2016 Annual Report

FINANCIAL RESULTS OVERVIEW Expenses NON-INTEREST EXPENSES

Reported non-interest expenses for the year were $18,877 million, an increase of $804 million, or 4%, compared with last year. All segments experienced increases in reported non-interest expenses. U.S. Retail non-interest expenses increased primarily due to business initiatives, volume growth, investments in front line employees, and the unfavourable impact of foreign exchange translation, partially offset by productivity savings. The increase in Canadian Retail non-interest expenses reflected business growth, higher employee-related expenses including revenue-based variable expenses in the wealth business, and higher investment in technology, partially offset by productivity savings. Corporate expenses increased due to the contribution from an acquisition in the strategic cards portfolio, an impairment of goodwill, non-financial assets and other charges this year, which was reported as an item of note, and higher net corporate expenses due to ongoing investments in enterprise and regulatory projects, partially offset by restructuring charges in the prior year which were reported as an item of note. Wholesale Banking non-interest expenses increased primarily due to higher variable compensation and the unfavourable impact of foreign exchange translation, partially offset by productivity savings. Adjusted non-interest expenses were $18,496 million, an increase of $1,420 million, or 8%, compared with last year.

INSURANCE CLAIMS AND RELATED EXPENSES Insurance claims and related expenses were $2,462 million, a decrease of $38 million, or 2%, compared with last year, reflecting more favourable prior years’ claims development, partially offset by more severe weather conditions and a change in mix of reinsurance contracts.

EFFICIENCY RATIO

The efficiency ratio measures operating efficiency and is calculated by taking the non-interest expenses as a percentage of total revenue. A lower ratio indicates a more efficient business operation. The reported efficiency ratio was 55.0%, compared with 57.5%

last year.

NON-INTEREST EXPENSES (millions of Canadian dollars)

$20,000 16,000

12,000 8,000 4,000

0 14 15 Reported Adjusted 16

EFFICIENCY RATIO (percent)

60% 50 40 30 20 10 0

Reported 14 15

16 Adjusted

T ABLE 10

NON-INTEREST EXPENSES AND EFFICIENCY RATIO1 (millions of Canadian dollars, except as noted) 2016

Salaries and employee benefits Salaries

Incentive compensation

Pension and other employee benefits Total salaries and employee benefits

Occupancy Rent

Depreciation and impairment losses Other

Total occupancy

Equipment Rent

Depreciation and impairment losses Other

Total equipment

Amortization of other intangibles Marketing and business development Restructuring charges Brokerage-related fees

Professional and advisory services Other expenses

Capital and business taxes Postage

Travel and relocation Other

Total other expenses Total expenses

Efficiency ratio – reported Efficiency ratio – adjusted

1

Certain comparative amounts have been reclassified to conform with the presentation adopted in the current period.

$ 5,576 2,170 1,552

9,298

915 427 483

1,825

182 202 560

944 708

743

(18) 316

1,232 176

225 191

3,237 3,829

$ 18,877

55.0% 53.9

2015

$ 5,452 2,057 1,534

9,043

887 376 456

1,719

172 212 508

892 662

728 686 324

1,032 139

222 175

2,451 2,987

$ 18,073

57.5% 54.3

2014

$ 5,171 1,927 1,353

8,451

800 324 425

1,549

147 209 454

810 598

756 29

321 991

160 212 185

2,434 2,991

$ 16,496

55.1% 53.4

2016 vs. 2015 % change

2 5 1

3 3

14 6

6 6 (5)

10 6 7

2

(103) (2)

19 27

1 9

32 28 4

(250)bps (40)

20 TD BANK GROUP ANNUAL REPORT 2016 MANAGEMENT’S DISCUSSION AND ANALYSIS

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