its retention of seller swaps resulting from its
participation in the CHT program. The Bank does
not have power over the CHT as its key
economic activities are controlled by the Government
of Canada. The Bank’s exposure to the
CHT is included in the
balance of residential mortgage loans as noted
in Note 9, and is not disclosed in the
table accompanying this Note.
The Bank participates in the securitization
programs sponsored by U.S. government
agencies. The Bank is not exposed to significant
variable returns from
these agencies and does not have power over
the key economic activities of these agencies,
which are controlled by the U.S. government.
Investment Holdings and Derivatives
The Bank may hold interests in third-party
structured entities, predominantly in
the form of direct investments in securities
or partnership interests issued by those
structured entities,
or through derivatives transacted with
counterparties which are structured entities.
Investments in, and derivatives with, structured
entities are
recognized on the Bank’s Consolidated Balance Sheet.
The Bank does not typically consolidate third-party
structured entities where its involvement
is limited to
investment holdings and/or derivatives as the Bank
would not generally have power over the
key economic decisions of these entities.
Financing Transactions
In the normal course of business, the Bank
may enter into financing transactions with third-party
structured entities including commercial loans,
reverse repurchase
agreements, prime brokerage margin lending,
and similar collateralized lending transactions.
While such transactions expose the Bank
to the structured entities’
counterparty credit risk, this exposure is
mitigated by the collateral related to these
transactions. The Bank typically has neither
power nor significant variable
returns due to financing transactions with
structured entities and would not generally
consolidate such entities. Financing transactions
with third-party sponsored
structured entities are included on the Bank’s
Consolidated Financial Statements and have not
been included in the table accompanying
this Note.
Arm’s-length Servicing Relationships
In addition to the involvement outlined above,
the Bank may also provide services
to structured entities on an arm’s-length basis,
for example as sub-advisor to an
investment fund or asset servicer. Similarly, the Bank’s asset management services
provided to institutional investors
may include transactions with structured
entities. As a consequence of providing
these services, the Bank may be exposed
to variable returns from these structured
entities, for example, through the
receipt of fees or short-term exposure
to the structured entity’s securities. Any such exposure
is typically mitigated by collateral or
some other contractual
arrangement with the structured entity or
its sponsor. The Bank generally has neither power nor
significant variable returns from the provision
of arm’s-length
services to a structured entity and, consequently
does not consolidate such entities.
Fees and other exposures through servicing
relationships are included on the
Bank’s Consolidated Financial Statements and have
not been included in the table accompanying
this Note.
(c)
INVOLVEMENT WITH CONSOLIDATED STRUCTURED ENTITIES
Securitizations
The Bank securitizes credit card receivables
through securitization entities, predominantly
single-seller conduits. These conduits are
consolidated by the Bank
based on the factors described above. Aside
from the exposure resulting from its involvement
as seller and sponsor of consolidated securitization
conduits
described above, including the liquidity facilities
provided, the Bank has no contractual or
non-contractual arrangements to provide
financial support to
consolidated securitization conduits. The Bank’s
interests in securitization conduits
generally rank senior to interests held by other
parties, in accordance with the
Bank’s investment and risk policies. As a result,
the Bank has no significant obligations to absorb
losses before other holders of securitization issuances.
Consolidation of Structured Entities
Effective July 31, 2025, the Bank concluded that it
no longer controls its U.S. multi-seller ABCP
conduits due to a change in the Bank’s exposure
to variable
returns and has therefore deconsolidated
these conduits prospectively. The deconsolidation has resulted
in a decrease of $
17,702
million of Business and
government loans, $
2,695
million of Non-trading financial assets at fair
value through profit or loss (FVTPL), $
77
million of Other assets and $
19,332
million of
Other liabilities on the Consolidated Balance
Sheet. The Bank concurrently recognized
$
1,142
million in Trading loans, securities, and other on the
Consolidated
Balance Sheet, representing the ABCPs purchased
by the Bank ($
1,111
million as at October 31, 2024, which
was previously eliminated upon consolidation).
Impacts on the Consolidated Statement of
Income as a result of deconsolidation are
minimal. In addition, the Bank continues to provide
liquidity facilities to these
conduits. The total committed undrawn amount
under these facilities as at October 31,
2025 was $
16.0
billion (October 31, 2024 – $
13.1
billion).
Other Consolidated Structured Entities
Depending on the specific facts and circumstances
of the Bank’s involvement with structured
entities, the Bank may consolidate asset
management entities,
financing vehicles,
or third-party sponsored structured entities,
based on the factors described above.
Aside from its exposure resulting from its
involvement as
sponsor or investor in the structured
entities as previously discussed,
the Bank does not typically have other
contractual or non-contractual arrangements
to
provide financial support to these consolidated
structured entities.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 54
(d)
INVOLVEMENT WITH UNCONSOLIDATED STRUCTURED ENTITIES
The following table presents information related
to the Bank’s unconsolidated structured entities.
Unconsolidated structured entities include both
TD and third-party
sponsored entities. Securitizations include holdings
in TD-sponsored multi-seller conduits,
as well as third-party sponsored mortgage
and asset-backed
securitizations, including government-sponsored
agency securities such as CMBs, and
U.S. government agency issuances. Investment
Funds and Trusts include
holdings in third-party funds and trusts, as
well as holdings in TD-sponsored asset management
funds and trusts and commitments to certain
U.S. municipal
funds. Amounts in Other are mainly related
to investments in community-based
U.S. tax-advantage entities described in
Note 12. These holdings do not result in
the consolidation of these entities as TD does
not have control over these entities.
Carrying Amount and Maximum Exposure to Unconsolidated
Structured Entities
(millions of Canadian dollars)
As at
October 31, 2025
October 31, 2024
Investment
Investment
funds and
funds and
Securitizations
trusts
Other
Total
Securitizations
trusts
Other
Total
FINANCIAL ASSETS
Trading loans, securities,
and other
$
10,875
$
1,114
$
6
$
11,995
$
7,559
$
992
$
–
$
8,551
Non-trading financial assets at
fair value through profit or loss
4,583
854
178
5,615
684
836
98
1,618
Derivatives
1
–
1,668
–
1,668
–
680
–
680
Financial assets designated at
fair value through profit or loss
176
107
–
283
–
298
–
298
Financial assets at fair value through
other comprehensive income
36,650
737
–
37,387
22,615
967
2
23,584
Debt securities at amortized cost,
net of allowance for credit losses
93,453
1,210
–
94,663
117,890
1,210
–
119,100
Loans
729
4
–
733
4,114
3
–
4,117
Other
27
7
6,024
6,058
2
88
5,762
5,852
Total assets
146,493
5,701
6,208
158,402
152,864
5,074
5,862
163,800
FINANCIAL LIABILITIES
Deposits
–
–
1,226
1,226
–
–
1,451
1,451
Derivatives
1
–
3,988
–
3,988
–
645
–
645
Obligations related to securities
sold short
2,703
317
–
3,020
2,324
331
–
2,655
Total liabilities
2,703
4,305
1,226
8,234
2,324
976
1,451
4,751
Off-balance sheet exposure
2
57,910
4,253
3,358
65,521
22,897
4,392
2,990
30,279
Maximum exposure to loss from
involvement with unconsolidated
structured entities
$
201,700
$
5,649
$
8,340
$
215,689
$
173,437
$
8,490
$
7,401
$
189,328
Size of sponsored unconsolidated
structured entities
3
$
38,029
$
69,554
$
1
$
107,584
$
15,850
$
45,272
$
12
$
61,134
1
Derivatives primarily subject to vanilla interest rate or foreign exchange risk are not included in these amounts
as those derivatives are designed to align the structured entity’s cash flows
with risks absorbed by investors and are not predominantly designed to expose the Bank to variable returns created
by the entity.
2
For the purposes of this disclosure, off-balance sheet exposure represents the notional value of liquidity
facilities, guarantees, or other off-balance sheet commitments without considering
the effect of collateral or other credit enhancements.
3
The size of sponsored unconsolidated structured entities is provided based on the most appropriate measure of
size for the type of entity: (1) The par value of notes issued by
securitization conduits and similar liability issuers; (2) the total AUM of investment funds and trusts; and (3) the total
fair value of partnership or equity shares in issue for partnerships and
similar equity issuers.
Sponsored Unconsolidated Structured Entities
in which the Bank has no Significant Investment
at the End of the Period
Sponsored unconsolidated structured entities
in which the Bank has no significant investment
at the end of the period are predominantly investment
funds and
trusts created for the asset management
business. The Bank would not typically
hold investments, with the exception of
seed capital, in these structured entities.
However, the Bank continues to earn fees from asset management
services provided to these entities, some
of which could be based on the performance of
the
fund. Fees payable are generally senior in
the entity’s priority of payment and would also
be backed by collateral, limiting the Bank’s exposure
to loss from these
entities. The Bank earned non-interest income
of $
2.4
billion (October 31, 2024 – $
2.3
billion) from its involvement with these asset
management entities for the
year ended October 31, 2025, of which $
2.1
billion (October 31, 2024 – $
1.9
billion) was received directly from these
entities. The total AUM in these entities
as at
October 31, 2025 was $
334
billion (October 31, 2024 – $
302.9
billion). Any assets transferred by the
Bank during the period are commingled
with assets obtained
from third parties in the market. Except as previously
disclosed, the Bank has no contractual or
non-contractual arrangements to provide
financial support to
unconsolidated structured entities.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 55
NOTE 11: DERIVATIVES
(a)
DERIVATIVE PRODUCT TYPES AND RISK EXPOSURES
The majority of the Bank’s derivative contracts
are OTC transactions that are bilaterally
negotiated between the Bank and the
counterparty to the contract. The
remainder are exchange-traded contracts transacted
through organized and regulated exchanges
and consist primarily of options and futures.
The Bank’s derivative transactions relate to trading
and non-trading activities. The purpose of
derivatives held for non-trading activities
is primarily for managing
interest rate, foreign exchange, and equity risk
related to the Bank’s funding, lending,
investment, and other structural market risk
management activities. The
Bank’s risk management strategy for these
risks is discussed in shaded sections of
the “Managing Risk” section of the MD&A.
Where hedge accounting is applied, only
specific or a combination of risk components
are hedged, including benchmark interest
rate, foreign exchange rate,
and equity price components. All these risk
components are observable in the relevant
market environment and the change in the fair
value or the variability in
cash flows attributable to these risk components
can be reliably measured for hedged items.
The Bank also enters into derivative transactions
to economically
hedge certain exposures that do not otherwise
qualify for hedge accounting, or
where hedge accounting is not considered
feasible.
Where the derivatives are in hedge relationships,
the main sources of ineffectiveness can be attributed
to differences between hedging instruments and hedged
items:
●
Differences in fixed rates, when contractual coupons
of the fixed rate hedged items are designated;
●
CVA on the hedging derivatives; and
●
Mismatch in critical terms such as tenor and
timing of cash flows between hedging instruments
and hedged items.
To mitigate a portion of the ineffectiveness, the Bank designates the benchmark risk
component of contractual cash flows of
hedged items and executes hedging
derivatives with high-quality counterparties.
The majority of the Bank’s hedging derivatives
are collateralized.
Interest Rate Derivatives
Interest rate swaps are OTC contracts in
which two counterparties agree to exchange
cash flows over a period of time based
on rates applied to a specified
notional amount. This includes interest rate
swaps that are transacted and settled through
a clearing house which acts as a central
counterparty. A typical interest
rate swap would require one counterparty
to pay a fixed market interest rate in exchange
for a variable market interest rate determined
from time to time, with both
calculated on a specified notional amount.
No exchange of principal amount takes place.
Forward rate agreements are OTC contracts
that effectively fix a future interest rate for a
period of time. A typical forward rate agreement
provides that at a pre-
determined future date, a cash settlement
will be made between the counterparties based
upon the difference between a contracted rate and
a market rate to be
determined in the future, calculated on a
specified notional amount. No exchange of principal
amount takes place.
Interest rate options are contracts in
which the purchaser of an option pays the
writer of the option a premium to acquire
the right, but not the obligation, to buy
or sell a specified financial instrument
at a contracted price on a specified future date,
series of future dates, or within a specified
time period. The underlying
financial instrument will have a market price
which varies in response to changes in interest
rates. In managing the Bank’s interest rate
exposure, the Bank acts as
both a writer and purchaser of these options.
Options are transacted both OTC and through
exchanges.
Interest rate futures are standardized
contracts transacted on an exchange, with interest
bearing instruments as the underlying reference
assets. These
contracts differ from forward rate agreements in
that they are in standard amounts with standard
settlement dates and are transacted on an exchange.
The Bank uses interest rate swaps to hedge
its exposure to benchmark interest rate
risk by modifying the repricing or maturity characteristics
of existing and/or
forecast assets and liabilities, including funding
and investment activities. These swaps are
designated in either fair value hedges against
fixed rate
assets/liabilities or cash flow hedges against
floating rate assets/liabilities. For fair
value hedges, the Bank assesses and measures
the hedge effectiveness based
on the change in the fair value of the derivative
hedging instrument relative to the change
in the fair value of the hedged item. For
cash flow hedges, the Bank uses
a hypothetical derivative having terms that identically
match the critical terms of the hedged item
as the proxy for measuring
the change in cash flows of the
hedged item.
Foreign Exchange Derivatives
Foreign exchange forwards are OTC contracts
in which one counterparty contracts
with another to exchange a specified amount
of one currency for a specified
amount of a second currency, at a future date or range of dates.
Swap contracts comprise foreign exchange
swaps and cross-currency interest rate swaps.
Foreign exchange swaps are transactions
in which a foreign
currency is simultaneously purchased in
the spot market and sold in the forward
market, or vice-versa. Cross-currency interest
rate swaps are transactions in
which counterparties exchange principal and
interest cash flows in different currencies over
a period of time. These contracts
are used to manage either currency
or currency and interest rate risk exposures.
Foreign exchange contract options are OTC
or exchange-traded contracts in which
the purchaser of an option pays the writer
of the option a premium to
purchase the right, but not the obligation, to buy
or sell a specified amount of one currency
at a predetermined exchange rate on or
before a specified future date.
Foreign exchange futures contracts are
similar to foreign exchange forward contracts
but differ in that they are in standard currency amounts
with standard
settlement dates and are transacted on an exchange.
The Bank uses non-derivative instruments
such as foreign currency deposit liabilities
and derivative instruments such as
cross-currency swaps and foreign
exchange forwards to hedge its foreign currency
exposure. These hedging instruments
are designated in either net investment hedges
or cash flow hedges. For
net investment hedges, the Bank assesses and
measures the hedge effectiveness based on
the change in the fair value of the hedging
instrument relative to the
translation gains and losses on the net investment
in the foreign operation. For cash flow
hedges, the Bank assesses and measures
the hedge effectiveness
based on the change in the fair value of
the hedging instrument relative to the change
in the cash flows of the foreign currency denominated
asset/liability
attributable to foreign exchange risk, using the
hypothetical derivative method.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 56
Credit Derivatives
The Bank uses credit derivatives such as
credit default swaps (CDS) and total return
swaps to manage risks in the Bank’s corporate loan
portfolio and other cash
instruments, as well as managing counterparty
credit risk on derivatives. Credit risk is the
risk of loss if a borrower or counterparty in
a transaction fails to meet its
agreed payment obligations. The Bank uses
credit derivatives to mitigate industry
concentration and borrower-specific exposure as
part of the Bank’s portfolio risk
management techniques. The credit, legal, and
other risks associated with these transactions
are controlled through well established
procedures. The Bank’s
policy is to enter into these transactions
with investment grade financial institutions.
Credit risk to these counterparties is managed
through the same approval,
limit, and monitoring processes that is
used for all counterparties to which the
Bank has credit exposure.
Credit derivatives are OTC contracts designed
to transfer the credit risk in an underlying
financial instrument (usually termed as a
reference asset) from one
counterparty to another. The most common credit derivatives
are CDS, which include contracts transacted
through clearing houses, and total return swaps.
In
CDS contracts, the CDS purchaser acquires
credit protection on a reference asset or group
of assets from a writer of CDS in exchange
for a premium. The
purchaser may pay the agreed premium
at inception or over a period of time.
The credit protection compensates the
purchaser for deterioration in value of the
reference asset or group of assets upon the occurrence
of certain credit events such as bankruptcy, or changes in specified
credit rating or credit index. Settlement
may be cash based or physical, requiring
the delivery of the reference asset to the
CDS writer. In total return swap contracts, one counterparty
agrees to pay or
receive from the other cash amounts based
on changes in the value of a reference
asset or group of assets, including any
returns such as interest earned on
these assets in exchange for amounts that are
based on prevailing market funding rates.
These cash settlements are made regardless of
whether there is a credit
event.
Other Derivatives
The Bank also transacts in equity and commodity
derivatives in both exchange and OTC
markets.
Equity swaps are OTC contracts in which one
counterparty agrees to pay, or receive from the other, cash amounts based on
changes in the value of a stock
index, a basket of stocks or a single stock.
These contracts sometimes include a payment
in respect of dividends.
Equity options give the purchaser of the option,
for a premium, the right, but not the obligation,
to buy from or sell to the writer of an option,
an underlying stock
index, basket of stocks or a single stock
at a contracted price. Options are transacted
both OTC and through exchanges.
Equity index futures are standardized
contracts transacted on an exchange. They
are based on an agreement to pay or receive
a cash amount based on the
difference between the contracted price level of
an underlying stock index and its corresponding
market price level at a specified future date.
There is no actual
delivery of stocks that comprise the underlying
index. These contracts are in standard amounts
with standard settlement dates.
Equity forwards are OTC contracts in
which one counterparty contracts with another
to buy or sell a single stock or stock index, or
to settle the contract in cash
based on changes in the value of a reference
asset, at a future date.
Commodity and other contracts include
commodity forwards, futures, swaps, and
options, such as precious metals and energy-related
products in both OTC
and exchange markets.
The Bank applies hedge accounting on
certain equity forwards and/or total return
swaps to hedge exposure to equity price risk.
These derivatives are
designated as cash flow hedges.
The Bank assesses and measures the hedge
effectiveness based on the change in the
fair value of the hedging instrument
relative to the change in the cash flows of the
hedged item attributable to movement in
equity price, using the hypothetical derivative
method.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 57
Fair Value of Derivatives
(millions of Canadian dollars)
October 31, 2025
October 31, 2024
Fair value as at
Fair value as at
balance sheet date
balance sheet date
Positive
Negative
Positive
Negative
Derivatives held or issued for trading
purposes
Interest rate contracts
1
Forward rate agreements
$
119
$
93
$
232
$
48
Swaps
7,968
6,432
11,971
9,470
Options written
–
1,121
–
1,118
Options purchased
1,237
–
1,210
–
Total interest rate contracts
9,324
7,646
13,413
10,636
Foreign exchange contracts
1
Forward contracts
3,585
1,935
3,617
2,521
Swaps
14,776
14,845
15,456
14,304
Cross-currency interest rate swaps
24,854
23,378
24,366
22,496
Options written
–
575
–
619
Options purchased
503
–
507
–
Total foreign exchange contracts
43,718
40,733
43,946
39,940
Credit derivative contracts
Credit default swaps – protection purchased
12
311
–
294
Credit default swaps – protection sold
32
1
5
2
Total credit derivative contracts
44
312
5
296
Other contracts
Equity contracts
9,485
16,808
5,286
6,636
Commodity and other contracts
5,619
7,054
5,321
5,545
Total other contracts
15,104
23,862
10,607
12,181
Fair value – trading
68,190
72,553
67,971
63,053
Derivatives held or issued for non-trading
purposes
Interest rate contracts
Forward rate agreements
–
–
8
–
Swaps
1,680
2,006
2,005
2,807
Options written
–
–
–
1
Options purchased
–
2
16
–
Total interest rate contracts
1,680
2,008
2,029
2,808
Foreign exchange contracts
Forward contracts
35
1,129
386
494
Swaps
29
1
80
20
Cross-currency interest rate swaps
9,827
662
6,649
524
Total foreign exchange contracts
9,891
1,792
7,115
1,038
Credit derivative contracts
Credit default swaps – protection purchased
–
128
1
107
Total credit derivative contracts
–
128
1
107
Other contracts
Equity contracts
3,211
2,875
945
1,362
Total other contracts
3,211
2,875
945
1,362
Fair value – non-trading
14,782
6,803
10,090
5,315
Total fair value
$
82,972
$
79,356
$
78,061
$
68,368
1
The fair values of interest rate futures and foreign exchange futures are immaterial and therefore excluded from
this table.
The following table distinguishes derivatives held
or issued for non-trading purposes between
those that have been designated in qualifying
hedge accounting
relationships and those which have not been
designated in qualifying hedge accounting
relationships as at October 31, 2025 and
October 31, 2024.
Fair Value of Non-Trading
Derivatives
1
(millions of Canadian dollars)
As at
October 31, 2025
Derivative Assets
Derivative Liabilities
Derivatives
Derivatives
Derivatives in qualifying
not in
Derivatives in qualifying
not in
hedging relationships
qualifying
hedging relationships
qualifying
Fair
Cash
Net
hedging
Fair
Cash
Net
hedging
value
flow
investment
relationships
Total
value
flow
investment
relationships
Total
Derivatives held or issued for
non-trading purposes
Interest rate contracts
$
1,275
$
199
$
–
$
206
$
1,680
$
300
$
771
$
–
$
937
$
2,008
Foreign exchange contracts
–
9,651
11
229
9,891
–
1,485
286
21
1,792
Credit derivative contracts
–
–
–
–
–
–
–
–
128
128
Other contracts
–
1,808
–
1,403
3,211
–
21
–
2,854
2,875
Fair value – non-trading
$
1,275
$
11,658
$
11
$
1,838
$
14,782
$
300
$
2,277
$
286
$
3,940
$
6,803
October 31, 2024
Derivatives held or issued for
non-trading purposes
Interest rate contracts
$
932
$
123
$
–
$
974
$
2,029
$
309
$
1,290
$
–
$
1,209
$
2,808
Foreign exchange contracts
–
6,945
–
170
7,115
–
846
–
192
1,038
Credit derivative contracts
–
–
–
1
1
–
–
–
107
107
Other contracts
–
337
–
608
945
–
132
–
1,230
1,362
Fair value – non-trading
$
932
$
7,405
$
–
$
1,753
$
10,090
$
309
$
2,268
$
–
$
2,738
$
5,315
1
Certain derivative assets qualify to be offset with certain derivative liabilities on the Consolidated Balance
Sheet. Refer to Note 6 for further details.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 58
Fair Value Hedges
The following table presents the effects of fair
value hedges on the Consolidated Balance
Sheet and the Consolidated Statement of Income.
Fair Value Hedges
(millions of Canadian dollars)
For the years ended or as at
October 31, 2025
Accumulated
Accumulated
Change in
Change in fair
amount of fair
amount of fair
value of hedged
value of hedging
Carrying
value hedge
value hedge
items for
instruments for
amounts
adjustments
adjustments on
ineffectiveness
ineffectiveness
Hedge
for hedged
on hedged
de-designated
measurement
measurement
ineffectiveness
items
items
1,2
hedged items
Assets
Interest rate risk
Debt securities at amortized cost
$
2,031
$
(2,033)
$
(2)
$
112,729
$
(7,849)
$
(3,195)
Financial assets at fair value through
other comprehensive income
1,616
(1,618)
(2)
93,230
472
18
Loans
517
(514)
3
31,906
(14)
(5)
Total assets
4,164
(4,165)
(1)
237,865
(7,391)
(3,182)
Liabilities
Interest rate risk
Deposits
(1,090)
1,088
(2)
165,311
(875)
27
Securitization liabilities at amortized cost
(141)
141
–
8,599
169
–
Subordinated notes and debentures
(53)
53
–
2,825
82
(54)
Total liabilities
(1,284)
1,282
(2)
176,735
(624)
(27)
Total
$
2,880
$
(2,883)
$
(3)
October 31, 2024
Assets
Interest rate risk
Debt securities at amortized cost
$
6,856
$
(6,899)
$
(43)
$
113,323
$
(10,995)
$
(3,015)
Financial assets at fair value through
other comprehensive income
3,127
(3,146)
(19)
53,253
(1,086)
(71)
Loans
1,789
(1,798)
(9)
52,765
(328)
4
Total assets
11,772
(11,843)
(71)
219,341
(12,409)
(3,082)
Liabilities
Interest rate risk
Deposits
(2,291)
2,265
(26)
125,519
(3,543)
(136)
Securitization liabilities at amortized cost
(163)
163
–
6,865
68
–
Subordinated notes and debentures
(50)
50
–
3,158
27
(91)
Total liabilities
(2,504)
2,478
(26)
135,542
(3,448)
(227)
Total
$
9,268
$
(9,365)
$
(97)
1
The Bank has portfolios of fixed rate financial assets and liabilities whereby the principal amount changes frequently
due to originations, issuances, maturities and prepayments. The
interest rate risk hedges on these portfolios are rebalanced dynamically.
2
Reported balances represent adjustments to the carrying values of hedged items as included in the “Carrying amounts
for hedged items” column in this table.
Cash Flow Hedges and Net Investment
Hedges
The following table presents the effects of cash
flow hedges and net investment hedges on the
Bank’s Consolidated Statement of Income and
the Consolidated
Statement of Comprehensive Income.
Cash Flow and Net Investment Hedges
(millions of Canadian dollars)
For the years ended
October 31, 2025
Change in fair
Hedging
Amount reclassified
Change in value
value of hedging
gains (losses)
from accumulated
Net change
of hedged items
instruments for
recognized in other
other comprehensive
in other
for ineffectiveness
ineffectiveness
Hedge
comprehensive
income (loss)
comprehensive
measurement
measurement
ineffectiveness
income
1
to earnings
1
income (loss)
1
Cash flow hedges
2
Interest rate risk
3
$
(1,859)
$
1,860
$
1
$
1,619
$
(1,048)
$
2,667
Foreign exchange risk
4,5,6
(5,199)
5,201
2
4,679
4,559
120
Equity price risk
(1,531)
1,542
11
1,542
1,347
195
Total cash flow hedges
$
(8,589)
$
8,603
$
14
$
7,840
$
4,858
$
2,982
Net investment hedges
7
$
1,088
$
(1,088)
$
–
$
(1,088)
$
(799)
$
(289)
October 31, 2024
Cash flow hedges
2
Interest rate risk
3
$
(3,602)
$
3,606
$
4
$
2,128
$
(2,311)
$
4,439
Foreign exchange risk
4,5,6
(1,863)
1,867
4
1,287
2,204
(917)
Equity price risk
56
(59)
(3)
(59)
(66)
7
Total cash flow hedges
$
(5,409)
$
5,414
$
5
$
3,356
$
(173)
$
3,529
Net investment hedges
$
457
$
(457)
$
–
$
(457)
$
(41)
$
(416)
1
Effects on OCI are presented on a pre-tax basis.
2
During the years ended October 31, 2025 and October 31, 2024, there were no instances where forecast hedged
transactions failed to occur.
3
Hedged items include forecast interest cash flows on loans
,
deposits, and securitization liabilities.
4
For non-derivative instruments designated as hedging foreign exchange risk, fair value change is measured as
the gains and losses due to spot foreign exchange movements.
5
Cross-currency swaps may be used to hedge 1) foreign exchange risk, or 2) a combination of interest rate risk
and foreign exchange risk in a single hedge relationship. Cross-currency
swaps in both types of hedge relationships are disclosed in the foreign exchange risk category.
6
Hedged items include principal and interest cash flows on foreign denominated securities, loans, deposits, other
liabilities, and subordinated notes and debentures.
7
The amount reclassified from accumulated other comprehensive income (loss) to earnings relates to the
sale of the Bank’s equity investment in Schwab.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 59
Reconciliation of Accumulated Other Comprehensive
Income (Loss)
1
(millions of Canadian dollars)
For the years ended
October 31, 2025
Accumulated other
Accumulated other
Accumulated other
Accumulated other
comprehensive
Net changes in other
comprehensive
comprehensive
comprehensive
income (loss)
comprehensive
income (loss)
income (loss) on
income (loss) on
at beginning of year
income (loss)
at end of year
designated hedges
de-designated hedges
Cash flow hedges
Interest rate risk
$
(2,002)
$
2,667
$
665
$
1,727
$
(1,062)
Foreign exchange risk
(2,008)
120
(1,888)
(1,888)
–
Equity price risk
(14)
195
181
181
–
Total cash flow hedges
$
(4,024)
$
2,982
$
(1,042)
$
20
$
(1,062)
Net investment hedges
Foreign translation risk
$
(6,768)
$
(289)
$
(7,057)
$
(7,057)
$
–
October 31, 2024
Cash flow hedges
Interest rate risk
$
(6,441)
$
4,439
$
(2,002)
$
455
$
(2,457)
Foreign exchange risk
(1,091)
(917)
(2,008)
(2,008)
–
Equity price risk
(21)
7
(14)
(14)
–
Total cash flow hedges
$
(7,553)
$
3,529
$
(4,024)
$
(1,567)
$
(2,457)
Net investment hedges
Foreign translation risk
$
(6,352)
$
(416)
$
(6,768)
$
(6,768)
$
–
1
Presented on a pre-tax basis.
(b)
NOTIONAL AMOUNTS
The notional amounts are not recorded as assets
or liabilities as they represent the face amount
of the contract to which a rate or price is applied
to determine the
amount of cash flows to be exchanged.
Notional amounts do not represent the potential
gain or loss associated with the market risk
nor are they indicative of the
credit risk associated with derivative
financial instruments.
The following table discloses the notional
amount of OTC and exchange-traded derivatives.
Over-the-Counter and Exchange-Traded Derivatives
(millions of Canadian dollars)
As at
October 31
October 31
2025
2024
Trading
Over-the-Counter
1
Non
Clearing
clearing
Exchange-
Non-
house
2
house
traded
Total
trading
3
Total
Total
Notional
Interest rate contracts
Futures
$
–
$
–
$
1,207,135
$
1,207,135
$
–
$
1,207,135
$
761,112
Forward rate agreements
942,703
31,384
–
974,087
579
974,666
574,289
Swaps
19,608,951
623,143
–
20,232,094
1,910,412
22,142,506
19,839,245
Options written
–
150,130
53,654
203,784
105
203,889
99,490
Options purchased
–
171,046
56,203
227,249
3
227,252
119,511
Total interest rate contracts
20,551,654
975,703
1,316,992
22,844,349
1,911,099
24,755,448
21,393,647
Foreign exchange contracts
Forward contracts
48
456,331
–
456,379
26,687
483,066
380,615
Swaps
–
1,824,527
–
1,824,527
2,160
1,826,687
1,692,601
Cross-currency interest rate swaps
–
1,716,271
–
1,716,271
181,907
1,898,178
1,669,577
Options written
–
62,931
326
63,257
–
63,257
56,777
Options purchased
–
58,215
40
58,255
–
58,255
49,359
Total foreign exchange contracts
48
4,118,275
366
4,118,689
210,754
4,329,443
3,848,929
Credit derivative contracts
Credit default swaps – protection purchased
13,907
1,934
–
15,841
2,890
18,731
15,504
Credit default swaps – protection sold
1,889
329
–
2,218
–
2,218
1,893
Total credit derivative contracts
15,796
2,263
–
18,059
2,890
20,949
17,397
Other contracts
Equity contracts
–
218,155
191,085
409,240
32,295
441,535
278,028
Commodity and other contracts
174
99,416
188,539
288,129
–
288,129
245,595
Total other contracts
174
317,571
379,624
697,369
32,295
729,664
523,623
Total
$
20,567,672
$
5,413,812
$
1,696,982
$
27,678,466
$
2,157,038
$
29,835,504
$
25,783,596
1
Collateral held under a Credit Support Annex to help reduce counterparty credit risk is in the form of high-quality
and liquid assets such as cash and high-quality government securities.
Acceptable collateral is governed by the Collateralized Trading Policy.
2
Derivatives executed through a central clearing house reduce settlement risk due to the ability to net settle offsetting
positions for capital purposes and therefore receive preferential
capital treatment compared to those settled with non-central clearing house counterparties.
3
Includes $
1,762
billion of OTC derivatives that are transacted with clearing houses (October 31, 2024 – $
1,532
billion) and $
395
billion of OTC derivatives that are transacted with non-
clearing houses (October 31, 2024 – $
394
billion). There were
no
exchange-traded derivatives both as at October 31, 2025 and October 31, 2024.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 60
The following table distinguishes the notional
amount of derivatives held or issued for
non-trading purposes between those that have
been designated in qualifying
hedge accounting relationships and those
which have not been designated in qualifying
hedge accounting relationships.
Notional of Non-Trading Derivatives
(millions of Canadian dollars)
As at
October 31, 2025
Derivatives in qualifying hedging relationships
Derivatives not in
Derivatives held or issued for
Fair
Cash
Net
qualifying hedging
hedging (non-trading) purposes
value
flow
1
Investment
1
relationships
Total
Interest rate contracts
$
436,988
$
380,109
$
–
$
1,094,002
$
1,911,099
Foreign exchange contracts
–
172,269
23,220
15,265
210,754
Credit derivative contracts
–
–
–
2,890
2,890
Other contracts
–
2,551
–
29,744
32,295
Total notional non-trading
$
436,988
$
554,929
$
23,220
$
1,141,901
$
2,157,038
October 31, 2024
Interest rate contracts
$
395,687
$
340,741
$
–
$
974,641
$
1,711,069
Foreign exchange contracts
–
159,693
–
15,771
175,464
Credit derivative contracts
–
–
–
2,708
2,708
Other contracts
–
2,409
–
33,640
36,049
Total notional non-trading
$
395,687
$
502,843
$
–
$
1,026,760
$
1,925,290
1
Certain cross-currency swaps are executed using multiple derivatives, including interest rate swaps. These derivatives
are used to hedge foreign exchange rate risk in cash flow hedges
and net investment hedges.
The following table discloses the notional
principal amount of OTC derivatives and exchange-traded
derivatives based on their contractual terms
to maturity.
Derivatives by Remaining Term-to-Maturity
(millions of Canadian dollars)
As at
October
October
2025
2024
Within
Over 1 year
Over
Notional Principal
1 year
to 5 years
5 years
Total
Total
Interest rate contracts
Futures
$
891,230
$
315,905
$
–
$
1,207,135
$
761,112
Forward rate agreements
946,656
28,010
–
974,666
574,289
Swaps
7,262,622
9,998,401
4,881,483
22,142,506
19,839,245
Options written
159,225
41,237
3,427
203,889
99,490
Options purchased
165,281
59,498
2,473
227,252
119,511
Total interest rate contracts
9,425,014
10,443,051
4,887,383
24,755,448
21,393,647
Foreign exchange contracts
Forward contracts
461,515
19,334
2,217
483,066
380,615
Swaps
1,781,558
42,098
3,031
1,826,687
1,692,601
Cross-currency interest rate swaps
551,107
945,450
401,621
1,898,178
1,669,577
Options written
58,108
5,149
–
63,257
56,777
Options purchased
53,584
4,666
5
58,255
49,359
Total foreign exchange contracts
2,905,872
1,016,697
406,874
4,329,443
3,848,929
Credit derivative contracts
Credit default swaps – protection purchased
4,943
8,716
5,072
18,731
15,504
Credit default swaps – protection sold
554
1,119
545
2,218
1,893
Total credit derivative contracts
5,497
9,835
5,617
20,949
17,397
Other contracts
Equity contracts
338,989
90,121
12,425
441,535
278,028
Commodity and other contracts
256,783
30,286
1,060
288,129
245,595
Total other contracts
595,772
120,407
13,485
729,664
523,623
Total
$
12,932,155
$
11,589,990
$
5,313,359
$
29,835,504
$
25,783,596
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 61
The following table discloses the notional amount
and average price of derivative instruments
designated in qualifying hedge accounting
relationships.
Hedging Instruments by Remaining Term-to-Maturity
(millions of Canadian dollars, except
as noted)
As at
October 31
October 31
2025
2024
Within
Over 1 year
Over 5
Notional
1 year
to 5 years
years
Total
Total
Interest rate risk
Interest rate swaps
Notional – pay fixed
$
15,114
$
126,746
$
106,458
$
248,318
$
230,740
Average fixed interest rate %
2.77
3.02
2.58
Notional – received fixed
121,601
190,068
44,210
355,879
317,149
Average fixed interest rate %
3.04
3.01
3.15
Total notional – interest rate risk
136,715
316,814
150,668
604,197
547,889
Foreign exchange risk
1
Forward contracts
Notional – USD/CAD
2,127
3,902
38
6,067
7,816
Average FX forward rate
1.31
1.31
1.30
Notional – EUR/CAD
2,808
14,007
2,756
19,571
15,141
Average FX forward rate
1.59
1.55
1.60
Notional – other
257
–
–
257
901
Cross-currency swaps
2,3
Notional – USD/CAD
39,860
29,184
11,449
80,493
46,944
Average FX rate
1.36
1.35
1.32
Notional – EUR/CAD
15,336
34,779
14,373
64,488
61,877
Average FX rate
1.45
1.47
1.49
Notional – GBP/CAD
–
8,189
–
8,189
9,760
Average FX rate
1.68
Notional – other currency pairs
4
5,997
9,101
1,326
16,424
17,254
Total notional – foreign exchange risk
66,385
99,162
29,942
195,489
159,693
Equity Price Risk
Notional – equity contracts
2,551
2,551
2,409
Total notional
$
205,651
$
415,976
$
180,610
$
802,237
$
709,991
1
Foreign currency denominated deposit liabilities are also used to hedge foreign exchange risk. Includes $
60.3
billion (October 31, 2024 – $
77.4
billion) of the carrying value of these non-
derivative hedging instruments
designated under net investment hedges.
2
Cross-currency swaps may be used to hedge 1) foreign exchange risk, or 2) a combination of interest rate risk and
foreign exchange risk in a single hedge relationship. Cross-currency
swaps in both types of hedge relationships are disclosed in the foreign exchange risk category.
3
Certain cross-currency swaps are executed using multiple derivatives, including interest rate swaps. The notional
amount of these interest rate swaps, excluded from the above, is
$
212.9
billion as at October 31, 2025 (October 31, 2024 – $
188.5
billion).
4
Includes derivatives executed to manage non-trading foreign currency exposures, when more than one currency
is involved prior to hedging to the Canadian dollar, or when
the currency
pair is not a significant exposure for the Bank.
(c)
DERIVATIVE-RELATED RISKS
Market Risk
Derivatives, in the absence of any compensating
upfront 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, such
that the previously contracted terms of the derivative
transactions have become more or less favourable
than what can be negotiated under current
market conditions for contracts with the same
terms and the same
remaining period to expiry. The potential for derivatives to increase
or decrease in value as a result of the foregoing
factors is generally referred to as market risk.
Credit Risk
Credit risk on derivatives, also known as
counterparty credit risk, is the risk of a
financial loss occurring as a result of
the failure of a counterparty to meet its
obligation to the Bank.
Derivative-related credit risks are subject
to the same credit approval, limit and
monitoring standards that are used for managing
other transactions that create
credit exposure. This includes evaluating
the creditworthiness of counterparties, and
managing the size, diversification and maturity
structure of the portfolios. The
Bank actively engages in risk mitigation
strategies through the use of multi-product
derivative master netting agreements,
collateral and other risk mitigation
techniques. Master netting agreements reduce
risk to the Bank by allowing the Bank
to close out and net transactions with counterparties
subject to such
agreements upon the occurrence of certain
events.
The current replacement cost and credit equivalent
amount shown in the following table are based
on the
standardized approach for counterparty credit
risk. According to this approach, the
current replacement cost accounts for
the fair value of the positions, posted and
received collateral, and master netting agreement
clauses. The credit equivalent amount is
the sum of the current replacement cost
and the potential future
exposure, which is calculated by applying
factors determined by OSFI to the notional
principal amount of the derivatives. The risk-weighted
amount is determined
by applying the adequate risk weights to
the credit equivalent amount.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 62
Credit Exposure of Derivatives
(millions of Canadian dollars)
As at
October 31, 2025
October 31, 2024
Current
Credit
Risk-
Current
Credit
Risk-
replacement
equivalent
weighted
replacement
equivalent
weighted
cost
amount
amount
cost
amount
amount
Interest rate contracts
Forward rate agreements
$
49
$
162
$
61
$
35
$
102
$
29
Swaps
2,838
8,962
1,323
4,215
11,037
964
Options written
5
147
26
7
140
26
Options purchased
10
151
29
17
123
23
Total interest rate contracts
2,902
9,422
1,439
4,274
11,402
1,042
Foreign exchange contracts
Forward contracts
1,064
5,180
978
1,746
5,643
1,022
Swaps
2,802
16,099
2,373
3,234
16,136
2,246
Cross-currency interest rate swaps
3,358
15,195
1,574
4,124
17,176
1,515
Options written
34
334
74
36
291
59
Options purchased
43
279
68
50
239
64
Total foreign exchange contracts
7,301
37,087
5,067
9,190
39,485
4,906
Other contracts
Credit derivatives
–
192
26
–
207
30
Equity contracts
729
12,531
2,994
669
8,964
2,348
Commodity and other contracts
746
4,777
1,044
1,115
5,752
848
Total other contracts
1,475
17,500
4,064
1,784
14,923
3,226
Total derivatives
11,678
64,009
10,570
15,248
65,810
9,174
Qualifying Central Counterparty Contracts
11,772
24,449
797
10,529
19,117
652
Total
$
23,450
$
88,458
$
11,367
$
25,777
$
84,927
$
9,826
Current Replacement Cost of Derivatives
(millions of Canadian dollars, except
as noted)
As at
Canada
1
United States
1
Other international
1
Total
October 31
October 31
October 31
October 31
October 31
October 31
October 31
October 31
By sector
2025
2024
2025
2024
2025
2024
2025
2024
Financial
$
3,367
$
4,647
$
56
$
38
$
605
$
272
$
4,028
$
4,957
Government
2,695
3,594
77
98
1,018
2,618
3,790
6,310
Other
1,818
1,670
673
639
1,369
1,671
3,860
3,980
Total current replacement cost
$
7,880
$
9,911
$
806
$
775
$
2,992
$
4,561
$
11,678
$
15,247
October 31
October 31
October 31
October 31
2025
2024
By location of risk
2025
2024
% mix
% mix
Canada
$
3,237
$
3,737
27.7
%
24.5
%
United States
3,930
4,937
33.7
32.4
Other international
United Kingdom
717
775
6.1
5.1
Europe – other
1,919
2,828
16.4
18.5
Other
1,875
2,970
16.1
19.5
Total Other international
4,511
6,573
38.6
43.1
Total current replacement cost
$
11,678
$
15,247
100.0
%
100.0
%
1
Based on geographic location of unit responsible for recording revenue.
Certain of the Bank’s derivative contracts are
governed by master derivative agreements
having provisions that may permit the Bank’s
counterparties to require,
upon the occurrence of a certain contingent event:
(1) the posting of collateral or other acceptable
remedy such as assignment of the affected
contracts to an
acceptable counterparty;
or (2)
settlement of outstanding derivative contracts.
Most often, these contingent events are in the
form of a downgrade of the senior
debt rating of the Bank, either as counterparty
or as guarantor of one of the Bank’s subsidiaries.
At October 31, 2025, the aggregate net liability
position of those
contracts would require: (1) the posting of
collateral or other acceptable remedy
totalling $
331
million (October 31, 2024 – $
511
million) in the event of a one-notch
or two-notch downgrade in the Bank’s senior debt rating;
and (2) funding totalling $
358
million (October 31, 2024 – $
134
million) following the termination and
settlement of outstanding derivative contracts
in the event of a one-notch or two-notch
downgrade in the Bank’s senior debt rating.
Certain of the Bank’s derivative contracts are
governed by master derivative agreements
having credit support provisions
that permit the Bank’s counterparties
to call for collateral depending on the net mark-to-market
exposure position of all derivative contracts
governed by that master derivative agreement.
Some of
these agreements may permit the Bank’s counterparties
to require, upon the downgrade of the senior
debt ratings of the Bank, to post additional
collateral. As of
October 31, 2025, the fair value of all derivative
instruments with credit risk related
contingent features in a net liability position
was $
17
billion (October 31, 2024 –
$
16
billion). The Bank has posted $
18
billion (October 31, 2024 – $
17
billion) of collateral for this exposure in the normal
course of business. As of
October 31, 2025, the impact of a one-notch downgrade
in the Bank’s senior debt ratings would require the
Bank to post an additional $
1,015
million
(October 31, 2024 – $
49
million) of collateral to that posted in the
normal course of business. The increase
is attributable to the clarification of downgrade
requirements under a single Credit Support
Annex with no economic impact. A two-notch
downgrade in the Bank’s senior debt ratings
would require the Bank to
post an additional $
1,536
million (October 31, 2024 – $
1,228
million) of collateral to that posted in the
normal course of business.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 63
(d)
IMPACT FROM TERMINATED FIRST HORIZON ACQUISITION-RELATED CAPITAL HEDGING STRATEGY
Prior to the termination of the merger agreement
with First Horizon on May 4, 2023,
the Bank had implemented a strategy to mitigate
the impact of interest rate
volatility to capital on closing of the acquisition.
In order to mitigate this impact, the Bank
de-designated certain interest rate
swaps hedging fixed income
investments in fair value hedge accounting
relationships. As a result of the de-designation,
mark-to-market gains (losses) on these
swaps were recognized in
earnings, without any corresponding offset from
the previously hedged investments. The
de-designation also triggered the amortization
of the investments’ basis
adjustment to net interest income over
the remaining expected life of the investments.
Following the announcement to terminate
the merger agreement, the Bank discontinued
this strategy and reinstated hedge accounting
on the portfolio of fixed
income investments using new swaps
entered into at higher market rates. The
impact from the higher swap rates and
the basis adjustment amortization discussed
above is reported in net interest income. Income
recognized from this strategy
will reverse over time causing a decrease
to net interest income. This impact is
expected to continue until fiscal 2029. For
the year ended October 31, 2025, the decrease
to net interest income was $
205
million (October 31, 2024 –
$
242
million), recorded in the Corporate segment.
NOTE 12: INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
INVESTMENT IN THE CHARLES SCHWAB CORPORATION
On February 12, 2025, the Bank sold its entire
remaining equity investment in Schwab
through a registered offering and share repurchase
by Schwab.
Immediately prior to the sale, TD held
184.7
million shares of Schwab’s common stock, representing
10.1
% economic ownership. The sale of the shares resulted
in proceeds of $
21.0
billion and the Bank recognized in Other
income (loss) a net gain on sale of $
9.2
billion. This gain is net of the release of
related cumulative
foreign currency translation from AOCI, the
release of AOCI on designated net investment
hedging items, and direct transaction costs.
For segment reporting, the
Bank recognized an after-tax gain of $
8.6
billion in its Corporate segment and $
184
million of underwriting fees in its Wholesale
segment as a result of TD
Securities acting as a lead bookrunner on
the transaction.
The Bank discontinued recording its share
of earnings available to common shareholders
from its investment in Schwab following the
sale. The Bank’s share of
net income from its prior investment in Schwab
of $
305
million during the year ended October 31, 2025,
reflects net income after adjustments
for amortization of
certain intangibles net of tax.
The stockholder agreement to which the Bank
and Schwab were party (the “Stockholder
Agreement”) was terminated by
the Bank’s sale of its equity investment
in Schwab. The Bank continues to have a
business relationship with Schwab through
the insured deposit account agreement
(“Schwab IDA Agreement”).
Prior to the sale, the Bank had significant
influence over Schwab and the ability to
participate in the financial and operational
policy-making decisions of Schwab
through a combination of the Bank’s ownership,
board representation and the insured deposit
account agreement between the Bank and
Schwab. As such, the
Bank accounted for its investment in
Schwab using the equity method. The Bank’s
share of Schwab’s earnings available to common
shareholders was reported
with a one-month lag. The Bank took into
account changes in the one-month lag period
that would significantly affect the results.
On August 21, 2024, the Bank sold
40.5
million shares of common stock of Schwab for
proceeds of $
3.4
billion (US$
2.5
billion). The share sale reduced the
Bank’s ownership interest in Schwab from
12.3
% to
10.1
%. The Bank recognized $
1.0
billion (US$
0.7
billion) as other income in fiscal 2024.
As at October 31, 2024, the Bank’s reported investment
in Schwab was approximately
10.1
%, consisting of
7.5
% of the outstanding voting common shares
and
the remainder in non-voting common shares
of Schwab with an aggregate fair value of
$
18
billion (US$
13
billion) based on the closing price of
US$
70.83
on the
New York Stock Exchange.
Under the Stockholder Agreement, the Bank
had the right to designate two members of
Schwab’s Board of Directors and had representation
on two Board
Committees, subject to the Bank meeting
certain conditions. The Bank’s designated directors
were the Bank’s former Group President and Chief
Executive Officer
and the Bank’s former Chair of the Board. Under
the Stockholder Agreement, the Bank
was not permitted to own more than
9.9
% voting common shares of
Schwab, and the Bank was subject to
customary standstill restrictions and
subject to certain exceptions, transfer restrictions.
The carrying value of the Bank’s prior investment
in Schwab of $
9.0
billion as at October 31, 2024 represented
the Bank’s share of Schwab’s stockholders’
equity, adjusted for goodwill, other intangibles, and cumulative
translation adjustment. The Bank’s share of net
income from its investment in Schwab of
$
703
million during the year ended October 31, 2024,
reflects net income after adjustments
for amortization of certain intangibles net of tax.
The following tables
represent the gross amount of Schwab’s total
assets, liabilities, net revenues, net income
available to common stockholders, other
comprehensive income (loss),
and comprehensive income (loss) for the
comparative year.
Summarized Financial Information
(millions of Canadian dollars)
As at
September 30
2024
Total assets
$
630,363
Total liabilities
566,502
(millions of Canadian dollars)
For the year ended
September 30
2024
Total net revenues
$
25,493
Total net income available to common stockholders
6,376
Total other comprehensive income (loss)
8,356
Total comprehensive income (loss)
14,732
Insured Deposit Account Agreement
On May 4, 2023, the Bank and Schwab entered
into an amended Schwab IDA Agreement,
with an initial expiration of July 1, 2034.
Pursuant to the Schwab IDA
Agreement, the Bank makes sweep deposit
accounts available to clients of Schwab.
Schwab designates a portion of the deposits
with the Bank as fixed-rate
obligation amounts (FROA). Remaining deposits
are designated as floating-rate obligations.
The FROA floor is set at US$
60
billion.
Refer to Note 26 for further details on
the Schwab IDA Agreement.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 64
INVESTMENTS
IN OTHER ASSOCIATES AND JOINT VENTURES
Except for Schwab as disclosed above,
the Bank did not have investments in associates
or joint ventures which were individually
material as of October 31, 2025,
or October 31, 2024. The carrying amount
of the Bank’s investments in other associates
and joint ventures as at October 31, 2025
was $
5.2
billion
(October 31, 2024 – $
4.9
billion), recorded in Other assets on the
Consolidated Balance Sheet.
Other associates and joint ventures consisted
predominantly of investments in private
funds or partnerships that make equity investments,
provide debt
financing or support community-based tax-advantaged
investments. The investments in these
entities generate a return primarily through
the realization of U.S.
federal and state income tax credits,
including Low Income Housing Tax Credits, New Markets Tax Credits,
and Historic Tax Credits.
NOTE 13: GOODWILL AND OTHER INTANGIBLES
GOODWILL
The recoverable amount of the Bank’s CGUs or groups
of CGUs is determined from internally
developed valuation models that consider
various factors and
assumptions such as forecasted earnings, growth
rates, discount rates, and terminal
growth rates. Management is required
to use judgment in estimating the
recoverable amount of the CGUs or groups
of CGUs,
and the use of different assumptions and estimates
in the calculations could influence the
determination of
the existence of impairment and the valuation
of goodwill. Management believes that the assumptions
and estimates used are reasonable and
supportable. Where
possible, assumptions generated internally
are compared to relevant market information.
The carrying amounts of the Bank’s CGUs or groups
of CGUs are
determined by management using risk-based
capital models to adjust net assets and liabilities
by CGU. These models consider various
factors including market
risk, credit risk,
and operational risk, including investment
capital (comprised of goodwill and other intangibles).
As at the date of the last impairment test,
the
amount of capital not directly attributable
to the CGUs and held within the Corporate
segment was approximately $
22.9
billion (2024 – $
11.5
billion) and primarily
related to treasury assets and excess capital
managed within the Corporate segment.
The Bank’s capital oversight committees provide
oversight to the Bank’s
capital allocation methodologies.
Key Assumptions
The recoverable amount of each CGU or group
of CGUs has been determined based on its estimated
value-in-use. In assessing value-in-use, estimated
future
cash flows based on the Bank’s internal forecast
are discounted using an appropriate pre-tax
discount rate.
The following were the key assumptions
applied in the goodwill impairment testing:
Discount Rate
The pre-tax discount rates used reflect
current market assessments
of the risks specific to each group of
CGUs and are dependent on the risk profile
and capital
requirements of each group of CGUs.
Forecasted Earnings
The earnings included in the goodwill impairment
testing for each group of CGUs were based
on the Bank’s internal forecast, which projects
expected cash flows
over the next five years,
with the exception of the U.S. Personal and
Commercial Banking group of CGUs
where cash flow projections covering a
seven year
period were used, which more closely aligns
with the long-term strategic growth plan for
the business.
Terminal Growth Rates
Beyond the Bank’s internal forecast, cash flows
were assumed to grow at a steady terminal
growth rate. Terminal growth rates were based on the expected long-
term growth of gross domestic product and
inflation and ranged from
3.7
% to
4.2
% (2024 –
2.0
% to
4.1
%).
In considering the sensitivity of the key assumptions
discussed above, management determined
that a reasonably
possible change in any of the above
would not
result in the recoverable amount of any of
the groups of CGUs to be less than their carrying
amount.
Goodwill by Segment
(millions of Canadian dollars)
Canadian
Personal and
Wealth
Commercial
U.S.
Management
Wholesale
Banking
Retail
1
and Insurance
Banking
Total
Carrying amount of goodwill as at November 1, 2023
$
902
$
14,620
$
2,122
$
958
$
18,602
Additions (disposals)
2
–
–
–
128
128
Foreign currency translation adjustments and other
–
43
3
75
121
Carrying amount of goodwill as at October 31, 2024
3
$
902
$
14,663
$
2,125
$
1,161
$
18,851
Additions (disposals)
–
–
–
–
–
Foreign currency translation adjustments and other
1
113
7
8
129
Carrying amount of goodwill as at October 31, 2025
3
$
903
$
14,776
$
2,132
$
1,169
$
18,980
Pre-tax discount rates
2024
9.7
–
9.9
%
10.7
–
11.8
%
10.9
–
11.0
%
14.4
%
2025
9.9
–
10.7
11.0
–
11.8
11.0
–
11.9
13.3
1
Goodwill predominantly relates to U.S. Personal and Commercial Banking.
2
Includes adjustments to the purchase price allocation in connection with the Cowen acquisition.
3
Accumulated impairment as at October 31, 2025 and October 31, 2024 was
nil
.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 65
OTHER INTANGIBLES
The following table presents details of other
intangibles as at October 31, 2025 and
October 31, 2024.
Other Intangibles
(millions of Canadian dollars)
Credit card
Internally
Core deposit
related
generated
Other
Other
intangibles
intangibles
software
software
intangibles
Total
Cost
As at November 1, 2023
$
2,712
$
850
$
3,103
$
236
$
1,556
$
8,457
Additions
–
–
961
23
9
993
Disposals
–
–
(5)
(6)
(6)
(17)
Fully amortized intangibles
–
–
(627)
(60)
–
(687)
Foreign currency translation adjustments
and other
1
8
1
(25)
2
36
22
As at October 31, 2024
$
2,720
$
851
$
3,407
$
195
$
1,595
$
8,768
Additions
–
–
1,095
70
–
1,165
Disposals
–
–
(3)
(7)
5
(5)
Fully amortized intangibles
(2,741)
(734)
(300)
(46)
(509)
(4,330)
Foreign currency translation adjustments
and other
21
1
(4)
1
(9)
10
As at October 31, 2025
$
–
$
118
$
4,195
$
213
$
1,082
$
5,608
Amortization and impairment
As at November 1, 2023
$
2,712
$
785
$
1,127
$
163
$
899
$
5,686
Disposals
–
–
–
(3)
–
(3)
Impairment losses (reversals)
–
–
–
–
–
–
Amortization charge for the year
–
11
498
32
161
702
Fully amortized intangibles
–
–
(627)
(60)
–
(687)
Foreign currency translation adjustments
and other
1
8
–
(2)
3
17
26
As at October 31, 2024
$
2,720
$
796
$
996
$
135
$
1,077
$
5,724
Disposals
–
–
(7)
(3)
–
(10)
Impairment losses (reversals)
–
–
–
–
–
–
Amortization charge for the year
–
11
586
58
125
780
Fully amortized intangibles
(2,741)
(734)
(300)
(46)
(509)
(4,330)
Foreign currency translation adjustments
and other
21
1
13
1
(1)
35
As at October 31, 2025
$
–
$
74
$
1,288
$
145
$
692
$
2,199
Net Book Value:
As at October 31, 2024
$
–
$
55
$
2,411
$
60
$
518
$
3,044
As at October 31, 2025
–
44
2,907
68
390
3,409
1
Includes amounts related to restructuring. Refer to Note 25 for further details.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 66
NOTE 14: LAND, BUILDINGS, EQUIPMENT, OTHER DEPRECIABLE ASSETS,
AND RIGHT-OF-USE ASSETS
The following table presents details of the
Bank’s land, buildings, equipment, and other depreciable
assets as at October 31, 2025
and October 31, 2024.
Land, Buildings, Equipment, and Other
Depreciable Assets
(millions of Canadian dollars)
Furniture,
fixtures,
and other
Computer
depreciable
Leasehold
Land
Buildings
equipment
assets
improvements
Total
Cost
As at November 1, 2023
$
919
$
2,555
$
917
$
1,511
$
3,679
$
9,581
Additions
–
216
153
362
485
1,216
Disposals
1
–
(9)
(65)
(137)
(127)
(338)
Fully depreciated assets
–
(22)
(143)
(171)
(289)
(625)
Foreign currency translation adjustments
and other
2
6
47
(11)
2
42
86
As at October 31, 2024
925
2,787
851
1,567
3,790
9,920
Additions
–
173
167
328
321
989
Disposals
1
–
(5)
(42)
(92)
(7)
(146)
Fully depreciated assets
–
(46)
(226)
(167)
(347)
(786)
Foreign currency translation adjustments
and other
2
(72)
(153)
(13)
6
21
(211)
As at October 31, 2025
$
853
$
2,756
$
737
$
1,642
$
3,778
$
9,766
Accumulated depreciation and
impairment losses
As at November 1, 2023
$
–
$
992
$
418
$
787
$
1,792
$
3,989
Depreciation charge for the year
–
93
179
165
298
735
Disposals
1
–
(9)
(62)
(134)
(108)
(313)
Impairment losses
–
–
11
7
1
19
Fully depreciated assets
–
(22)
(143)
(171)
(289)
(625)
Foreign currency translation adjustments
and other
2
–
25
(4)
13
42
76
As at October 31, 2024
–
1,079
399
667
1,736
3,881
Depreciation charge for the year
–
100
176
198
300
774
Disposals
1
–
(2)
(42)
(90)
(4)
(138)
Impairment losses
–
1
21
5
2
29
Fully depreciated assets
–
(46)
(226)
(167)
(347)
(786)
Foreign currency translation adjustments
and other
2
–
(74)
–
29
36
(9)
As at October 31, 2025
$
–
$
1,058
$
328
$
642
$
1,723
$
3,751
Net Book Value Excluding Right-of-Use Assets:
As at October 31, 2024
$
925
$
1,708
$
452
$
900
$
2,054
$
6,039
As at October 31, 2025
853
1,698
409
1,000
2,055
6,015
1
Cash received from disposals was $
3
million for the year ended October 31, 2025 (October 31, 2024 – $
22
million).
2
Includes amounts related to restructuring and adjustments to reclassify held-for-sale items to other assets.
Refer to Note 25 for further details.
The following table presents details of the
Bank’s ROU assets as recorded in accordance
with IFRS 16,
Leases
. Refer to Note 17 and Note 25 for the related
lease
liabilities details.
Right-of-Use Assets Net Book Value
(millions of Canadian dollars)
Computer
Land
Buildings
equipment
Total
As at November 1, 2023
$
709
$
3,101
$
32
$
3,842
Additions
3
373
48
424
Depreciation
(97)
(462)
(13)
(572)
Reassessments, modifications, and variable
lease payment adjustments
21
130
(20)
131
Terminations and impairment
–
1
–
1
Foreign currency translation adjustments
and other
(3)
(25)
–
(28)
As at October 31, 2024
$
633
$
3,118
$
47
$
3,798
Additions
3
490
7
500
Depreciation
(92)
(478)
(13)
(583)
Reassessments, modifications, and variable
lease payment adjustments
54
295
–
349
Terminations and impairment
–
–
–
–
Foreign currency translation adjustments
and other
2
51
–
53
As at October 31, 2025
$
600
$
3,476
$
41
$
4,117
Total Land, Buildings, Equipment, Other Depreciable
Assets, and Right-of-Use Assets Net
Book Value
(millions of Canadian dollars)
Furniture,
fixtures,
and other
Computer
depreciable
Leasehold
Land
Buildings
equipment
assets
improvements
Total
As at October 31, 2024
$
1,558
$
4,826
$
499
$
900
$
2,054
$
9,837
As at October 31, 2025
1,453
5,174
450
1,000
2,055
10,132
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 67
NOTE 15: OTHER ASSETS
Other Assets
(millions of Canadian dollars)
As at
October 31
October 31
2025
2024
Accounts receivable and other items
$
9,366
$
8,076
Accrued interest
5,674
5,509
Cheques and other items in transit
–
1,656
Current income tax receivable
3,849
4,061
Defined benefit asset
(Note 22)
1,111
1,042
Investments in other associates and joint
ventures
(Note 12)
5,237
4,855
Prepaid expenses
1,815
1,794
Reinsurance contract assets
936
1,188
Total
$
27,988
$
28,181
NOTE 16: DEPOSITS
Demand deposits are those for which
the Bank does not have the right to require notice
prior to withdrawal, which primarily include business
and government
chequing accounts. Notice deposits are those
for which the Bank can legally require notice
prior to withdrawal, which include both
savings and chequing accounts.
Term deposits are payable on a given date of maturity and are purchased by
customers to earn interest over a fixed period,
with terms ranging from one day to ten
years and generally include fixed term deposits,
guaranteed investment certificates,
senior debt, and similar instruments.
The aggregate amount of term deposits
in denominations of $100,000 or more as
at October 31, 2025 was $
544
billion (October 31, 2024 – $
546
billion).
Deposits
(millions of Canadian dollars)
As at
October 31
October 31
By Type
By Country
2025
2024
Demand
Notice
Term
1
Canada
United States
International
Total
Total
Personal
$
24,606
$
488,831
$
136,959
$
354,799
$
295,597
$
–
$
650,396
$
641,667
Banks
11,379
417
15,437
21,937
1,235
4,061
27,233
57,698
Business and government
2
161,003
204,780
223,692
426,753
161,610
1,112
589,475
569,315
196,988
694,028
376,088
803,489
458,442
5,173
1,267,104
1,268,680
Trading
–
–
37,882
27,633
4,290
5,959
37,882
30,412
Designated at fair value
through profit or loss
3
–
–
197,336
63,949
78,960
54,427
197,336
207,668
Total
$
196,988
$
694,028
$
611,306
$
895,071
$
541,692
$
65,559
$
1,502,322
$
1,506,760
Non-interest-bearing deposits included
above
4
Canada
$
60,796
$
58,873
United States
73,364
73,509
International
1
–
Interest-bearing deposits included above
4
Canada
834,275
781,526
United States
5
468,328
504,896
International
65,558
87,956
Total
2,6
$
1,502,322
$
1,506,760
1
Includes $
104.3
billion (October 31, 2024 – $
97.6
billion) of senior debt which is subject to the bank recapitalization “bail-in” regime. This regime provides certain
statutory powers to the
Canada Deposit Insurance Corporation, including the ability to convert specified eligible shares and liabilities into
common shares in the event that the Bank becomes non-viable.
2
Includes $
70.6
billion relating to covered bondholders (October 31, 2024 – $
75.4
billion).
3
Financial liabilities designated at FVTPL on the Consolidated Balance Sheet also includes $
299
million (October 31, 2024 – $
246
million) of loan commitments, financial guarantees and
other liabilities designated at FVTPL.
4
The geographical splits of the deposits are based on the point of origin of the deposits.
5
Includes $
7.2
billion (October 31, 2024 – $
13.1
billion) of U.S. federal funds deposited and $
1.1
billion (October 31, 2024 – $
36.2
billion) of deposits and advances with the FHLB.
6
Includes deposits of $
807.7
billion (October 31, 2024 – $
810.2
billion) denominated in U.S. dollars and $
111.1
billion (October 31, 2024 – $
140.7
billion) denominated in other foreign
currencies.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 68
Term Deposits by Remaining Term-to-Maturity
(millions of Canadian dollars)
As at
October 31
October 31
2025
2024
Over
Over
Over
Over
Within
1 year to
2 years to
3 years to
4 years to
Over
1 year
2 years
3 years
4 years
5 years
5 years
Total
Total
Personal
$
106,877
$
17,296
$
6,753
$
3,752
$
2,279
$
2
$
136,959
$
143,758
Banks
15,433
2
1
–
1
–
15,437
44,735
Business and government
83,830
51,067
28,311
14,668
13,812
32,004
223,692
225,517
Trading
20,538
6,314
4,140
1,538
2,253
3,099
37,882
30,412
Designated at fair value through
profit or loss
196,684
652
–
–
–
–
197,336
207,668
Total
$
423,362
$
75,331
$
39,205
$
19,958
$
18,345
$
35,105
$
611,306
$
652,090
Term Deposits due within a Year
(millions of Canadian dollars)
As at
October 31
October 31
2025
2024
Over 3
Over 6
Within
months to
months to
3 months
6 months
12 months
Total
Total
Personal
$
45,952
$
24,351
$
36,574
$
106,877
$
113,041
Banks
15,328
56
49
15,433
44,732
Business and government
39,046
19,236
25,548
83,830
87,025
Trading
7,493
5,288
7,757
20,538
15,622
Designated at fair value through
profit or loss
95,227
57,600
43,857
196,684
206,191
Total
$
203,046
$
106,531
$
113,785
$
423,362
$
466,611
NOTE 17: OTHER LIABILITIES
Other Liabilities
(millions of Canadian dollars)
As at
October 31
October 31
2025
2024
Accounts payable, accrued expenses, and
other items
$
8,954
$
7,706
Accrued interest
4,652
5,559
Accrued salaries and employee benefits
7,313
5,386
Cheques and other items in transit
255
–
Current income tax payable
296
67
Deferred tax liabilities
(Note 23)
303
300
Defined benefit liability
(Note 22)
1,372
1,380
Lease liabilities
1
5,352
5,013
Liabilities related to structured entities
(Note 10)
4,008
22,792
Provisions
(Note 25)
1,735
3,675
Total
$
34,240
$
51,878
1
Refer to Note 25 for lease liability maturity and lease payment details.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 69
NOTE 18: SUBORDINATED NOTES AND DEBENTURES
Subordinated notes and debentures are
direct unsecured obligations of the 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 qualifying
as regulatory capital are
subject to the consent and approval of OSFI.
Subordinated Notes and Debentures
1
(millions of Canadian dollars, except
as noted)
As at
Earliest par
Interest
Reset
redemption
October 31
October 31
Maturity date
rate (%)
2
spread (%)
date
2025
2024
May 26, 2025
3
9.150
n/a
–
$
–
$
200
April 22, 2030
4
3.105
n/a
April 22, 2025
–
2,989
March 4, 2031
4.859
3.490
5
March 4, 2026
1,252
1,257
September 15, 2031
3.625
2.205
6
September 15, 2026
1,997
2,045
January 26, 2032
3.060
1.330
7
January 26, 2027
1,715
1,637
April 9, 2034
5.177
1.530
7
April 9, 2029
1,820
1,803
September 10, 2034
5.146
1.500
8
September 10, 2029
1,396
1,359
October 30, 2034
1.601
1.032
9
October 30, 2029
181
183
January 23, 2036
4.030
1.500
6
January 23, 2031
1,209
–
February 1, 2035
4.231
1.540
7
February 1, 2030
1,009
–
September 25, 2035
2.058
0.970
10
September 25, 2030
127
–
July 23, 2040
5.930
1.870
11
July 23, 2035
27
–
Total
$
10,733
$
11,473
1
The outstanding subordinated notes and debentures include non-viability contingent capital (NVCC) provisions
and qualify as regulatory capital under OSFI’s Capital Adequacy
Requirements (CAR) guideline. Refer to Note 19 for further details.
2
Interest rate is for the period to but excluding the earliest par redemption date and, thereafter,
if not otherwise redeemed, it will be reset at the applicable reset rate.
3
On May 26, 2025, this note matured and all of the accrued interest and outstanding principal was repaid
in full.
4
On April 22, 2025, the Bank redeemed all of its outstanding $
3
billion
3.105
% medium-term notes due April 22, 2030, at a redemption price of
100
per cent of the principal amount, plus
accrued and unpaid interest to, but excluding, the redemption date.
5
To be reset at a rate to be determined
with consent of the noteholders as the CORRA-based rate and spread considered to be reasonably equivalent
to the of
3-month bankers’
acceptance rate
(as such term is defined in the applicable offering document) plus the reset spread noted.
6
To be reset at a rate of
5-year Mid-Swap Rate
plus the reset spread noted.
7
To be reset at Daily Compounded
Canadian Overnight Repo Rate Average plus the reset spread noted.
8
To be reset at the prevailing
5-year U.S. Treasury Rate
plus the reset spread noted.
9
To be reset at the Japanese
government bond yield plus the reset spread noted.
10
To
be reset at the
5-year Tokyo Overnight Average Rate
mid-swap rate plus the reset spread noted.
11
To
be reset at the
3-month Bank Bill Swap Rate
plus the reset spread noted.
NOTE 19: EQUITY
COMMON SHARES
The Bank is authorized by its shareholders
to issue an unlimited number of common
shares, without par value, for unlimited
consideration. The common shares
are not redeemable or convertible. Dividends
are typically declared by the Board of
Directors of the Bank on a quarterly basis and
the amount may vary from
quarter to quarter.
PREFERRED SHARES AND OTHER EQUITY
INSTRUMENTS
Preferred Shares
The Bank is authorized by its shareholders
to issue, in one or more series, an unlimited
number of Class A First Preferred Shares,
without nominal or par value.
Non-cumulative preferential dividends are payable
either quarterly or semi-annually in accordance
with applicable terms, as and when declared
by the Board of
Directors of the Bank. All preferred shares
issued by the Bank currently include
NVCC provisions, necessary for the
preferred shares to qualify as regulatory
capital under OSFI’s CAR guideline. NVCC provisions
require the conversion of the impacted instruments
into a variable number of common shares
upon the
occurrence of a Trigger Event. A Trigger Event is currently defined
in the CAR Guideline as an event where
OSFI determines that the Bank is, or is about
to
become, non-viable and that after conversion
or write-off, as applicable, of all non-common
capital instruments and consideration of
any other relevant factors or
circumstances, the viability of the Bank is expected
to be restored, or where the Bank has accepted
or agreed to accept a capital injection or equivalent
support
from a federal or provincial government of
Canada without which the Bank would have
been determined by OSFI to be non-viable.
Limited Recourse Capital Notes
The Bank has issued Limited Recourse
Capital Notes (the “LRCNs”) with recourse
limited to assets held in a trust consolidated by
the Bank (the “Limited Recourse
Trust”). The Limited Recourse Trust’s assets consist of Class A First
Preferred Shares of the Bank, each series
of which is issued concurrently with
the LRCNs
(the “LRCN Preferred Shares”). The LRCN
Preferred Shares are eliminated on the Bank’s
Consolidated Financial Statements.
In the event of (i) non-payment of interest
following any interest payment date,
(ii) non-payment of the redemption price
in case of a redemption of the LRCNs,
(iii) non-payment of principal plus accrued
and unpaid interest at the maturity of the LRCNs,
(iv) an event of default on the LRCNs,
or (v) a Trigger Event, the
recourse of each LRCN holder will be limited
to that holder’s pro rata share of the
Limited Recourse Trust’s assets.
The LRCNs, by virtue of the recourse
to the LRCN Preferred Shares, include standard
NVCC provisions necessary for them to qualify as
Additional Tier 1
Capital under OSFI’s CAR guideline. NVCC provisions
require the conversion of the instrument
into a variable number of common shares
upon the occurrence of
a Trigger Event. In such an event, each LRCN Preferred
Share will automatically and immediately be
converted into a variable number of common
shares which
will be delivered to LRCN holders in
satisfaction of the principal amount of, and accrued
and unpaid interest on, the LRCNs. The number
of common shares issued
will be determined based on the conversion
formula set out in the terms of the respective
series of LRCN Preferred Shares.
The LRCNs are compound instruments with
both equity and liability features. Non-payment
of interest and principal in cash does not
constitute an event of
default and will trigger the delivery of the LRCN
Preferred Shares. The liability component
has a nominal value and, therefore,
the proceeds received upon
issuance have been presented as equity, and any interest payments
are accounted for as distributions on other
equity instruments.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 70
Perpetual Subordinated Capital Notes
The Bank has issued Perpetual Subordinated
Capital Notes (“Perpetual Notes”). The
Perpetual Notes have no scheduled maturity
or redemption date. Interest
payments are at the discretion of the Bank.
The Perpetual Notes include standard NVCC
provisions necessary for them to qualify as
Additional Tier 1 Capital
under OSFI’s CAR guideline.
The Perpetual Notes are compound instruments
with both equity and liability features. The
liability component has a nominal value and,
therefore, the proceeds
received upon issuance have been presented
as equity, and any interest payments are accounted for as distributions
on other equity instruments.
The following table summarizes the changes
to the shares and other equity instruments
issued and outstanding and treasury instruments
held as at and for the
years ended October 31, 2025 and October
31, 2024.
Shares and Other Equity Instruments
Issued and Outstanding and Treasury Instruments
Held
(thousands of shares or other equity instruments
and millions of Canadian dollars)
October 31, 2025
October 31, 2024
Number
Number
of shares
Amount
of shares
Amount
Common Shares
Balance as at beginning of year
1,750,272
$
25,373
1,791,422
$
25,434
Proceeds from shares issued on exercise
of stock options
2,260
165
1,657
112
Shares issued as a result of dividend reinvestment
plan
1,575
130
6,592
529
Purchase of shares for cancellation and other
(64,611)
(941)
(49,399)
(702)
Balance as at end of year – common shares
1,689,496
$
24,727
1,750,272
$
25,373
Preferred Shares and Other Equity Instruments
Preferred Shares – Class A
Series 1
20,000
$
500
20,000
$
500
Series 5
1
–
–
20,000
500
Series 7
2
–
–
14,000
350
Series 9
3
–
–
8,000
200
Series 16
14,000
350
14,000
350
Series 18
14,000
350
14,000
350
Series 27
850
850
850
850
Series 28
800
800
800
800
49,650
$
2,850
91,650
$
3,900
Other Equity Instruments
4
Limited Recourse Capital Notes – Series 1
1,750
$
1,750
1,750
$
1,750
Limited Recourse Capital Notes – Series 2
1,500
1,500
1,500
1,500
Limited Recourse Capital Notes – Series 3
5
1,750
2,403
1,750
2,403
Limited Recourse Capital Notes – Series 4
5
750
1,023
750
1,023
Limited Recourse Capital Notes – Series 5
750
750
–
–
Limited Recourse Capital Notes – Series 6
5
750
1,037
–
–
Perpetual Subordinated Capital Notes – Series
2023-9
6
1
312
1
312
7,251
8,775
5,751
6,988
Balance as at end of year – preferred shares
and other equity instruments
56,901
$
11,625
97,401
$
10,888
Treasury – common shares
7
Balance as at beginning of year
213
$
(17)
748
$
(64)
Purchase of shares
145,166
(13,094)
139,135
(11,209)
Sale of shares
(145,379)
13,111
(139,670)
11,256
Balance as at end of year – treasury
– common shares
–
$
–
213
$
(17)
Treasury – preferred shares and other equity instruments
7
Balance as at beginning of year
163
$
(18)
142
$
(65)
Purchase of shares and other equity instruments
4,614
(1,535)
6,556
(625)
Sale of shares and other equity instruments
(4,748)
1,549
(6,535)
672
Balance as at end of year – treasury
– preferred shares and other equity
instruments
29
$
(4)
163
$
(18)
1
On January 31, 2025, the Bank redeemed all of its
20
million outstanding Non-Cumulative 5-Year
Rate Reset Class A First Preferred Shares NVCC, Series 5 (“Series 5 Preferred
Shares”), at a redemption price of $
25.00
per Series 5 Preferred Share, for a total redemption cost of approximately $
500
million.
2
On July 31, 2025, the Bank redeemed all of its
14
million outstanding Non-Cumulative 5-Year
Rate Reset Class A First Preferred Shares NVCC, Series 7 (“Series 7 Preferred Shares”), at
a redemption price of $
25.00
per Series 7 Preferred Share, for a total redemption cost of approximately $
350
million.
3
On October 31, 2025, the Bank redeemed all of its
8
million outstanding Non-Cumulative 5-Year
Rate Reset Class A First Preferred Shares NVCC, Series 9 (“Series 9 Preferred Shares”),
at a redemption price of $
25.00
per Series 9 Preferred Share, for a total redemption cost of approximately $
200
million.
4
For Other Equity Instruments, the number of shares represents the number of notes issued.
5
For LRCNs – Series 3, 4, and 6, the amount represents the Canadian dollar equivalent of the U.S. dollar notional
amount. Refer to “Preferred Shares and Other Equity Instruments –
Significant Terms and Conditions” table
for further details.
6
For Perpetual Subordinated Capital Notes (AT1),
the amount represents the Canadian dollar equivalent of the Singapore dollar notional amount. Refer to
“Preferred Shares and Other
Equity Instruments – Significant Terms and
Conditions” table for further details.
7
When the Bank purchases its own equity instruments as part of its trading business, they are classified as treasury
instruments and the cost of these instruments is recorded as a
reduction in equity.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 71
Preferred Shares and Other Equity Instruments – Significant
Terms and Conditions
Annual
Dividend
Reset
Next redemption/
Convertible
Issue date
yield (%)
1
frequency
1
spread (%)
1
conversion date
1,2
into
1,2
NVCC Rate Reset Preferred Shares
Series 1
June 4, 2014
4.970
Quarterly
2.240
October 31, 2029
Series 2
Series 16
July 14, 2017
6.301
Quarterly
3.010
October 31, 2027
Series 17
Series 18
March 14, 2018
5.747
Quarterly
2.700
April 30, 2028
Series 19
Series 27
April 4, 2022
5.750
Semi-annual
3.317
October 31, 2027
–
Series 28
July 25, 2022
7.232
Semi-annual
4.200
October 31, 2027
–
Annual
Coupon
Reset
Next redemption
Recourse to
Issue date
yield (%)
frequency
spread (%)
date
Preferred Shares
3
Other Equity Instruments
Perpetual Subordinated Capital Notes
4
July 10, 2024
5.700
Semi-annual
2.652
July 31, 2029
n/a
NVCC Limited Recourse Capital Notes
5
Series 1
July 29, 2021
3.600
Semi-annual
2.747
October 31, 2026
Series 26
Series 2
September 14, 2022
7.283
Semi-annual
4.100
October 31, 2027
Series 29
Series 3
6
October 17, 2022
8.125
Quarterly
4.075
October 31, 2027
Series 30
Series 4
6
July 3, 2024
7.250
Quarterly
2.977
July 31, 2029
Series 31
Series 5
December 18, 2024
5.909
Quarterly
3.100
January 1, 2030
Series 32
Series 6
6
September 23, 2025
6.350
Quarterly
2.721
October 31, 2030
Series 33
1
Non-cumulative preferred dividends for each series are payable as and when declared by the Board of Directors.
Unless redeemed, the dividend rate of the Rate Reset Preferred Shares
will reset on the next earliest optional redemption/conversion date and every
5
years thereafter to equal the then
5
-year Government of Canada bond yield plus the noted reset spread. If
converted into a series of floating rate preferred shares, the dividend rate for the quarterly period will be equal to
the then
90
-day Government of Canada Treasury bill yield plus the noted
reset spread unless otherwise stated.
2
Subject to regulatory consent and unless otherwise stated, preferred shares are redeemable on the next earliest
optional redemption date as noted and every
5
years thereafter. Preferred
Shares, except Series 27 and Series 28, are convertible into the corresponding series of floating rate preferred shares
on the conversion date noted and every
5
years thereafter if not
redeemed. If converted, the holders have the option to convert back to the original series of preferred shares every
5
years.
3
LRCN Preferred Share Series 26, Series 29, and Series 32 were issued at a price of $
1,000
per share and LRCN Preferred Share Series 30, Series 31, and Series 33 were issued at a
price of US$
1,000
per share. The LRCN Preferred Shares are eliminated on the Bank’s Consolidated
Balance Sheet.
4
Perpetual Subordinated Capital Notes are denominated in Singapore dollars. Unless redeemed, the interest rate
on Perpetual Subordinated Capital Notes will reset on the next interest
reset date and every
5
years thereafter to a rate equal to the then prevailing
5
-year SORA-OIS Rate plus the noted reset spread.
5
LRCNs may be redeemed at the option of the Bank, with the prior written approval of OSFI, in whole
or in part on prior notice by the Bank as of the earliest redemption date and each
optional redemption date thereafter. Unless redeemed or otherwise stated, the interest
rate on the LRCNs will reset on the next earliest optional redemption date and every
5
years
thereafter at a rate equal to the then
5
-year Government of Canada bond yield plus the noted reset spread.
6
LRCN Series 3, 4, and 6 are denominated in U.S. dollars. Unless redeemed, the interest rate on LRCN
Series 3, 4, and 6 will reset on the next interest reset date and every
5
years
thereafter to equal the then
5
-year U.S. Treasury yield plus the noted reset spread.
NVCC Provision
If an NVCC trigger event were to occur, for all series of
Class A First Preferred Shares excluding
the preferred shares issued with respect
to LRCNs, the maximum
number of common shares that could be issued,
assuming there are no declared and unpaid
dividends on the respective series
of preferred shares at the time of
conversion, would be
0.6
billion in aggregate.
The LRCNs, by virtue of the recourse
to the preferred shares held in the Limited
Recourse Trust, include NVCC provisions. For LRCNs, if
an NVCC trigger were
to occur, the maximum number of common shares that
could be issued, assuming there are
no declared and unpaid dividends on the preferred
shares series
issued in connection with such LRCNs,
would be
1.7
billion in aggregate.
For NVCC subordinated notes and debentures
(including Perpetual Notes), if an
NVCC trigger event were to occur, the maximum number of common
shares
that could be issued, assuming there is no accrued
and unpaid interest on the respective
subordinated notes and debentures, would be
3.3
billion in aggregate.
DIVIDEND RESTRICTIONS
The Bank is prohibited by the
Bank Act (Canada)
from declaring dividends on its preferred
or common shares if there are reasonable
grounds for believing that the
Bank is, or the payment would cause the
Bank to be, in contravention of the capital adequacy
and liquidity regulations of the
Bank Act (Canada)
or directions of
OSFI. The Bank does not anticipate that this
condition will restrict it from paying dividends
in the normal course of business. In addition,
the ability to pay dividends
on common shares without the approval of
the holders of the outstanding preferred
shares is restricted unless all dividends on
the preferred shares have been
declared and paid or set apart for payment.
Currently, these limitations do not restrict the payment of dividends
on common shares or preferred shares.
DIVIDENDS
On December 3, 2025, the Board approved
a dividend in an amount of one dollar and
eight cents ($
1.08
) per fully paid common share in the capital
stock of the
Bank for the quarter ending January 31, 2026,
payable on and after January 31, 2026,
to shareholders of record at the close of
business on January 9, 2026.
At October 31, 2025, the quarterly dividend
was $
1.05
per common share. Common share
cash dividends declared and paid during the
year totalled $
4.20
per
share (October 31, 2024 – $
4.08
), representing a payout ratio of
50
%, at the high end of the Bank’s target payout range
of
40
-
50
% of adjusted earnings. For cash
dividends payable on the Bank’s preferred shares,
refer to Note 19. As at October 31, 2025,
1,689
million common shares were outstanding
(October 31, 2024 –
1,750
million).
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 72
DIVIDEND REINVESTMENT PLAN
The Bank offers a Dividend Reinvestment Plan (DRIP)
for its common shareholders. Participation
in the plan is optional and under the
terms of the plan, cash
dividends on common shares are used
to purchase additional common shares. At
the option of the Bank, the common shares
may be issued from 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
purchased from the open market at market
prices.
During the year ended October 31, 2025,
the Bank satisfied the DRIP requirements
through common shares issued from treasury
with
no
discount for the first
three months and open market common
share purchases in the last nine months.
During the year ended October 31, 2024,
the Bank satisfied the DRIP
requirements through common shares issued
from treasury with
no
discount.
NORMAL COURSE ISSUER BID
On August 28, 2023, the Bank announced
that the Toronto Stock Exchange (TSX) and OSFI approved a normal course issuer
bid (2023 NCIB) to repurchase for
cancellation up to
90
million of its common shares. The 2023 NCIB
commenced on August 31, 2023 and continued
until August 31, 2024. During the year ended
October 31, 2024, the Bank repurchased
49.4
million common shares under the 2023 NCIB,
at an average price of $
80.15
per share for a total amount of
$
4.0
billion.
On February 24, 2025, the Bank announced
that the TSX and OSFI had approved a normal
course issuer bid (2025 NCIB) to purchase
for cancellation up to
100
million of its common shares for up to $
8
billion. The 2025 NCIB commenced on
March 3, 2025 and will end on February
28, 2026, or such earlier date as the
Bank may determine. From the commencement
of the 2025 NCIB to October 31, 2025,
the Bank repurchased
64.6
million shares under the program, at an
average price of $
94.29
per share for a total amount of $
6.1
billion.
NOTE 20: INSURANCE
(a)
INSURANCE SERVICE RESULT
Insurance revenue and expenses are presented
on the Consolidated Statement of Income
under Insurance revenue and Insurance
service expenses,
respectively. Net income or expense from reinsurance is presented
in other income (loss).
The following table shows components of the insurance
service result
included in the Consolidated Statement of
Income for the Bank which includes
the results of property and casualty insurance,
life and health insurance, as well as
reinsurance issued and held in Canada and
internationally.
Insurance Service Result
(millions of Canadian dollars)
For the year ended
October 31, 2025
October 31, 2024
Insurance revenue
$
7,737
$
6,952
Insurance service expenses
6,089
6,647
Insurance service result before reinsurance
contracts held
1,648
305
Net income (expense) from reinsurance
contracts held
(172)
524
Insurance service result
$
1,476
$
829
Net income (expense) from reinsurance
contracts held is comprised of recoveries
from reinsurers offset by ceded premiums. For
the year ended October 31, 2025,
the Bank recognized recoveries from reinsurers
of $
439
million (October 31, 2024 – $
1,054
million) and ceded premiums of $
611
million (October 31, 2024 –
$
530
million). For the year ended October 31, 2025,
the Bank recognized insurance finance expenses
of $
299
million (October 31, 2024 – $
443
million) from
insurance and reinsurance contracts in other
income (loss). The Bank’s investment return on
securities supporting insurance contracts is
comprised of interest
income reported in net interest income and
fair value changes reported in other income (loss).
Investment return on securities supporting
insurance contracts was
$
247
million for the year ended October 31, 2025 (October
31, 2024 – $
372
million).
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 73
(b)
INSURANCE CONTRACT LIABILITIES
Insurance contract liabilities are comprised
of amounts related to the LRC, LIC and
other insurance liabilities.
The following table presents movements in
the property and casualty insurance liabilities.
Property and casualty insurance contract
liabilities by LRC and LIC
(millions of Canadian dollars)
For the year ended October 31, 2025
Liabilities for remaining coverage
Liabilities for incurred claims
Total
Excluding
Estimates of the
loss
Loss
present value of
Risk
component
component
future cash flows
adjustment
Insurance contract liabilities at beginning
of year
$
714
$
101
$
5,989
$
221
$
7,025
Insurance revenue
(6,230)
(6,230)
Insurance service expenses:
Incurred claims and other insurance service
expenses
–
(148)
4,420
70
4,342
Amortization of insurance acquisition cash
flows
864
–
–
–
864
Losses (reversal of losses) on onerous
contracts
–
163
–
–
163
Changes to liabilities for incurred claims
–
–
(34)
(116)
(150)
Insurance service result
(5,366)
15
4,386
(46)
(1,011)
Insurance finance expenses
2
–
332
11
345
Total changes in the Consolidated Statement of Income
(5,364)
15
4,718
(35)
(666)
Cash flows:
Premiums received
6,268
–
–
–
6,268
Claims and other insurance service expenses
paid
–
–
(4,576)
–
(4,576)
Acquisition cash flows paid
(912)
–
–
–
(912)
Total cash flows
5,356
–
(4,576)
–
780
Insurance contract liabilities at end of year
$
706
$
116
$
6,131
$
186
$
7,139
Property and casualty insurance contract
liabilities by LRC and LIC
(millions of Canadian dollars)
For the year ended October 31, 2024
Liabilities for remaining coverage
Liabilities for incurred claims
Total
Excluding
Estimates of the
loss
Loss
present value of
Risk
component
component
future cash flows
adjustment
Insurance contract liabilities at beginning
of year
$
630
$
129
$
4,740
$
220
$
5,719
Insurance revenue
(5,506)
–
–
–
(5,506)
Insurance service expenses:
Incurred claims and other insurance service
expenses
–
(145)
5,099
96
5,050
Amortization of insurance acquisition cash
flows
803
–
–
–
803
Losses (reversal of losses) on onerous
contracts
–
117
–
–
117
Changes to liabilities for incurred claims
–
–
(65)
(114)
(179)
Insurance service result
(4,703)
(28)
5,034
(18)
285
Insurance finance expenses
7
–
479
19
505
Total changes in the Consolidated Statement of Income
(4,696)
(28)
5,513
1
790
Cash flows:
Premiums received
5,576
–
–
–
5,576
Claims and other insurance service expenses
paid
–
–
(4,264)
–
(4,264)
Acquisition cash flows paid
(796)
–
–
–
(796)
Total cash flows
4,780
–
(4,264)
–
516
Insurance contract liabilities at end of year
$
714
$
101
$
5,989
$
221
$
7,025
Other insurance contract liabilities were $
139
million as at October 31, 2025 (October 31,
2024 – $
144
million) and include life and health insurance contract
liabilities of $
113
million (October 31, 2024 – $
121
million).
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 74
(c)
PROPERTY AND CASUALTY CLAIMS DEVELOPMENT
The following table shows the estimates of
the insurance liabilities for incurred
claims net of reinsurance assets for incurred
claims (net LIC) with subsequent
developments during the periods and cumulative
payments to date. The original estimates
are evaluated monthly for redundancy or
deficiency. The evaluation is
based on actual payments in full or partial
settlement of claims and current estimates
of the net LIC related to claims still open
or claims still unreported.
Incurred Claims by Accident Year
(millions of Canadian dollars)
Accident Year
2016
and prior
2017
2018
2019
2020
2021
2022
2023
2024
2025
Total
Net ultimate claims cost at
end of accident year
$
6,645
$
2,425
$
2,631
$
2,727
$
2,646
$
2,529
$
3,242
$
3,830
$
4,478
$
4,397
Revised estimates
One year later
6,327
2,307
2,615
2,684
2,499
2,367
3,182
4,039
4,515
Two years later
5,990
2,258
2,573
2,654
2,412
2,278
3,167
3,994
Three years later
5,647
2,201
2,522
2,575
2,278
2,225
3,165
Four years later
5,440
2,151
2,465
2,489
2,230
2,211
Five years later
5,377
2,108
2,408
2,474
2,224
Six years later
5,315
2,086
2,396
2,471
Seven years later
5,281
2,078
2,399
Eight years later
5,267
2,078
Nine years later
5,266
Current estimates of
cumulative net claims
5,266
2,078
2,399
2,471
2,224
2,211
3,165
3,994
4,515
4,397
Cumulative net claims paid to date
(5,115)
(2,033)
(2,309)
(2,335)
(2,059)
(1,961)
(2,662)
(3,057)
(3,010)
(2,178)
Net undiscounted provision
for unpaid claims
151
45
90
136
165
250
503
937
1,505
2,219
$
6,001
Effect of discounting
(517)
Effect of risk adjustment for
non-financial risk
167
Net liabilities for incurred claims
$
5,651
Insurance liabilities for incurred claims
6,317
Reinsurance assets for incurred claims
(666)
(d)
RISK ADJUSTMENT FOR NON-FINANCIAL
RISK AND DISCOUNTING
The risk adjustment reflects an amount that
an insurer would reasonably pay to remove
the uncertainty that future cash flows
will exceed the expected value
amount. The Bank has estimated the risk adjustment
for its property and casualty operations’ LIC
using statistical techniques in accordance
with Canadian
accepted actuarial principles to develop potential
future observations and a confidence level
range of 75
th
to 85
th
percentile.
Insurance contract liabilities are calculated
by discounting expected future cash flows.
The interest rates used to discount the Bank’s insurance
balances over a
duration of
1
to
10
years range from
2.8
% to
4.1
% as at October 31, 2025 (October
31, 2024 –
3.8
% to
4.5
%).
(e)
SENSITIVITY TO INSURANCE RISK
A variety of assumptions are made related
to the future level of claims, policyholder behaviour, expenses
and sales levels when products are designed
and priced,
as well as when actuarial liabilities are determined.
Such assumptions require a significant amount
of professional judgment. The LIC is
sensitive to certain
assumptions. It has not been possible
to quantify the sensitivity of certain assumptions
such as legislative changes or uncertainty in
the estimation process. Actual
experience may differ from the assumptions
made by the Bank.
For property and casualty insurance, the
main assumption underlying the LIC is that past
claims development experience can be
used to project future claims
development and hence ultimate claims costs.
As such, these methods extrapolate the development
of paid and incurred losses, average costs
per claim, and
claim numbers based on the observed development
of earlier years and expected loss ratios.
Net LIC estimates are based on various quantitative
and qualitative
factors including the discount rate, the risk
adjustment,
reinsurance, trends in claims severity and
frequency,
and other external drivers.
Qualitative and other unforeseen factors could
negatively impact the Bank’s ability to accurately
assess the risk of the insurance policies that
the Bank
underwrites. In addition, there may be
significant lags between the occurrence of
an insured event and the time it is actually
reported to the Bank and additional
lags between the time of reporting and final
settlements of claims.
The following table outlines the sensitivity of
the Bank’s property and casualty LIC to reasonably
possible movements in the discount
rate, risk adjustment, and
the frequency and severity of claims, with
all other assumptions held constant.
Movements in the assumptions may be non-linear.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 75
Sensitivity of Critical Assumptions – Property
and Casualty Insurance
(millions of Canadian dollars)
As at
October 31, 2025
October 31, 2024
Impact on net
Impact on net
income (loss)
income (loss)
before
Impact on
before
Impact on
income taxes
equity
income taxes
equity
Impact of a 1% change
Discount rate
Increase in assumption
$
135
$
100
$
121
$
90
Decrease in assumption
(143)
(107)
(129)
(95)
Impact of a 5% change
Frequency of claims
Increase in assumption
$
(202)
$
(150)
$
(182)
$
(135)
Decrease in assumption
202
150
182
135
Severity of claims
Increase in assumption
(289)
(215)
(288)
(213)
Decrease in assumption
289
215
288
213
Risk adjustment
Increase in assumption
(39)
(29)
(52)
(38)
Decrease in assumption
34
25
40
29
For life and health insurance, the processes
used to determine critical assumptions
are as follows:
●
Mortality, morbidity, and lapse assumptions are based on industry and historical company
data; and
●
Expense assumptions are based on the annual
expense study.
Sensitivity analysis was performed on
these critical assumptions for the life and health
insurance business and impacts were
deemed not significant to the Bank’s
Consolidated Financial Statements.
(f)
CONCENTRATION OF INSURANCE RISK
Concentration risk is the risk resulting from
large exposures to similar risks that are positively
correlated.
Risk associated with automobile, residential
and other products may vary in relation to the
geographical area of the risk insured. Exposure
to concentrations of
insurance risk, by type of risk, is mitigated by
ceding these risks through reinsurance
contracts, as well as careful selection and implementation
of underwriting
strategies, which is in turn largely achieved
through diversification by line of business and
geographical areas. For automobile insurance,
legislation is in place at a
provincial level and this creates differences in risk
selection and underwriting strategies among
the different provinces.
As at October 31, 2025, for the property
and casualty insurance business,
64.3
% of insurance revenue was mainly derived
from automobile policies
(October 31, 2024 –
65.5
%) followed by residential with
35.3
% (October 31, 2024 –
34.3
%). The distribution by provinces show that business
is mostly
concentrated in Ontario with
51.4
% of insurance revenue (October 31, 2024
–
50.5
%). The Western provinces represented
31.0
% (October 31, 2024 –
31.9
%),
followed by the Atlantic provinces with
10.5
% (October 31, 2024 –
10.6
%), and Québec at
6.7
% (October 31, 2024 –
6.8
%).
Concentration risk is not a major concern
for the life and health insurance business
as it does not have a material level of regional
specific characteristics like
those exhibited in the property and casualty
insurance business. Reinsurance is used
to limit the liability on a single claim and
from a single weather-related event.
Concentration risk is further limited by diversification
across uncorrelated risks. This limits the
impact of a regional pandemic and other
concentration risks.
To
improve understanding of exposure to this risk,
a pandemic scenario is tested annually.
NOTE 21: SHARE-BASED COMPENSATION
STOCK OPTION PLAN
The Bank maintains a stock option program
for certain key employees. Options on
common shares are granted to eligible employees
of the Bank under the plan
for terms of
ten years
and vest over a
four-year
period. These options provide holders
with the right to purchase common shares of
the Bank at a fixed price equal
to the closing market price of the shares
on the TSX on the day prior to the date the
options were issued. The outstanding options
expire on various dates to
December 12, 2034.
The following table summarizes the Bank’s stock
option activity and related information,
adjusted to reflect the impact of the 2014
stock
dividend on a retrospective basis, for the
years ended October 31, 2025
and October 31, 2024.
Stock Option Activity
(millions of shares and Canadian dollars)
2025
2024
Weighted-
Weighted-
Number
average
Number
average
of shares
exercise price
of shares
exercise price
Number outstanding, beginning of year
14.7
$
79.17
14.1
$
76.58
Granted
2.0
75.76
2.6
81.78
Exercised
(2.3)
65.99
(1.7)
60.07
Forfeited/expired
(0.2)
85.29
(0.3)
85.36
Number outstanding, end of year
14.2
$
80.65
14.7
$
79.17
Exercisable, end of year
5.2
$
70.94
5.4
$
68.51
Available for grant
3.4
5.1
The weighted-average share price for the
options exercised in 2025 was $
93.40
(2024 – $
80.57
).
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 76
The following table summarizes information
relating to stock options outstanding and
exercisable as at October 31, 2025.
Range of Exercise Prices
(millions of shares and Canadian dollars)
Options outstanding
Options exercisable
Weighted-
average
Weighted-
Weighted-
Number
remaining
average
Number
average
of shares
contractual
exercise
of shares
exercise
outstanding
life (years)
price
exercisable
price
$
53.15
-$
69.39
1.7
2.3
68.07
1.7
68.07
$
71.88
-$
72.64
2.2
4.0
72.13
2.2
72.13
$
72.84
-$
81.78
5.6
7.5
77.67
1.3
72.84
$
90.55
2.4
7.0
90.55
–
–
$
95.33
2.3
6.0
95.33
–
–
For the year ended October 31, 2025, the Bank
recognized compensation expense for
stock option awards of $
22.9
million (October 31, 2024 – $
34.2
million). For
the year ended October 31, 2025,
2.0
million (October 31, 2024 –
2.6
million) options were granted by the Bank at a
weighted-average fair value of $
12.80
per
option (2024 – $
14.36
per option) estimated using a binomial tree-based
valuation option pricing model.
The following table summarizes the assumptions
used for estimating the fair value of options
for the years ended October 31, 2025 and
October 31, 2024.
Assumptions Used for Estimating the
Fair Value of Options
(in Canadian dollars, except as noted)
2025
2024
Risk-free interest rate
3.08
%
3.41
%
Option contractual life
10
years
10
years
Expected volatility
19.47
%
18.92
%
Expected dividend yield
3.94
%
3.78
%
Exercise price/share price
$
75.76
$
81.78
The risk-free interest rate is based on Government
of Canada benchmark bond yields as
at the grant date. Expected volatility is
calculated based on the historical
average daily volatility and expected dividend
yield is based on dividend payouts in the last
fiscal year. These assumptions are measured over a period
corresponding to the option contractual life.
OTHER SHARE-BASED COMPENSATION PLANS
The Bank operates restricted share unit and performance
share unit plans which are offered to certain employees
of the Bank. Under these plans, participants
are
awarded share units equivalent to the Bank’s
common shares that generally vest over
three years
. During the vesting period, dividend equivalents
accrue to the
participants in the form of additional share
units. At the maturity date, the participant receives
cash representing the value of the share
units. The final number of
performance share units will typically vary
from
80
% to
120
% of the number of units outstanding
at maturity (consisting of initial units awarded
plus additional units
in lieu of dividends) based on the Bank’s total
shareholder return relative to the average of
a peer group of large Canadian financial
institutions.
For the year ended
October 31, 2025, the Bank awarded
12.9
million of such share units at a weighted-average
price of $
76.19
(2024 –
9.9
million units at a weighted-average price of
$
81.54
). The number of such share units outstanding
under these plans as at October 31, 2025
was
32.2
million (October 31, 2024 –
27.9
million).
The Bank also offers deferred share unit plans
to eligible employees and non-employee directors.
Under these plans, a portion of the participant’s
annual
incentive award may be deferred,
or in the case of non-employee directors,
a portion of their annual compensation
may be delivered as share units equivalent
to
the Bank’s common shares. The deferred share units
are not redeemable by the participant until
termination of employment or directorship. Once
these conditions
are met, the deferred share units
must be redeemed for cash no later than
the end of the next calendar year. Dividend equivalents accrue
to the participants in the
form of additional units. For the year ended
October 31, 2025, the Bank awarded
0.2
million deferred share units at a weighted-average
price of $
79.30
(2024 –
0.2
million units at a weighted-average price
of $
81.57
). As at October 31, 2025,
5.9
million deferred share units were outstanding
(October 31, 2024 –
6.6
million).
Compensation expense for these plans is recorded
in the year the incentive award is earned
by the plan participant. Changes in the value of
these plans are
recorded, net of the effects of related hedges, on
the Consolidated Statement of Income.
For the year ended October 31, 2025, the Bank
recognized
compensation expense, net of the effects of hedges,
for these plans of $
1,043
million (2024 – $
970
million). The compensation expense recognized
before the
effects of hedges was $
2,390
million (2024 – $
903
million). The carrying amount of the liability relating
to these plans, based on the closing share
price, was
$
4.4
billion at October 31, 2025 (October
31, 2024 – $
2.7
billion), and is reported in Other liabilities
on the Consolidated Balance Sheet.
EMPLOYEE OWNERSHIP PLAN
The Bank also operates a share purchase plan
available to Canadian employees. Employees
can contribute up to
10
% of their annual eligible earnings (net
of
source deductions) to the Employee Ownership
Plan. For participating employees below
the level of Vice President, the Bank matches
100
% of the first $
250
of
employee contributions each year and the remainder
of employee contributions at
50
% to an overall maximum of
3.5
% of the employee’s eligible earnings or
$
2,250
, whichever comes first. The Bank’s contributions
vest once an employee has completed
two years of continuous service with the Bank.
For the year ended
October 31, 2025, the Bank’s contributions totalled $
93
million (2024 – $
91
million) and were expensed as salaries and
employee benefits. As at
October 31, 2025, an aggregate of
23
million (October 31, 2024 –
24
million) common shares were held under
the Employee Ownership Plan. The shares
in the
Employee Ownership Plan are purchased in
the open market and are considered outstanding
for computing the Bank’s basic and diluted earnings
per share.
Dividends earned on the Bank’s
common shares held by the Employee Ownership
Plan are used to purchase additional common
shares for the Employee
Ownership Plan in the open market.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 77
NOTE 22: EMPLOYEE BENEFITS
PENSION AND OTHER POST-RETIREMENT
BENEFIT PLANS
The Bank sponsors a number of pension and
post-retirement benefit plans for current eligible
and former employees. Pension arrangements
include defined
benefit pension plans, defined contribution
pension plans and supplementary arrangements
that provide pension benefits in excess of
statutory limits. The Bank
also provides certain post-retirement benefits.
The Bank’s principal defined benefit pension plans,
consisting of The Pension Fund Society of
The Toronto-Dominion Bank (the “Society”) and the defined
benefit portion of the TD Pension Plan (Canada)
(the “TDPP DB”), are for eligible Canadian
Bank employees who elected to join the Society
or the TDPP DB. The
Society was closed to new members on January
30, 2009, and the TDPP DB commenced
on March 1, 2009. Effective December 31, 2018,
the TDPP DB was
closed to new employees hired after that
date. All new permanent employees hired
in Canada on or after January 1, 2019 are eligible
to join the defined
contribution portion of the TDPP (the “TDPP
DC”) after one year of service. Benefits
under the principal defined benefit pension plans
are determined based upon
the period of plan participation and the average
salary of the member in the best consecutive
five years in the last ten years of combined plan
membership.
Benefits under the TDPP DC are funded
from the balance of the accumulated
contributions of the member and the Bank plus
the member’s investment earnings.
Annual expense for the TDPP DC is
equal to the Bank’s contributions to the plan.
Funding for the Bank’s principal defined benefit
pension plans is provided by contributions
from the Bank and members of the plans
through a separate trust. In
accordance with legislation, the Bank contributes
amounts, as determined on an actuarial basis,
to the plans and has the ultimate responsibility
for ensuring that
the liabilities of the plans are adequately funded
over time. Any deficits determined
in the funding valuations must generally be
funded over a period not exceeding
fifteen years. The Bank’s funding policy is to
make at least the minimum annual contributions
required by legislation. Any contributions
in excess of the minimum
requirements are discretionary. The principal defined benefit pension
plans are registered with OSFI and
the Canada Revenue Agency and are subject
to the acts
and regulations that govern federally regulated
pension plans. The 2025
and 2024 contributions were made in accordance
with the actuarial valuation reports for
funding purposes as at October 31, 2024 and
October 31, 2023, respectively. Valuations for funding purposes are being prepared as
of October 31, 2025.
Post-retirement defined benefit plans are unfunded
and, where offered, generally include health
care and dental benefits or, to assist with the cost, a benefits
subsidy to be used to reduce the cost of
coverage. Employees must meet certain
age and service requirements to be eligible
for post-retirement benefits and are
generally required to pay a portion of the
cost of the benefits. Effective June 1, 2017, the
Bank’s principal post-retirement defined benefit
plan, covering eligible
Canadian employees, was closed to new employees
hired on or after that date.
(a)
INVESTMENT STRATEGY AND ASSET ALLOCATION
The principal defined benefit pension plans are expected to each achieve a rate of return that meets or exceeds the change in value of the plan’s respective
liabilities over rolling five-year periods. The investments are managed with the primary objective of providing reasonable rates of return, consistent with available
market opportunities, economic conditions, consideration of plan liabilities, prudent portfolio management, and the target risk profiles for the plans.
The asset allocations by asset category for
the principal defined benefit pension plans
are as follows:
Plan Asset Allocation
(millions of Canadian dollars except as noted)
Society
1
TDPP DB
1
Target
% of
Fair value
Target
% of
Fair value
As at October 31, 2025
range
total
Quoted
Unquoted
range
total
Quoted
Unquoted
Debt
60
-
90
%
71
%
$
–
$
4,172
55
-
75
%
65
%
$
–
$
2,245
Equity
0
-
21
7
124
297
0
-
30
9
65
238
Alternative investments
2
0
-
29
22
–
1,312
5
-
38
26
–
894
Other
3
n/a
n/a
–
218
n/a
n/a
–
307
Total
100
%
$
124
$
5,999
100
%
$
65
$
3,684
As at October 31, 2024
Debt
60
-
90
%
71
%
$
–
$
4,245
55
-
75
%
67
%
$
–
$
2,106
Equity
0
-
21
5
104
194
0
-
30
5
54
106
Alternative investments
2
0
-
29
24
–
1,458
5
-
38
28
–
877
Other
3
n/a
n/a
–
86
n/a
n/a
–
188
Total
100
%
$
104
$
5,983
100
%
$
54
$
3,277
1
The principal defined benefit pension plans invest in investment vehicles which may hold shares or debt issued
by the Bank.
2
The principal defined benefit pension plans’ alternative investments are primarily private equity,
infrastructure, and real estate funds.
3
Consists mainly of amounts due to and due from brokers for securities traded but not yet settled, bond repurchase
agreements, interest and dividends receivable, and Pension
Enhancement Account assets, which are invested at the members’ discretion in certain mutual and
pooled funds.
Public debt instruments of the Bank’s principal defined
benefit pension plans must meet or exceed
a credit rating of BBB – at the time of
purchase.
The equity portfolios of the principal defined
benefit pension plans are broadly diversified
primarily across small to large capitalization
quality companies with no
individual holding exceeding
10
% of the equity portfolio or
10
% of the outstanding shares of any one
company. Foreign equities are included to further diversify the
portfolio. A maximum of
10
% of the equity portfolio can be invested
in emerging market equities.
Derivatives can be utilized by the principal
defined benefit pension plans provided
they are not used to create financial leverage,
unless the financial leverage is
for risk management purposes. The principal
defined benefit pension plans are permitted
to invest in alternative investments, such as private
equity, infrastructure
equity, and real estate.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 78
(b)
RISK MANAGEMENT PRACTICES
The Bank’s principal defined benefit pension plans
are overseen by a single retirement governance
structure established by the Human Resources
Committee of
the Bank’s Board of Directors. The governance
structure utilizes retirement governance
committees who have responsibility
to oversee plan operations and
investments, acting in a fiduciary capacity. Strategic, material
plan changes require the approval of the
Bank’s Board of Directors.
The principal defined benefit pension plans’ investments
include financial instruments which
are exposed to various risks. These risks include
market risk
(including foreign currency, interest rate, inflation, equity price, and
credit spread risks), credit risk, and liquidity
risk. Key material risks faced by defined benefit
plans are a decline in interest rates or credit
spreads, which could increase the present
value of the projected benefit obligation by
more than the change in the
value of plan assets, and from longevity risk
(that is, lower mortality rates).
Asset-liability matching strategies are employed
to focus on obtaining an appropriate balance
between earning an adequate return
and having changes in
liability values hedged by changes in asset
values.
The principal defined benefit pension plans
manage these financial risks in accordance
with the
Pension Benefits Standards Act, 1985
, applicable regulations,
as well as the plans’ written investment policies.
Specific risk management practices
monitored for the principal defined benefit pension
plans include performance,
credit exposure, and asset mix.
(c)
OTHER SIGNIFICANT PENSION AND POST-RETIREMENT
BENEFIT PLANS
Canada Trust (CT) Pension Plan
As a result of the acquisition of CT Financial
Services Inc., the Bank sponsors a defined benefit
pension plan, which is closed to new
members, but for which
active members continue to accrue benefits.
Funding for the plan is provided by contributions
from the Bank and members of the plan.
TD Insurance Pension Plan
As a result of the acquisition of Meloche
Monnex Inc., the Bank sponsors a defined benefit
pension plan, which is closed to new
members, but for which active
members continue to accrue benefits. Funding
for the plan is provided by contributions
from the Bank.
TD Bank, N.A. Retirement Plans
TD Bank, N.A. and its subsidiaries maintain
a defined contribution 401(k) plan covering
all employees. Annual expense is equal
to the Bank’s contributions to the
plan. TD Bank, N.A. also has frozen defined
benefit pension plans covering certain legacy
TD Banknorth and TD Auto Finance (legacy
Chrysler Financial)
employees.
Government Pension Plans
The Bank also makes contributions to government
pension plans, including the Canada Pension
Plan, Quebec Pension Plan and Social Security
under the
U.S.
Federal Insurance Contributions
Act.
(d)
DEFINED CONTRIBUTION PLAN EXPENSE
The following table summarizes expenses for
the Bank’s defined contribution plans.
Defined Contribution Plan Expenses
(millions of Canadian dollars)
For the years ended October 31
2025
2024
Defined contribution pension plans
1
$
362
$
310
Government pension plans
2
597
533
Total
$
959
$
843
1
Includes the TDPP DC and the TD Bank, N.A. defined contribution 401(k) plan.
2
Includes Canada Pension Plan, Quebec Pension Plan, and Social Security under the U.S.
Federal Insurance Contributions
Act
.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 79
(e)
DEFINED BENEFIT PLAN FINANCIAL INFORMATION
The following table presents the financial position
of the Bank’s principal pension and post-retirement
defined benefit plans and the Bank’s other material
defined
benefit pension plans for the years ended October
31, 2025 and October 31, 2024. Other
employee defined benefit plans operated
by the Bank and certain of its
subsidiaries are not considered material
for disclosure purposes.
Employee Defined Benefit Plans’ Obligations, Assets,
Funded Status, and Expense
(millions of Canadian dollars, except as noted)
Principal
post-retirement
Principal pension plans
benefit plan
1
Other pension plans
2
2025
2024
2025
2024
2025
2024
Change in projected benefit obligation
Projected benefit obligation at beginning of year
$
8,470
$
6,833
$
397
$
352
$
2,500
$
2,264
Service cost – benefits earned
276
217
6
5
19
15
Interest cost on projected benefit obligation
374
381
17
20
116
128
Remeasurement (gain) loss – financial
(15)
1,155
5
40
16
220
Remeasurement (gain) loss – demographic
–
–
–
–
(14)
(1)
Remeasurement (gain) loss – experience
107
92
(1)
–
(29)
20
Members’ contributions
109
112
–
–
–
–
Benefits paid
(400)
(355)
(19)
(20)
(161)
(149)
Change in foreign currency exchange rate
–
–
–
–
10
3
Past service cost
3
–
35
–
–
2
–
Projected benefit obligation as at October 31
8,921
8,470
405
397
2,459
2,500
Wholly or partially funded projected benefit obligation
8,921
8,470
–
1,858
1,898
Unfunded projected benefit obligation
–
–
405
397
601
602
Total projected benefit obligation
as at October 31
8,921
8,470
405
397
2,459
2,500
Change in plan assets
Plan assets at fair value at beginning of year
9,418
8,220
–
–
2,000
1,816
Interest income on plan assets
425
464
–
–
94
102
Remeasurement gain (loss) – return on plan assets less
interest income
41
988
–
–
38
177
Members’ contributions
109
112
–
–
–
–
Employer’s contributions
289
–
19
20
69
56
Benefits paid
(400)
(355)
(19)
(20)
(161)
(149)
Change in foreign currency exchange rate
–
–
–
–
10
3
Defined benefit administrative expenses
(10)
(11)
–
–
(4)
(5)
Plan assets at fair value as at October 31
9,872
9,418
–
–
2,046
2,000
Excess (deficit) of plan assets at fair value over projected
benefit obligation
951
948
(405)
(397)
(413)
(500)
Effect of asset limitation and minimum funding requirement
–
–
–
–
(26)
(21)
Net defined benefit asset (liability)
951
948
(405)
(397)
(439)
(521)
Recorded in
Other assets in the Bank’s Consolidated Balance Sheet
951
948
–
–
160
94
Other liabilities in the Bank’s Consolidated Balance Sheet
–
–
(405)
(397)
(599)
(615)
Net defined benefit asset (liability)
951
948
(405)
(397)
(439)
(521)
Annual expense
Net employee benefits expense includes the following:
Service cost – benefits earned
276
217
6
5
19
15
Net interest cost (income) on net defined benefit liability
(asset)
(51)
(83)
17
20
22
26
Interest cost on asset limitation and minimum funding requirement
–
11
–
–
1
3
Past service cost
3
–
35
–
–
2
–
Defined benefit administrative expenses
11
9
–
–
4
5
Total
$
236
$
189
$
23
$
25
$
48
$
49
Actuarial assumptions used to determine the annual expense
Weighted-average discount rate for projected benefit
obligation
4.83
%
5.66
%
4.80
%
5.71
%
5.06
%
5.95
%
Weighted-average rate of compensation increase
2.78
%
2.78
%
3.00
%
3.05
%
1.37
%
1.35
%
Assumed life expectancy at age 65, in years
Male aged 65
23.2
23.2
23.2
23.2
21.9
21.9
Female aged 65
24.3
24.3
24.3
24.3
23.5
23.4
Male aged 45
24.1
24.1
24.1
24.1
22.7
22.6
Female aged 45
25.2
25.2
25.2
25.2
24.3
24.3
Actuarial assumptions used to determine the projected
benefit obligation as at October 31
Weighted-average discount rate for projected benefit
obligation
4.80
%
4.83
%
4.70
%
4.80
%
4.97
%
5.06
%
Weighted-average rate of compensation increase
2.79
%
2.78
%
3.00
%
3.00
%
1.39
%
1.37
%
Assumed life expectancy at age 65, in years
Male aged 65
23.3
23.2
23.3
23.2
22.0
21.9
Female aged 65
24.4
24.3
24.4
24.3
23.6
23.5
Male aged 45
24.2
24.1
24.2
24.1
22.7
22.7
Female aged 45
25.3
25.2
25.3
25.2
24.4
24.3
1
The rate of increase for health care costs for the next year used to measure the expected cost of benefits covered
for the principal post-retirement defined benefit plan is
2.46
%.
The rate
is assumed to decrease gradually to
0.89
% by the year 2040 and remain at that level thereafter (2024 –
2.59
% grading to
0.89
% by the year 2040 and remain at that level thereafter).
2
Includes Canada Trust defined benefit pension plan, TD Banknorth defined benefit pension
plan, TD Auto Finance defined benefit pension plan, TD Insurance defined benefit pension
plan, and supplemental executive defined benefit pension plans.
3
Relates to the Pension Fund Society that was modified in fiscal 2024.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 80
The Bank recognized the following amounts
on the Consolidated Balance Sheet.
Amounts Recognized in the Consolidated
Balance Sheet
(millions of Canadian dollars)
As at
October 31
October 31
2025
2024
Other assets
Principal defined benefit pension plans
$
951
$
948
Other defined benefit pension plans
160
94
Total
1,111
1,042
Other liabilities
Principal post-retirement defined benefit
plan
405
397
Other defined benefit pension plans
599
615
Other employee benefit plans
1
368
368
Total
1,372
1,380
Net amount recognized
$
(261)
$
(338)
1
Consists of other pension and other post-retirement benefit plans operated by the Bank and its subsidiaries that
are not considered material for disclosure purposes.
The following table summarizes the remeasurements
recognized in OCI for the Bank’s principal pension
and post-retirement defined benefit plans and
certain of
the Bank’s other material defined benefit pension plans.
Amounts Recognized in Other Comprehensive
Income for Remeasurement of Defined
Benefit Plans
1,2
(millions of Canadian dollars)
Principal
post-retirement
Other
Principal pension plans
benefit plan
pension plans
For the years ended October 31
2025
2024
2025
2024
2025
2024
Remeasurement gains (losses) – financial
$
15
$
(1,155)
$
(5)
$
(40)
$
(16)
$
(220)
Remeasurement gains (losses) – demographic
–
–
–
–
14
1
Remeasurement gains (losses) – experience
(107)
(92)
1
–
29
(20)
Remeasurement gains (losses) – return
on
plan assets less interest income
42
986
–
–
38
177
Changes in asset limitation and minimum funding
requirement
–
206
–
–
(4)
35
Total
$
(50)
$
(55)
$
(4)
$
(40)
$
61
$
(27)
1
Amounts are presented on a pre-tax basis.
2
Excludes net remeasurement gains (losses) recognized in OCI in respect of other employee defined
benefit plans operated by the Bank and certain of its subsidiaries not considered
material for disclosure purposes totalling $
15
million (2024 – ($
29
) million).
(f)
CASH FLOWS
During the year ended October 31, 2026,
the Bank expects to contribute $
190
million to its principal defined benefit pension
plans, $
22
million to its principal post-
retirement defined benefit plan, and $
61
million to its other defined benefit pension
plans. Future contribution amounts
may change upon the Bank’s review of its
contribution levels during the year.
The following table summarizes the expected
future benefit payments for the next 10 years.
Expected Future Benefit Payments
(millions of Canadian dollars)
Principal
Principal
post-retirement
pension plans
benefit plan
Other pension
plans
Benefit payments expected to be paid
in:
2026
$
435
$
22
$
165
2027
458
23
167
2028
484
24
168
2029
506
24
169
2030
527
25
170
2031-2035
2,918
134
830
Total
$
5,328
$
252
$
1,669
(g)
MATURITY PROFILE
The breakdown of the projected benefit obligations
between active, deferred, and retired
members is as follows:
Disaggregation of Projected Benefit Obligation
(millions of Canadian dollars)
Principal
Principal
post-retirement
pension plans
benefit plan
Other pension plans
As at October 31
2025
2024
2025
2024
2025
2024
Active members
$
5,956
$
5,722
$
170
$
163
$
472
$
488
Deferred members
633
543
–
–
456
373
Retired members
2,332
2,205
235
234
1,531
1,639
Total
$
8,921
$
8,470
$
405
$
397
$
2,459
$
2,500
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 81
The weighted-average duration of the projected
benefit obligations is as follows:
Duration of Projected Benefit Obligation
(number of years)
Principal
Principal
pension
post-retirement
plans
benefit plan
Other pension plans
As at October 31
2025
2024
2025
2024
2025
2024
Weighted-average duration
13
14
13
13
11
11
(h)
SENSITIVITY ANALYSIS
The following table provides the sensitivity
of the projected benefit obligation for the
Bank’s principal defined benefit pension plans,
the principal post-retirement
defined benefit plan, and the Bank’s significant
other defined benefit pension plans to actuarial
assumptions considered significant by the Bank.
These include
discount rate, rates of compensation increase,
life expectancy, and health care cost initial trend rates, as applicable.
The sensitivity analysis provided in the table
should be used with caution, as it is hypothetical
and the impact of changes in each significant
assumption may not be linear. For each sensitivity test,
the impact
of a reasonably possible change in a single
factor is shown with other assumptions left
unchanged. Actual experience may result in
simultaneous changes in a
number of key assumptions, which could
magnify or diminish certain sensitivities.
Sensitivity of Significant Defined Benefit
Plan Actuarial Assumptions
(millions of Canadian dollars, except
as noted)
As at
October 31, 2025
Obligation Increase (Decrease)
Principal
Principal
post-
Other
pension
retirement
pension
plans
benefit plan
plans
Impact of an absolute change in
significant actuarial assumptions
Discount rate
1% decrease in assumption
$
1,280
$
53
$
286
1% increase in assumption
(1,017)
(43)
(237)
Rates of compensation increase
1% decrease in assumption
(240)
–
1
(23)
1% increase in assumption
213
–
1
28
Life expectancy
1 year decrease in assumption
(157)
(11)
(76)
1 year increase in assumption
152
11
75
Health care cost initial trend rate
1% decrease in assumption
n/a
(7)
n/a
1% increase in assumption
n/a
8
n/a
1
An absolute change in this assumption is immaterial.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 82
NOTE 23: INCOME TAXES
The provision for (recovery of) income
taxes is comprised of the following:
Provision for (Recovery of) Income Taxes
(millions of Canadian dollars)
For the years ended October 31
2025
2024
Provision for (recovery of) income taxes
– Consolidated Statement of Income
Current income taxes
Provision for (recovery of) income taxes
for the current period
$
4,281
$
3,956
Adjustments in respect of prior years and
other
(107)
(204)
Total current income taxes
4,174
3,752
Deferred income taxes
Provision for (recovery of) deferred income
taxes related to the origination
and reversal of temporary differences
(778)
(1,254)
Effect of changes in tax rates
(45)
(13)
Adjustments in respect of prior years and
other
59
206
Total deferred income taxes
(764)
(1,061)
Total provision for (recovery of) income taxes – Consolidated Statement
of Income
3,410
2,691
Provision for (recovery of) income taxes
– Statement of Other Comprehensive Income
Current income taxes
628
767
Deferred income taxes
323
183
Total provision for (recovery of) income taxes – Statement of Other
Comprehensive Income
951
950
Income taxes – other items including
business combinations and other adjustments
Current income taxes
(134)
(38)
Deferred income taxes
(7)
(12)
(141)
(50)
Total provision for (recovery of) income taxes
4,220
3,591
Current income taxes
Federal
2,078
1,712
Provincial
1,454
1,221
Foreign
1,136
1,548
4,668
4,481
Deferred income taxes
Federal
(162)
92
Provincial
(132)
54
Foreign
(154)
(1,036)
(448)
(890)
Total provision for (recovery of) income taxes
$
4,220
$
3,591
The Bank’s statutory and effective tax rate is outlined
in the following table.
Reconciliation to Statutory Income Tax Rate
(millions of Canadian dollars, except
as noted)
2025
2024
Income taxes at Canadian statutory income
tax rate
$
6,572
27.8
%
$
3,009
27.8
%
Increase (decrease) resulting from:
Dividends received
(13)
(0.1)
(28)
(0.3)
Rate differentials on international operations
1
(3,037)
(12.8)
(270)
(2.5)
Other – net
(112)
(0.5)
(20)
(0.2)
Provision for income taxes and effective
income tax rate
$
3,410
14.4
%
$
2,691
24.8
%
1
The 2025 amount includes the Pillar Two Global Minimum Tax
impact to provision for income taxes as discussed in the International Tax
Reform – Pillar Two Global Minimum Tax
section
below.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 83
International Tax Reform – Pillar Two Global Minimum Tax
On December 20, 2021, the OECD published
Pillar Two model rules as part of its efforts toward international
tax reform. The Pillar Two model rules provide for the
implementation of a 15% global minimum
tax for large multinational enterprises,
which is to be applied on a jurisdiction-by-jurisdiction
basis. Pillar Two legislation
was enacted in Canada on June 20, 2024
under Bill C-69, which includes the
Global Minimum Tax Act
addressing the Pillar Two model rules. Similar legislation
has passed in other jurisdictions in which
the Bank operates and will result in additional
taxes being paid in these countries. The rules
were effective and
implemented by the Bank on November 1, 2024.
The IASB previously issued amendments
to IAS 12
Income Taxes
for a temporary mandatory exception
from the
recognition and disclosure of deferred
taxes related to the implementation of Pillar
Two model rules, which the Bank has applied. For the year ended
October 31, 2025, the Bank’s effective tax rate increased
by approximately
0.3
% due to Pillar Two taxes.
Other Tax Matters
The Canada Revenue Agency (CRA), Revenu
Québec Agency (RQA) and Alberta Tax and Revenue Administration (ATRA) are denying certain
dividend and
interest deductions claimed by the Bank.
During the year ended October 31, 2025,
the CRA and the ATRA reassessed the Bank for a total of $
15
million of
additional income tax and interest in respect
of the 2019 and 2020 taxation years. As at
October 31, 2025, the CRA has reassessed
the Bank for $
1,676
million for
the years 2011 to 2020, the RQA has reassessed the Bank for $
52
million for the years 2011 to 2018, and the ATRA has reassessed the Bank for $
71
million for
the years 2011 to 2020. In total, the Bank has been reassessed for
$
1,799
million of income tax and interest. The Bank
expects to continue to be reassessed
for
open years. The Bank is of the view that its
tax filing positions were appropriate and
filed a Notice of Appeal with the Tax Court of Canada on March 21, 2023.
Deferred tax assets and liabilities comprise of
the following:
Deferred Tax Assets and Liabilities
(millions of Canadian dollars)
As at
October 31
October 31
2025
2024
Deferred tax assets
Allowance for credit losses
$
1,760
$
1,592
Trading loans
26
31
Employee benefits
1,089
1,036
Losses available for carry forward
44
45
Tax credits
81
89
Land, buildings, equipment, other depreciable
assets, and right-of-use assets
437
366
Securities
478
589
Deferred income
359
353
Intangibles
202
92
Other
923
727
Total deferred tax assets
5,399
4,920
Deferred tax liabilities
Pensions
91
81
Goodwill
223
202
Total deferred tax liabilities
314
283
Net deferred tax assets
5,085
4,637
Reflected on the Consolidated Balance Sheet
as follows:
Deferred tax assets
5,388
4,937
Deferred tax liabilities
1
303
300
Net deferred tax assets
$
5,085
$
4,637
1
Included in Other liabilities on the Consolidated Balance Sheet.
The amount of temporary differences, unused tax
losses, and unused tax credits for which
no deferred tax asset is recognized on the
Consolidated Balance Sheet
was $
735
million as at October 31, 2025 (October 31,
2024 – $
658
million), of which $
1
million (October 31, 2024 – $
2
million) is scheduled to expire within
five
years.
Certain taxable temporary differences associated
with the Bank’s investments in subsidiaries, branches
and associates, and interests in joint ventures
did not
result in the recognition of deferred tax liabilities
as at October 31, 2025. The total amount
of these temporary differences was $
84
billion as at October 31, 2025
(October 31, 2024 – $
72
billion).
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 84
The movement in the net deferred tax asset
for the years ended October 31, 2025 and
October 31, 2024, was as follows:
Deferred Income Tax Expense (Recovery)
(millions of Canadian dollars)
For the years ended October 31
2025
2024
Consolidated
Other
Business
Consolidated
Other
Business
statement of
comprehensive
combinations
statement of
comprehensive
combinations
income
income
and other
Total
income
income
and other
Total
Deferred income tax expense
(recovery)
Allowance for credit losses
$
(168)
$
–
$
–
$
(168)
$
(126)
$
–
$
–
$
(126)
Trading loans
5
–
–
5
(1)
–
–
(1)
Employee benefits
(55)
2
–
(53)
(154)
(15)
–
(169)
Losses available for carry
forward
1
–
–
1
82
–
–
82
Tax credits
8
–
–
8
(43)
–
–
(43)
Land, buildings, equipment, other depreciable
assets, and right-of-use assets
(71)
–
–
(71)
105
–
–
105
Securities
(219)
330
–
111
(494)
219
–
(275)
Deferred (income) expenses
(6)
–
–
(6)
(591)
–
–
(591)
Intangibles
(110)
–
–
(110)
(102)
–
–
(102)
Other deferred tax assets
(189)
–
(7)
(196)
291
–
(12)
279
Pensions
19
(9)
–
10
(56)
(21)
–
(77)
Goodwill
21
–
–
21
28
–
–
28
Total deferred income tax
expense (recovery)
$
(764)
$
323
$
(7)
$
(448)
$
(1,061)
$
183
$
(12)
$
(890)
NOTE 24: EARNINGS PER SHARE
Basic earnings per share is calculated by
dividing net income attributable to common
shareholders by the weighted-average number
of common shares
outstanding for the period.
Diluted earnings per share is calculated using
the same method as basic earnings per
share except that certain adjustments are made
to net income
attributable to common shareholders and
the weighted-average number of shares outstanding
for the effects of all dilutive potential common
shares that are
assumed to be issued by the Bank.
The following table presents the Bank’s basic and
diluted earnings per share for the years ended
October 31, 2025 and October 31, 2024.
Basic and Diluted Earnings Per Share
(millions of Canadian dollars, except
as noted)
For the years ended October 31
2025
2024
Basic earnings per share
Net income attributable to common shareholders
$
19,973
$
8,316
Weighted-average number of common shares outstanding
(millions)
1,726.3
1,758.8
Basic earnings per share
(Canadian dollars)
$
11.57
$
4.73
Diluted earnings per share
Net income attributable to common shareholders
$
19,973
$
8,316
Net income available to common shareholders
including impact of dilutive securities
19,973
8,316
Weighted-average number of common shares outstanding
(millions)
1,726.3
1,758.8
Effect of dilutive securities
Stock options potentially exercisable (millions)
1
1.7
1.2
Weighted-average number of common shares outstanding
– diluted (millions)
1,728.0
1,760.0
Diluted earnings per share
(Canadian dollars)
1
$
11.56
$
4.72
1
For the year ended October 31, 2025, the computation of diluted earnings per share excluded average options
outstanding of
2.3
million with a weighted-average exercise price of $
95.33
as the option price was greater than the average market price of the Bank’s common
shares. For the year ended October 31, 2024, the computation of diluted earnings per share
excluded average options outstanding of
6.9
million with an exercise price of $
89.49
, as the option price was greater than the average market price of the Bank’s common
shares.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 85
NOTE 25: PROVISIONS, CONTINGENT LIABILITIES,
COMMITMENTS, GUARANTEES, PLEDGED
ASSETS, AND COLLATERAL
(a)
PROVISIONS
The following table summarizes
the Bank’s provisions recorded in other liabilities.
Provisions
(millions of Canadian dollars)
Legal, Regulatory,
Restructuring
and Other
Total
Balance as at November 1, 2024
$
236
$
2,396
$
2,632
Additions
701
143
844
Amounts used
(492)
(2,272)
(2,764)
Release of unused amounts
(15)
(55)
(70)
Foreign currency translation adjustments
and other
(12)
53
41
Balance as at October 31, 2025, before
allowance for
credit losses for off-balance sheet instruments
$
418
$
265
$
683
Add: Allowance for credit losses for off-balance
sheet instruments
1
1,052
Balance as at October 31, 2025
$
1,735
1
Refer to Note 8 for further details.
(b)
RESTRUCTURING CHARGES
The Bank continued to undertake certain
measures in the fourth quarter of 2025 to reduce
its cost base and achieve greater efficiency. In connection with
this
program, the Bank incurred $
686
million pre-tax of restructuring charges during
the year ended October 31, 2025 (October
31, 2024 – $
566
million). The
restructuring charges primarily relate to: (i)
employee severance and other personnel-related
costs recorded as provisions; (ii) asset impairment
and other
rationalization, including certain business
wind-downs and (iii) real estate optimization
mainly recorded as a reduction to buildings
and land.
(c)
LEGAL AND REGULATORY MATTERS
In the ordinary course of business, the Bank
and its subsidiaries are involved in various
legal and regulatory actions, including but
not limited to civil claims and
lawsuits, regulatory examinations, investigations,
audits, and requests for information by
governmental, regulatory and self-regulatory
agencies and law
enforcement authorities in various jurisdictions,
in respect of our businesses and compliance
programs. The Bank establishes provisions
when it becomes
probable that the Bank will incur a loss and
the amount can be reliably estimated.
The Bank also estimates the aggregate range
of reasonably possible losses
(RPL) in its legal and regulatory actions (that
is, those which are neither probable nor
remote), in excess of provisions. However, the Bank does
not disclose the
specific possible loss associated with each underlying
matter given the substantial uncertainty associated
with each possible loss as described below and
the
negative consequences to the Bank’s resolution
of the matters that comprise the
RPL should individual possible losses be disclosed.
As at October 31, 2025, the
Bank’s RPL is from
zero
to approximately $
440.7
million (October 31, 2024 – from
zero
to approximately $
625
million). The Bank’s provisions and RPL represent
the Bank’s best estimates based upon currently available
information for actions for which estimates
can be made, but there are a number of factors
that could
cause the Bank’s actual losses to be significantly
different from its provisions or RPL. For example,
the Bank’s estimates involve significant judgment
due to the
varying stages of the proceedings, the existence
of multiple defendants in many proceedings
whose share of liability has yet to be determined,
the numerous yet-
unresolved issues in many of the proceedings,
some of which are beyond the Bank’s control and/or
involve novel legal theories and interpretations,
the attendant
uncertainty of the various potential outcomes
of such proceedings, and the fact that the underlying
matters will change from time to time. In addition,
some actions
seek very large or indeterminate damages.
Based on the Bank’s current knowledge, and
subject to the factors listed above as
well as other uncertainties inherent
in litigation and regulatory matters, other
than as described below, since October 31, 2025, no other
legal or regulatory matter has arisen or progressed
to the point
that it would reasonably be expected to result
in a material financial impact to the
Bank.
As previously disclosed, on October 10, 2024,
the Bank announced that, following active
cooperation and engagement with authorities and
regulators, it
reached a resolution (the “Global Resolution”)
of previously disclosed investigations related
to its U.S. Bank Secrecy Act (BSA) and Anti-Money
Laundering (AML)
compliance programs (collectively, the “U.S. BSA/AML program”).
The Bank and certain of its U.S. subsidiaries
consented to orders with the Office of the
Comptroller of the Currency (OCC), the Federal
Reserve Board, and the Financial Crimes
Enforcement Network and entered into plea agreements
with the
Department of Justice (DOJ), Criminal
Division, Money Laundering and Asset
Recovery Section and the United States
Attorney’s Office for the District of New
Jersey. Details of the Global Resolution include: (i) a total payment
of US$
3.088
billion ($
4.233
billion), all of which was provisioned during
the 2024 fiscal year;
(ii) TD Bank, N.A. (TDBNA) pleading guilty
to one count of conspiring to fail to maintain
an adequate AML program, failing
to file accurate currency transaction
reports (CTRs) and launder money and
TD Bank US Holding Company (TDBUSH)
pleading guilty to two counts of causing
TDBNA to fail to maintain an adequate
AML program and to fail to file accurate
CTRs; (iii) requirements to remediate the
Bank’s U.S. BSA/AML program; (iv) a requirement
to prioritize the funding and
staffing of the remediation, which includes Board
certifications for dividend distributions
from certain of the Bank’s U.S. subsidiaries to the
Bank; (v) formal
oversight of the U.S. BSA/AML remediation
through an independent compliance monitorship;
(vi) a prohibition against the average combined
total assets of TD’s
two U.S. banking subsidiaries (TDBNA and
TD Bank USA, N.A.) (collectively, the “U.S. Bank”) exceeding
US$
434
billion (representing the combined total assets
of the U.S. Bank as at September 30, 2024)
(the “Asset Limitation”), and if the
U.S. Bank does not achieve compliance with
all actionable articles in the OCC
consent orders (and for each successive
year that the U.S. Bank remains non-compliant),
the OCC may require the U.S. Bank to
further reduce total consolidated
assets by up to
7
%; (vii) the U.S. Bank being subject to OCC
supervisory approval processes for any
additions of new bank products, services,
markets, and
stores prior to the OCC’s acceptance of the
U.S. Bank’s improved AML policies and procedures,
to ensure the AML risk of new initiatives is appropriately
considered and mitigated; (viii) requirements
for the Bank and TD Group U.S. Holdings,
LLC (TDGUS) to retain a third party
to assess the effectiveness of the
corporate governance and U.S. management
structure and composition to adequately
oversee U.S. operations; (ix) requirements
to comply with the terms of the
plea agreements with the DOJ during a five-year
term of probation (which could be extended
as a result of the Bank failing to complete
the compliance
undertakings, failing to cooperate or to report
alleged misconduct as required, or
committing additional crimes); (x) an ongoing
obligation to cooperate with DOJ
investigations; and (xi) an ongoing obligation
to report evidence or allegations of violations
by the Bank, its affiliates, or their employees
that may be a violation of
U.S. federal law. The Bank is focused on meeting the
terms of the consent orders and plea agreements,
including meeting its requirements to remediate
the
Bank’s U.S. BSA/AML compliance programs.
During the first fiscal quarter of 2025, the
Bank fully paid the remainder of the monetary penalty
owed pursuant to the
consent orders and plea agreements that
were entered into as part of the Global Resolution.
The payment was covered by provisions previously
taken by the Bank
for this matter.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 86
As previously disclosed, the Bank and
some former and current directors, officers and employees
have been named as defendants in proposed
class action
lawsuits in the United States and Canada
purporting to be brought on behalf of
the Bank’s shareholders alleging, among other things,
that a decline in the price of
the Bank’s shares was the result of misleading disclosures
with respect to the Bank’s AML compliance programs
and/or the potential outcomes of the government
agencies’ or regulators’ investigations.
The two proposed class actions filed in
the United States have been consolidated
under the caption Tiessen v. The
Toronto-Dominion Bank, et al., in the United States District Court for the
Southern District of New York, and a consolidated amended complaint
has been filed
which names TD Bank, N.A., TDBUSH,
and certain former and current officers as
defendants. On May 30, 2025, the defendants
filed motions to dismiss in the
Tiessen case. Out of the three proposed class actions
in Ontario, Parkin v. The Toronto-Dominion Bank, et al., has been identified as the lead action
with the other
two Ontario actions being stayed. There remains
one further proposed class action in
Quebec which has been stayed. A putative shareholder
derivative action,
captioned Rubin v. Masrani, et al., has also been filed purportedly
on behalf of TD in the United States
in the Supreme Court of the State of
New York, New York
County, against certain former and current TD directors, officers and employees,
and certain of TD’s U.S. affiliates and subsidiaries.
The complaint asserts alleged
breaches of duties and other claims against
the individual defendants in connection with
the Bank’s U.S. BSA/AML compliance programs.
On October 31, 2025,
TD filed a motion to dismiss the Rubin action.
Certain purported TD shareholders have
also filed an application in the Ontario
Superior Court of Justice (The
Trustees of International Brotherhood of Electrical Workers, et
al., v. The Toronto-Dominion Bank, et al.) seeking leave to bring a shareholder derivative action
in
the Delaware Court of Chancery on behalf
of TD and TDBUSH against certain current
and former directors and officers. All of the proceedings
are still in early
stages and none of the proposed class action
lawsuits have been certified to proceed
as a class action. Losses or damages
cannot be estimated at this time.
As previously disclosed, the Bank has been
named as defendant in a purported class
action lawsuit in the United States purporting
to be brought on behalf of
First Horizon shareholders alleging that a decline
in the price of First Horizon shares
was the result of alleged misleading disclosures
the Bank made with respect
to its U.S. BSA/AML compliance programs
and its effect on the Bank’s contemplated
merger with First Horizon. The lawsuit also names
some of the Bank’s former
and current officers and a former employee as defendants.
On November 26, 2025, the court dismissed
plaintiffs’ complaint, but gave plaintiffs a final opportunity
to amend their complaint again to attempt
to address its deficiencies. These proceedings
are still in early stages and have not been
certified to proceed as a class
action. Losses or damages cannot be estimated
at this time.
As previously disclosed, the Bank is a defendant
in Canada and/or the United States in a
number of matters brought by customers, including
class actions,
alleging claims in connection with various
fees, practices and credit decisions. The
cases are in various stages of maturity and
include, among others: a Quebec
action against members of the financial
services industry (including the Bank) regarding
the existence and amount of the insufficient or
non-sufficient funds fee, a
Quebec action against certain brokers (including
TD Direct Investing) regarding disclosure
of foreign conversion fees, and a Quebec action
against members of
the automobile insurance industry (including
Primmum Insurance Company) regarding
underwriting practices in Quebec.
As previously disclosed, on September 30,
2024, TD Securities (USA) LLC (TDS-US)
entered into a Deferred Prosecution
Agreement (DPA) with the U.S. DOJ
related to the actions of a former TDS trader. Pursuant to
the terms of the DPA, TDS-US agreed to pay total monetary sanctions
of approximately US$
15.5
million,
which consists of a criminal penalty, forfeiture and victim compensation.
TDS-US and, in certain instances, TD Group
US Holdings LLC, further agreed to abide by
certain cooperation, reporting and compliance
obligations in connection with the DPA. These include, but are not
limited to: (i) an ongoing obligation to cooperate
with DOJ investigations; (ii) an ongoing obligation
to report evidence or allegations of violations
by TDS-US of certain federal statutes;
(iii) the implementation and
maintenance of a corporate compliance program
that meets certain enumerated standards;
and (iv) an ongoing obligation to regularly
report to the DOJ on its
efforts to bolster its compliance program. TDS-US
also resolved investigations by the U.S.
Securities and Exchange Commission
(SEC) and the Financial Industry
Regulatory Authority (FINRA) relating
to the actions of the former TDS-US trader. As part of the resolutions,
TDS-US agreed to pay approximately US$
7
million in
total monetary sanctions to the SEC
and US$
6
million to FINRA.
As previously disclosed, the Bank was named
as a defendant in Rotstain v. Trustmark National Bank, et al., a putative
class action lawsuit in the United States
District Court for the Northern District of
Texas related to a US$
7.2
billion Ponzi scheme perpetrated by
R. Allen Stanford, the owner of Stanford
International
Bank, Limited, an offshore bank based in Antigua.
In fiscal year 2023, the Bank reached a settlement
agreement pursuant to which the Bank agreed
to pay
US$
1.205
billion to the U.S. Receiver to resolve
all claims against the Bank arising from or
related to R. Allen Stanford, including
the claims asserted in the
Rotstain et al. v. Trustmark National Bank et al. and Smith et al. v. Independent Bank actions. Under
the terms of the agreement, all involved parties
have agreed
to a bar order dismissing and releasing all
current or future claims arising from or
related to R. Allen Stanford. On May 31, 2024,
the claims against the Bank were
dismissed with prejudice in Rotstain
v. Trustmark National Bank, et al. This brings to a close the Stanford litigation
in the United States. A case regarding
the same
facts was also brought in Ontario by the Joint
Liquidators of Stanford International Bank
Ltd. appointed by the Eastern Caribbean
Supreme Court, under the title
McDonald v. The Toronto-Dominion Bank; on July 20, 2023, the Canadian proceeding ended
following the Supreme Court of Canada’s dismissal
of an application
for leave to appeal by the Joint Liquidators.
As previously disclosed, in the third quarter
of 2024, the Bank and certain of its subsidiaries
resolved the investigations by the SEC
and the Commodity Futures
Trading Commission concerning compliance with records
preservation requirements relating
to business communications exchanged on
unapproved electronic
channels. The Bank and its subsidiaries in the
aggregate paid penalties totaling US$
124.5
million, for which the Bank was fully provisioned,
and agreed to various
other customary terms similar to those
imposed on other financial institutions
that have resolved similar investigations.
As previously disclosed, in the second quarter
of 2024, the Bank and certain of its subsidiaries
reached a settlement in principle relating to a
civil matter, pursuant
to which the Bank recorded a provision of $
274
million.
Refer to Note 23 for disclosures related
to tax matters.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 87
(d)
COMMITMENTS
Credit-related Arrangements
In the normal course of business, the Bank
enters into various commitments and
contingent liability contracts. The primary purpose
of these contracts is to make
funds available for the financing needs of
customers. The Bank’s policy for requiring
collateral security with respect to these contracts
and the types of collateral
security held is generally the same as for loans
made by the Bank.
Financial and performance standby letters
of credit represent irrevocable assurances
that the Bank will make payments in the event
that a customer cannot
meet its obligations to third parties and they
carry the same credit risk, recourse,
and collateral security requirements as loans
extended to customers.
Performance standby letters of credit are
considered non-financial guarantees as payment
does not depend on the occurrence of
a credit event and is generally
related to a non-financial trigger event.
Documentary and commercial letters of
credit are instruments issued on behalf
of a customer authorizing a third party to
draw drafts on the Bank up to a certain
amount subject to specific terms and conditions.
The Bank is at risk for any drafts drawn
that are not ultimately settled by the customer, and the amounts
are
collateralized by the assets to which
they relate.
Commitments to extend credit represent unutilized
portions of authorizations to extend credit
in the form of loans. A discussion on the
types of liquidity facilities
the Bank provides to its securitization
conduits is included in Note 10.
The values of credit instruments reported as
follows represent the maximum amount
of additional credit that the Bank could
be obligated to extend should
contracts be fully utilized.
Credit Instruments
(millions of Canadian dollars)
As at
October 31
October 31
2025
2024
Financial and performance standby letters
of credit
$
48,348
$
44,463
Documentary and commercial letters
of credit
321
337
Commitments to extend credit
1
Original term-to-maturity of one year or less
96,042
76,060
Original term-to-maturity of more than one
year
244,078
245,846
Total
$
388,789
$
366,706
1
Commitments to extend credit exclude personal lines of credit and credit card lines, which are unconditionally cancellable
at the Bank’s discretion at any time.
In addition, as at October 31, 2025, the Bank
is committed to fund $
617
million (October 31, 2024 – $
594
million) of private equity investments.
Long-term Commitments or Leases
The Bank has obligations under long-term non-cancellable
leases for premises and equipment.
The maturity profile for undiscounted lease liabilities
is $
31
million
for 2026, $
128
million for 2027, $
186
million for 2028, $
359
million for 2029, $
482
million for 2030, $
5,490
million for 2031 and thereafter. Total lease payments,
including $
7
million (October 31, 2024 – $
19
million) paid for short-term and low-value asset
leases, for the year ended October 31,
2025, were $
833
million
(October 31, 2024 – $
829
million).
(e)
ASSETS SOLD WITH RECOURSE
In connection with its securitization activities,
the Bank typically makes customary representations
and warranties about the underlying assets
which may result in
an obligation to repurchase the assets. These
representations and warranties attest that
the Bank, as the seller, has executed the sale of assets
in good faith, and
in compliance with relevant laws and contractual
requirements. In the event that they do not
meet these criteria, the loans may be required
to be repurchased by
the Bank.
(f)
GUARANTEES
In addition to financial and performance
standby letters of credit, the following types
of transactions represent the principal guarantees
that the Bank has entered
into.
Credit Enhancements
The Bank guarantees payments to counterparties
in the event that third-party credit enhancements
supporting asset pools are insufficient.
Indemnification Agreements
In the normal course of operations, the Bank
provides indemnification agreements
to various counterparties in transactions such as
service agreements, leasing
transactions, and agreements relating
to acquisitions and dispositions. Under these agreements,
the Bank is required to compensate counterparties
for costs
incurred as a result of various contingencies
such as changes in laws and regulations
and litigation claims. The nature of certain indemnification
agreements
prevent the Bank from making a reasonable
estimate of the maximum potential amount
that the Bank would be required to pay such
counterparties.
The Bank also indemnifies directors, officers,
and other persons, to the extent permitted by
law, against certain claims that may be made against
them as a
result of their services to the Bank or, at the Bank’s request, to
another entity.
(g)
PLEDGED ASSETS AND COLLATERAL
In the ordinary course of business, securities
and other assets are pledged against liabilities
or contingent liabilities, including repurchase
agreements,
securitization liabilities, covered bonds,
obligations related to securities sold
short, and securities borrowing transactions.
Assets are also deposited for the
purposes of participation in clearing and payment
systems and depositories or to have access
to the facilities of central banks in foreign jurisdictions,
or as security
for contract settlements with derivative exchanges
or other derivative counterparties.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 88
Details of assets pledged against liabilities
and collateral assets held or repledged are
shown in the following table:
Sources and Uses of Pledged Assets
and Collateral
(millions of Canadian dollars)
As at
October 31
October 31
2025
2024
Sources of pledged assets and collateral
Bank assets
Interest-bearing deposits with banks
$
5,700
$
6,161
Loans
213,125
205,337
Securities
236,430
240,425
Other assets
262
238
455,517
452,161
Third-party assets
1
Collateral received and available for sale or
repledging
439,278
364,178
Less: Collateral not repledged
(84,094)
(73,996)
355,184
290,182
810,701
742,343
Uses of pledged assets and collateral
2
Derivatives
18,709
15,964
Obligations related to securities sold
under repurchase agreements
204,710
186,777
Securities borrowing and lending
170,642
137,292
Obligations related to securities sold
short
37,320
34,336
Securitization
44,674
36,806
Covered bond
69,695
76,698
Clearing systems, payment systems, and depositories
11,048
10,540
Foreign governments and central banks
20
26
Other
95,851
124,408
652,669
622,847
Assets pledged but not encumbered
3
158,032
119,496
Total
$
810,701
$
742,343
1
Includes collateral received from reverse repurchase agreements, securities lending,
margin loans, and other client activity.
2
Includes $
68
billion of on-balance sheet assets that the Bank has pledged and that the counterparty can subsequently repledge
as at October 31, 2025 (October 31, 2024 – $
63.7
billion).
3
Represents assets pledged as pre-positioned collateral or to generate unused borrowing capacity with the U.S. Federal Reserve
Bank and the FHLB system.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 89
NOTE 26: RELATED PARTY TRANSACTIONS
Parties are considered to be related if one party
has the ability to directly or indirectly
control the other party or exercise significant influence
over the other party in
making financial or operational decisions.
The Bank’s related parties include key management
personnel, their close family members and their related
entities,
subsidiaries, associates, joint ventures, and
post-employment benefit plans for the Bank’s employees.
TRANSACTIONS WITH KEY MANAGEMENT
PERSONNEL, THEIR CLOSE FAMILY MEMBERS,
AND THEIR RELATED ENTITIES
Key management personnel are those persons
having authority and responsibility
for planning, directing,
and controlling the activities of the Bank, directly
or
indirectly. The Bank considers certain of its officers and directors to be
key management personnel. The Bank
makes loans to its key management personnel,
their
close family members,
and their related entities on market
terms and conditions with the exception of
banking products and services for key
management
personnel, which are subject to approved policy
guidelines that govern all employees.
As at October 31, 2025, $
131
million (October 31, 2024 – $
14
million) of related party loans were outstanding
from key management personnel, their
close family
members,
and their related entities. This amount
also includes balances from certain retired
key management personnel.
COMPENSATION
The remuneration of key management personnel
was as follows:
Compensation
(millions of Canadian dollars)
For the years ended October 31
2025
2024
Short-term employee benefits
$
52
$
30
Post-employment benefits
3
1
Share-based payments
54
23
Total
$
109
$
54
In addition, the Bank offers deferred share and
other plans to non-employee directors, executives,
and certain other key employees. Refer
to Note 21 for further
details.
In the ordinary course of business, the Bank
also provides various banking services to associated
and other related corporations on terms
similar to those
offered to non-related parties.
TRANSACTIONS WITH SUBSIDIARIES,
SCHWAB, AND SYMCOR INC.
Transactions between the Bank and its subsidiaries
meet the definition of related party transactions.
If these transactions are eliminated on
consolidation, they are
not disclosed as related party transactions.
Transactions between the Bank, Schwab, and Symcor
Inc. (Symcor) also qualify as related party
transactions. As the Bank’s entire remaining equity
investment
in Schwab was sold on February 12, 2025, Schwab
is no longer a related party as of October
31, 2025, but was a related party up to the date
of sale. There were
no significant transactions between the Bank,
Schwab, and Symcor during the year
ended October 31, 2025, other than as described
in the following sections and
in Note 12.
i) TRANSACTIONS WITH SCHWAB
A description of significant transactions
between the Bank and its affiliates with Schwab
is set forth below.
Insured Deposit Account Agreement
As at October 31, 2025, deposits under
the Schwab IDA Agreement were $
106
billion (US$
76
billion) (October 31, 2024 – $
117
billion (US$
84
billion)). The Bank
paid fees of $405 million related to sweep deposit
accounts from November 1, 2024 to February
11, 2025, the period in which Schwab was a related party to
the
Bank. The Bank paid fees, net of the termination
fees received from Schwab, of $
908
million during the year ended October 31, 2024.
As at October 31, 2025, amounts receivable
from Schwab were $
49
million (October 31, 2024 – $
12
million). As at October 31, 2025, amounts payable
to
Schwab were $
38
million (October 31, 2024 – $
42
million).
ii) TRANSACTIONS WITH SYMCOR
The Bank has
one-third ownership
in Symcor, a Canadian provider of business process
outsourcing services offering a diverse portfolio
of integrated solutions in
item processing, statement processing and
production, and cash management
services. The Bank accounts for Symcor’s
results using the equity method of
accounting. During the year ended October 31,
2025, the Bank paid $
89
million (October 31, 2024 – $
88
million) for these services. As at October
31, 2025, the
amount payable to Symcor was $
7
million (October 31, 2024 – $
6
million).
The Bank and two other shareholder banks
have also provided a $
100
million unsecured loan facility to Symcor
which was undrawn as at October 31, 2025 and
October 31, 2024.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 90
NOTE 27: SEGMENTED INFORMATION
For management reporting purposes, the Bank
reports its results under four key
business segments: Canadian Personal
and Commercial Banking,
U.S. Retail,
Wealth Management and Insurance,
and Wholesale Banking. The Bank’s other activities
are grouped into the Corporate segment.
Canadian Personal and Commercial
Banking provides financial products and services
to personal, small business and commercial
customers, and includes
TD Auto Finance Canada. U.S. Retail is
comprised of personal and business banking
in the U.S., TD Auto Finance U.S., and
the U.S. wealth business. On
February 12, 2025, the Bank sold its entire remaining
equity investment in Schwab. Prior to the
sale, the Bank’s investment in Schwab was reported
in the
U.S. Retail segment, refer to Note 12
for further details. Wealth Management and Insurance
includes the Canadian wealth business
which provides investment
products and services to institutional and retail
investors, and the insurance business
which provides property and casualty insurance,
as well as life and health
insurance products to customers across
Canada. Wholesale Banking provides a
wide range of capital markets, investment
banking, and corporate banking
products and services, including underwriting
and distribution of new debt and equity issues,
providing advice on strategic acquisitions
and divestitures, and
meeting the daily trading, funding, and investment
needs of the Bank’s clients. The Corporate
segment includes the effects of certain asset securitization
programs, treasury management, elimination
of taxable equivalent adjustments and other
management reclassifications, corporate level
tax items, and residual
unallocated revenue and expenses. Effective
fiscal 2025, certain U.S. governance and
control investments, including costs for U.S. BSA/AML
remediation,
previously reported in the Corporate segment
are now reported in the U.S. Retail
segment. Comparative amounts have
been reclassified to conform with the
presentation adopted in the current period.
The results of each business segment reflect
revenue, expenses, and assets generated
by the businesses in that segment.
Due to the complexity of the Bank,
its management reporting model uses various
estimates, assumptions, allocations, and
risk-based methodologies for funds
transfer pricing, inter-segment
revenue, income tax rates, capital, indirect
expenses and cost transfers to
measure business segment results. The basis
of allocation and methodologies are
reviewed periodically to align with management’s
evaluation of the Bank’s business segments.
Transfer pricing of funds is generally applied at market rates.
Intersegment revenue is negotiated between
each business segment and approximates
the fair value of the services provided.
Income tax provision or recovery is
generally applied to each segment based on
a statutory tax rate and may be adjusted
for items and activities unique to each segment.
Amortization of intangibles
acquired as a result of business combinations
is included in the Corporate segment. Accordingly, net income
for business segments is presented before
amortization of these intangibles.
Non-interest income is earned by the Bank
primarily through investment and
securities services, credit fees, trading
income, service charges, card services, and
insurance revenues. Revenues from
investment and securities services are earned
predominantly in the Wealth Management
and Insurance segment. Revenues
from credit fees are primarily earned
in the Wholesale Banking and Canadian Personal
and Commercial Banking segments.
Trading income is earned within
Wholesale Banking. Both service charges
and card services revenue are mainly earned
in the U.S. Retail and Canadian Personal
and Commercial Banking
segments. Insurance revenue is earned in
the Wealth Management and Insurance segment.
Net interest income within Wholesale Banking
is calculated on a taxable equivalent basis
(TEB), which means that the value of non-taxable
or tax-exempt
income, primarily dividends, is adjusted
to its equivalent before-tax value. Using TEB allows
the Bank to measure income from all
securities and loans consistently
and makes for a more meaningful comparison
of net interest income with similar institutions.
The TEB adjustment reflected in Wholesale
Banking is reversed in the
Corporate segment.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 91
The following table summarizes the segment
results for the years ended October 31, 2025
and October 31, 2024.
Results by Business Segment
1
(millions of Canadian dollars)
For the years ended
October 31, 2025
Canadian
Personal and
Wealth
Commercial
U.S.
Management
Wholesale
Banking
Retail
and Insurance
Banking
2
Corporate
2
Total
Net interest income (loss)
$
16,701
$
12,368
$
1,493
$
(18)
$
2,518
$
33,062
Non-interest income (loss)
3,985
(63)
13,069
8,410
9,314
34,715
Total revenue
20,686
12,305
14,562
8,392
11,832
67,777
Provision for (recovery of)
credit losses
2,143
1,514
–
290
559
4,506
Insurance service expenses
–
–
6,089
–
–
6,089
Non-interest expenses
8,382
9,599
4,698
6,048
4,812
33,539
Income (loss) before income taxes
and share of net income from
investment in Schwab
10,161
1,192
3,775
2,054
6,461
23,643
Provision for (recovery of)
income taxes
2,844
(472)
986
444
(392)
3,410
Share of net income from
investment in Schwab
3,4
–
277
–
–
28
305
Net income (loss)
$
7,317
$
1,941
$
2,789
$
1,610
$
6,881
$
20,538
October 31, 2024
Net interest income (loss)
$
15,697
$
11,600
$
1,226
$
582
$
1,367
$
30,472
Non-interest income (loss)
4,093
2,113
12,309
6,704
1,532
26,751
Total revenue
19,790
13,713
13,535
7,286
2,899
57,223
Provision for (recovery of)
credit losses
1,755
1,532
–
317
649
4,253
Insurance service expenses
–
–
6,647
–
–
6,647
Non-interest expenses
8,010
13,141
4,285
5,576
4,481
35,493
Income (loss) before income taxes
and share of net income
from investment in Schwab
10,025
(960)
2,603
1,393
(2,231)
10,830
Provision for (recovery of)
income taxes
2,806
69
648
275
(1,107)
2,691
Share of net income from
investment in Schwab
3,4
–
709
–
–
(6)
703
Net income (loss)
$
7,219
$
(320)
$
1,955
$
1,118
$
(1,130)
$
8,842
1
The retailer program partners’
share of revenues and credit losses is presented in the Corporate segment, with an offsetting
amount (representing the partners’ net share) recorded in
Non-interest expenses, resulting in no impact to Corporate reported Net income (loss).
The Net income (loss) included in the U.S. Retail segment includes only the portion of revenue and
credit losses attributable to the Bank under the agreements.
2
Net interest income within Wholesale Banking is calculated on a TEB. The TEB adjustment reflected in Wholesale
Banking is reversed in the Corporate segment.
3
The after-tax amounts for amortization of acquired intangibles, the Bank’s share of acquisition and integration
charges associated with Schwab’s acquisition of TD Ameritrade, the Bank’s
share of Schwab’s restructuring charges, and the Bank’s share of Schwab’s Federal
Deposit Insurance Corporation special assessment charge were recorded in the Corporate segment.
4
The Bank’s share of Schwab’s earnings was reported with a one-month lag. Refer to
Note 12 for further details.
Total Assets by Business Segment
(millions of Canadian dollars)
Canadian
Personal and
Wealth
Commercial
Management
Wholesale
Banking
U.S. Retail
and Insurance
Banking
Corporate
Total
As at October 31, 2025
Total assets
$
616,115
$
530,729
$
25,231
$
754,391
$
168,092
$
2,094,558
As at October 31, 2024
Total assets
$
584,468
$
606,572
$
23,217
$
686,795
$
160,699
$
2,061,751
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 92
RESULTS BY GEOGRAPHY
For reporting of geographic results, segments
are grouped into Canada, United States,
and Other international. Transactions are primarily
recorded in the location
responsible for recording the revenue or assets.
This location frequently corresponds
with the location of the legal entity through which
the business is conducted
and the location of the customer.
Results by Geography
(millions of Canadian dollars)
For the years ended
As at
October 31
October 31
2025
2025
Total revenue
Total assets
Canada
$
33,916
$
1,167,980
United States
29,706
753,258
Other international
4,155
173,320
Total
$
67,777
$
2,094,558
2024
2024
Canada
$
31,453
$
1,146,243
United States
22,097
749,353
Other international
3,673
166,155
Total
$
57,223
$
2,061,751
NOTE 28: INTEREST INCOME AND EXPENSE
The following tables present interest income
and interest expense by basis of accounting
measurement.
Interest Income
(millions of Canadian dollars)
For the years ended October 31
2025
2024
Measured at amortized cost
1
$
74,659
$
80,581
Measured at FVOCI – Debt instruments
1
4,342
3,743
79,001
84,324
Measured or designated at FVTPL
8,282
8,742
Measured at FVOCI – Equity instruments
338
323
Total
$
87,621
$
93,389
1
Interest income is calculated using EIRM.
Interest Expense
(millions of Canadian dollars)
For the years ended October 31
2025
2024
Measured at amortized cost
1,2
$
43,268
$
50,382
Measured or designated at FVTPL
11,291
12,535
Total
$
54,559
$
62,917
1
Interest expense is calculated using EIRM.
2
Includes interest expense on lease liabilities for the year ended October 31, 2025 of $
163
million (October 31, 2024 – $
151
million).
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 93
NOTE 29: CREDIT RISK
Concentration of credit risk exists where
a number of borrowers or counterparties are
engaged in similar activities, are located
in the same geographic area or
have comparable economic characteristics.
Their ability to meet contractual obligations
may be similarly affected by changing economic, political
or other
conditions. The Bank’s portfolio could be sensitive
to changing conditions in particular geographic
regions.
Concentration of Credit Risk
(millions of Canadian dollars,
As at
except as noted)
Derivative financial
Loans
1,2
Credit Instruments
3,4
instruments
5,6
October 31
October 31
October 31
October 31
October 31
October 31
2025
2024
2025
2024
2025
2024
Canada
69
%
66
%
30
%
32
%
28
%
28
%
United States
30
33
67
64
33
32
United Kingdom
–
–
1
1
9
9
Europe – other
–
–
2
2
22
21
Other international
1
1
–
1
8
10
Total
100
%
100
%
100
%
100
%
100
%
100
%
$
953,300
$
949,779
$
388,789
$
366,706
$
72,333
$
69,970
1
Of the total loans the only industry segment which equalled or exceeded
5
% of the total concentration as at October 31, 2025 was real estate
10
% (October 31, 2024 –
10
%).
2
Includes loans that are measured at FVOCI.
3
As at October 31, 2025, the Bank had commitments and contingent liability contracts in the amount of $
389
billion (October 31, 2024 – $
367
billion). Included are commitments to extend
credit totalling $
340
billion (October 31, 2024 – $
322
billion), of which the credit risk is dispersed as detailed in the table above.
4
Of the commitments to extend credit, industry segments which equalled or exceeded
5
% of the total concentration were as follows as at October 31, 2025: financial institutions
22
%
(October 31, 2024 –
19
%); power and utilities
11
% (October 31, 2024 –
11
%); government, public sector entities and education
7
% (October 31, 2024 –
7
%); automotive
7
%
(October 31, 2024 –
7
%); professional and other services
8
% (October 31, 2024 –
8
%); sundry manufacturing and wholesale
7
% (October 31, 2024 –
7
%); telecommunications, cable and
media
5
% (October 31, 2024 –
5
%).
5
As at October 31, 2025, the current replacement cost of derivative financial instruments, excluding the impact of
master netting agreements and collateral, amounted to $
72
billion
(October 31, 2024 – $
70
billion). Based on the location of the ultimate counterparty,
the credit risk was allocated as detailed in the table above. The table excludes the fair
value of
exchange traded derivatives.
6
The largest concentration by counterparty type was with financial institutions (including non-banking financial institutions),
which accounted for
74
% of the total as at October 31, 2025
(October 31, 2024 –
66
%). The second largest concentration was with governments, which accounted for
16
% of the total as at October 31, 2025 (October 31, 2024 –
24
%). No other
industry segment exceeded
5
% of the total.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 94
The following table presents the maximum
exposure to credit risk of financial instruments,
before taking account of any collateral
held or other credit
enhancements.
Gross Maximum Credit Risk Exposure
(millions of Canadian dollars)
As at
October 31
October 31
2025
2024
Cash and due from banks
$
7,512
$
6,437
Interest-bearing deposits with banks
109,417
169,930
Securities
1
Financial assets designated at fair value through
profit or loss
Government and government-insured
securities
3,473
3,056
Other debt securities
3,513
3,361
Trading
Government and government-insured
securities
43,957
46,575
Other debt securities
23,270
22,482
Retained interest
1
1
Non-trading securities at fair value through
profit or loss
Government and government-insured
securities
333
271
Other debt securities
5,346
1,376
Securities at fair value through other
comprehensive income
Government and government-insured
securities
101,234
78,422
Other debt securities
21,800
10,830
Debt securities at amortized cost
Government and government-insured
securities
182,488
205,098
Other debt securities
57,951
66,517
Securities purchased under reverse purchase
agreements
247,078
208,217
Derivatives
2
82,972
78,061
Loans
Residential mortgages
314,706
331,284
Consumer instalment and other personal
256,840
226,333
Credit card
39,370
38,542
Business and government
342,096
353,390
Trading loans
30,032
23,518
Non-trading loans at fair value through profit
or loss
344
3,057
Loans at fair value through other comprehensive
income
288
230
Amounts receivable from brokers, dealers,
and clients
27,345
22,115
Other assets
12,318
12,761
Total assets
1,913,684
1,911,864
Credit instruments
3
388,789
366,706
Unconditionally cancellable commitments
to extend credit
468,663
450,574
Total credit exposure
$
2,771,136
$
2,729,144
1
Excludes equity securities.
2
The carrying amount of the derivative assets represents the maximum credit risk exposure related to derivative contracts.
3
The balance represents the maximum amount of additional funds that the Bank could be obligated to extend should the contracts
be fully utilized. The actual maximum exposure may
differ from the amount reported above. Refer to Note 25 for further details.
NOTE 30: REGULATORY CAPITAL
The Bank manages its capital in accordance
with guidelines established by OSFI. The regulatory
capital guidelines measure capital in relation
to credit, market,
and operational risks. The Bank has various
capital policies, procedures,
and controls which it utilizes to achieve its
goals and objectives. The Bank is designated
as a domestic systemically important bank
(D-SIB) and a global systemically important
bank (G-SIB).
The Bank’s capital management objectives are:
●
To maintain an adequate level of capital based on the Bank’s risk profile
as determined by:
–
the Bank’s Risk Appetite Statement;
–
capital requirements defined by relevant
regulatory authorities; and
–
the Bank’s internal assessment of capital requirements,
including stress test analysis, consistent
with the Bank’s risk profile and risk tolerance levels.
●
Manage capital levels, in order to:
–
insulate the Bank from unexpected loss events;
–
maintain stakeholder confidence in the Bank;
–
establish that the Bank has adequate capital
under a severe but plausible stress event;
and
–
facilitate business growth and/or strategic
deployment consistent with the Bank’s
strategy and risk appetite.
●
To have the most economic weighted-average cost of capital achievable, while
preserving the appropriate mix of
capital instruments to meet targeted
capitalization levels and provide a satisfactory
return on shareholders’
equity.
●
To support strong external debt ratings, in order to manage the Bank’s overall cost
of funds and to maintain access to required
funding (in the event of
unexpected loss or business growth).
●
To maintain a robust capital planning process and framework to support capital
funding decisions such as issuances, redemptions
and distributions which in
turn support the Bank’s capital adequacy.
These objectives are applied in a manner
consistent with the Bank’s overall objective of
providing a satisfactory return on
shareholders’ equity.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 95
Basel III Capital Framework
Capital requirements of the Basel Committee
on Banking Supervision are commonly referred
to as Basel III. Under Basel III, Total Capital consists of three
components, namely Common Equity Tier 1 (CET1),
Additional Tier 1, and Tier 2 Capital. Risk sensitive regulatory
capital ratios are calculated by dividing
CET1,
Tier 1, and Total Capital by risk-weighted assets (RWA), inclusive of any minimum requirements outlined
under the regulatory floor. Basel III also implemented a
non-risk sensitive leverage ratio to act as a
supplementary measure to the risk-sensitive
capital requirements. The leverage ratio
is calculated by dividing Tier 1
Capital by leverage exposure which is primarily
comprised of on-balance sheet assets
with adjustments made to derivative and securities
financing transaction
exposures, and credit equivalent amounts
of off-balance sheet exposures. TD manages its
regulatory capital in accordance with
OSFI’s implementation of the
Basel III Capital Framework.
Capital Position and Capital Ratios
The Basel framework allows qualifying banks
to determine capital levels consistent with
the way they measure, manage, and
mitigate risks. It specifies
methodologies for the measurement of credit,
trading market, and operational risks. The
Bank uses the Internal Ratings-Based
approaches to credit risk for all
material portfolios.
For accounting purposes, IFRS is followed
for consolidation of subsidiaries and joint ventures.
For regulatory capital purposes, all
subsidiaries of the Bank are
consolidated except for insurance subsidiaries
which are deconsolidated and follow prescribed
treatment per OSFI’s CAR guidelines. Insurance
subsidiaries are
subject to their own capital adequacy reporting,
such as OSFI’s Minimum Capital Test for General Insurance and Life Insurance Capital
Adequacy Test for Life and
Health.
Some of the Bank’s subsidiaries are individually
regulated by either OSFI or other regulators.
Many of these entities have minimum
capital requirements which
may limit the Bank’s ability to extract capital
or funds for other uses.
Canadian banks designated as D-SIBs are required
to comply with OSFI’s minimum targets for risk-based
capital and leverage ratios. The minimum
targets
include a D-SIB surcharge and Domestic Stability
Buffer (DSB) for CET1, Tier 1, Total Capital and risk-based Total Loss Absorbing Capacity (TLAC) ratios. The
DSB level was increased to
3.5
% as of November 1, 2023, and as
a result the published regulatory minimum
targets are set at
11.5
%,
13.0
%,
15.0
% and
25.0
%,
respectively. The OSFI target includes the greater of the D-SIB or
G-SIB surcharge, both of which are
currently
1
% for the Bank. The OSFI target for leverage
requires D-SIBs to hold a leverage ratio buffer of
0.50
% in addition to the existing minimum
requirement. This sets the published regulatory
minimum targets for
leverage and TLAC leverage ratios at
3.5
% and
7.25
%, respectively.
The Bank complied with all minimum risk-based
capital and leverage ratio requirements
set by OSFI during the year ended October
31, 2025.
The following table summarizes the Bank’s regulatory
capital position as at October 31, 2025 and
October 31, 2024.
Regulatory Capital Position
(millions of Canadian dollars, except
as noted)
As at
October 31
October 31
2025
2024
Capital
Common Equity Tier 1 Capital
$
93,579
$
82,714
Tier 1 Capital
104,502
93,248
Total Capital
116,866
105,745
Risk-weighted assets used in the calculation
of capital ratios
636,424
630,900
Capital and leverage ratios
Common Equity Tier 1 Capital ratio
14.7
%
13.1
%
Tier 1 Capital ratio
16.4
14.8
Total Capital ratio
18.4
16.8
Leverage ratio
4.6
4.2
TLAC Ratio
31.8
28.7
TLAC Leverage Ratio
8.9
8.1
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 96
NOTE 31: INFORMATION ON SUBSIDIARIES
The following is a list of the directly or indirectly
held significant subsidiaries.
SIGNIFICANT SUBSIDIARIES
1
(millions of Canadian dollars)
October 31, 2025
Address of Head
Carrying value of shares
North America
or Principal Office
2
owned by the Bank
3
Meloche Monnex Inc.
Montreal, Québec
$
3,202
Security National Insurance Company
Montreal, Québec
Primmum Insurance Company
Toronto, Ontario
TD Direct Insurance Inc.
Toronto, Ontario
TD General Insurance Company
Toronto, Ontario
TD Home and Auto Insurance Company
Toronto, Ontario
TD Wealth Holdings Canada Limited
Toronto, Ontario
12,683
TD Asset Management Inc.
Toronto, Ontario
GMI Servicing Inc.
Winnipeg, Manitoba
TD Waterhouse Private Investment Counsel Inc.
Toronto, Ontario
TD Waterhouse Canada Inc.
Toronto, Ontario
TD Auto Finance (Canada) Inc.
Toronto, Ontario
4,542
TD Group US Holdings LLC
Wilmington, Delaware
75,699
Toronto Dominion Holdings (U.S.A.), Inc.
New York, New York
Cowen Inc.
New York, New York
Cowen Structured Holdings LLC
New York, New York
Cowen Structured Holdings Inc.
New York, New York
TD Arranged Services LLC
New York, New York
RCG LV Pearl, LLC
New York, New York
Cowen Financial Products LLC
New York, New York
Cowen Holdings, Inc.
New York, New York
Cowen CV Acquisition LLC
New York, New York
Cowen Execution Holdco LLC
New York, New York
Westminster Research Associates LLC
New York, New York
RCG Insurance Company
New York, New York
TD Prime Services LLC
New York, New York
TD Financial Products LLC
Chicago, Illinois
TD Securities (USA) LLC
New York, New York
Toronto Dominion (Texas) LLC
New York, New York
Toronto Dominion (New York) LLC
New York, New York
Toronto Dominion Investments LLC
New York, New York
TD Bank US Holding Company
Cherry Hill, New Jersey
Epoch Investment Partners, Inc.
New York, New York
TD Bank USA, National Association
Cherry Hill, New Jersey
TD Bank, National Association
Cherry Hill, New Jersey
TD Equipment Finance, Inc.
Mt. Laurel, New Jersey
TD Private Client Wealth LLC
New York, New York
TD Public Finance LLC
New York, New York
TD Wealth Management Services Inc.
Mt. Laurel, New Jersey
TD Investment Services Inc.
Toronto, Ontario
68
TD Life Insurance Company
Toronto, Ontario
180
TD Mortgage Corporation
Toronto, Ontario
14,052
TD Pacific Mortgage Corporation
Vancouver, British Columbia
The Canada Trust Company
Toronto, Ontario
TD Securities Inc.
Toronto, Ontario
3,589
TD Vermillion Holdings Limited
Toronto, Ontario
24,279
TD Reinsurance (Barbados) Inc.
St. James, Barbados
International
Ramius Enterprise Luxembourg Holdco S.à.r.l.
Luxembourg, Luxembourg
49
Cowen Reinsurance S.A.
Luxembourg, Luxembourg
TD Ireland Unlimited Company
Dublin, Ireland
2,973
TD Global Finance Unlimited Company
Dublin, Ireland
TD Securities (Japan) Co. Ltd.
Tokyo, Japan
12
Toronto Dominion Australia Limited
Sydney, Australia
107
TD Bank Europe Limited
London, England
1,420
Toronto Dominion International Pte. Ltd.
Singapore, Singapore
10,701
TD Execution Services Limited
London, England
Toronto Dominion (South East Asia) Limited
Singapore, Singapore
1,813
1
Unless otherwise noted, The Toronto-Dominion Bank, either directly or through its subsidiaries, owns
100
% of the entity and/or
100
% of any issued and outstanding voting
securities and
non-voting securities of the entities listed.
2
Each subsidiary is incorporated or organized in the country in which its head or principal office is located.
3
Carrying amounts are prepared for purposes of meeting the disclosure requirements of Section 308 (3)(a)(ii) of the
Bank Act (Canada)
. Intercompany transactions may be included herein
which are eliminated for consolidated financial reporting purposes.
TD BANK GROUP • 2025 ANNUAL REPORT • FINANCIAL STATEMENTS AND NOTES
Page 97
SUBSIDIARIES WITH RESTRICTIONS
TO TRANSFER FUNDS
Certain of the Bank’s subsidiaries have regulatory requirements
to fulfil, in accordance with applicable law, in order to transfer
funds, including paying dividends to,
repaying loans to, or redeeming subordinated
debentures issued to, the Bank.
These customary requirements include,
but are not limited to:
●
Local regulatory capital and/or surplus adequacy
requirements;
●
Basel requirements under Pillar 1 and Pillar
2;
●
Local regulatory approval requirements; and
●
Local corporate and/or securities laws.
Pursuant to the terms of the orders that
TD Bank USA, N.A. (TDBUSA) and TDBNA
(collectively the “U.S. Bank”) entered into
with the OCC, the Boards of
Directors of the U.S. Bank are required
to certify to the OCC that the U.S. Bank has
allocated appropriate resources and
staffing to the remediation required by the
orders before declaring or paying dividends, engaging
in share repurchases, or making any
other capital distribution. In addition, pursuant
to the terms of the
cease and desist order that the Bank, TDGUS
and TDBUSH entered into with the
Federal Reserve, the Boards of Directors
of the Bank, TDGUS and TDBUSH are
required to certify to the Federal Reserve
that appropriate resources and staffing have been
allocated to remediation, as required by the
order, before declaring or
paying any dividends, engaging in share
repurchases, or making any other capital
distributions. If the Bank, the U.S. Bank,
TDGUS or TDBUSH are unable to so
certify, then there would be restrictions on (i) the payment of dividends
or making of any other capital distributions,
or (ii) the repurchase of shares by these
entities
.
As at October 31, 2025, the net assets of
subsidiaries subject to regulatory or CAR
was approximately $
107
billion (October 31, 2024 – $
109
billion), before
intercompany eliminations.
In addition to regulatory requirements outlined
above, the Bank may be subject to significant
restrictions on its ability to use the assets
or settle the liabilities of
members of its group. Key contractual restrictions
may arise from the provision of collateral
to third parties in the normal course of business,
for example through
secured financing transactions; assets
securitized which are not subsequently available
for transfer by the Bank; and assets transferred
into other consolidated
and unconsolidated structured entities. The impact
of these restrictions has been disclosed
in Notes 9 and 25.