TD Bank 2007 Annual Report Download - page 94

TD BANK FINANCIAL GROUP ANNUAL REPORT 2007 Financial Results90
Loans and Impaired Loans
(millions of Canadian dollars)
2007
Gross
amount of
loans
Gross
impaired
loans
Specific
allowance
Impaired
loans net
of specific
allowance
General
allowance
Total
allowance
for credit
losses
Net
amount
of loans
Residential mortgages $ 58,485 $ 48 $ 8 $ 40 $ 14 $ 22 $ 58,463
Consumer installment and other personal 67,532 150 61 89 273 334 67,198
Credit card 5,700 70 39 31 197 236 5,464
Business and government 44,258 301 95 206 608 703 43,555
Business and government designated as
trading under the fair value option 1,235 – – – – – 1,235
Total $ 177,210 $ 569 $ 203 $ 366 $ 1,092 $ 1,295 $ 175,915
2006
Residential mortgages $ 53,425 $ 31 $ 6 $ 25 $ 33 $ 39 $ 53,386
Consumer installment and other personal 63,130 126 61 65 269 330 62,800
Credit card 4,856 46 23 23 90 113 4,743
Business and government 40,514 243 86 157 749 835 39,679
Total $ 161,925 $ 446 $ 176 $ 270 $ 1,141 $ 1,317 $ 160,608
2007 2006
Average gross impaired loans during the year $ 548 $ 384
Included in residential mortgages are Canadian government-
insured mortgages of $39,834 million at October 31, 2007
(2006 – $29,433 million). Included in consumer installment
and other personal loans are Canadian government-insured real
estate personal loans of $16,994 million at October 31, 2007
(2006 – $13,702 million).
Foreclosed assets are non-financial assets repossessed, such as
real estate properties, which are made available 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. Gross impaired loans include fore-
closed assets held for sale with a gross carrying value of $57 mil-
lion at October 31, 2007 (2006 – $27 million) and a related
allowance of $10 million (2006 – $12 million). The gross carrying
value of non-financial assets repossessed during the year was not
material. Financial assets repossessed, such as cash and bonds, are
used in the Bank’s daily trading and lending activities and are not
differentiated from other financial assets in the portfolios.
Allowance for Credit Losses
(millions of Canadian dollars) 2007 2006 2005
Specific
allowance
General
allowance Total
Specific
allowance
General
allowance Total Total
Balance at beginning of year $ 176 $ 1,141 $ 1,317 $ 155 $ 1,138 $ 1,293 $ 1,183
Acquisitions of TD Banknorth (includes Hudson) and VFC –14 14 –87 87 316
Provision for (reversal of) credit losses 643 2645 457 (48)409 55
Write-offs1(763) – (763)(583) – (583) (487)
Recoveries 135 –135 129 –129 245
Other2 12 (65)(53)18 (36)(18)(19)
Allowance for credit losses at end of year $ 203 $ 1,092 $ 1,295 $ 176 $ 1,141 $ 1,317 $ 1,293
1 For the year ended October 31, 2007, there were no write-offs related to
restructured loans (2006 – nil; 2005 – nil).
2 Includes foreign exchange rate changes, net of losses on loan sales.
NOTE 4LOAN SECURITIZATIONS
When loan receivables are transferred in a securitization to a
special purpose entity under terms that transfer control to third
parties, and consideration other than beneficial interest in
the transferred assets is received, the transaction is recognized
as a sale and the related loan assets are removed from the
Consolidated Balance Sheet. For control to have transferred,
(1) the transferred loans must be isolated from the seller, even
in the event of bankruptcy or receivership of the seller, (2) the
purchaser must have the right to sell or pledge the transferred
loans or, if the purchaser is a Qualifying Special Purpose Entity
(QSPE) as defined in the CICA Accounting Guideline 12, Transfers
of Receivables, the investors of the QSPE must have the right to
sell or pledge their ownership interest in the QSPE, and (3) the
seller cannot retain the right to repurchase the loans and receive
more than trivial benefit.
As part of the securitization, certain financial assets are
retained and may consist of an interest-only strip, servicing
rights and, in some cases, a cash reserve account.
expected future cash flows at the effective interest rate inherent
in the loan immediately prior to impairment. For personal and
small business loans and credit card loans, specific provisions are
calculated using a formula taking into account recent loss experi-
ence. Specific provisions for credit card loans are recorded when
account balances are 90 days in arrears. Credit card loans with
payments 180 days in arrears are entirely written off.
General allowances include the accumulated provisions for
losses which are considered to have occurred but cannot be
determined on an item-by-item or group basis. The level of the
general allowance depends upon an assessment of business and
economic conditions, historical and expected loss experience,
loan portfolio composition and other relevant indicators. General
allowances are computed using credit risk models developed
by the Bank. The models consider probability of default (loss
frequency), loss given default (loss severity) and exposure at
default. This allowance, reviewed quarterly, reflects model and
estimation risks in addition to management judgment.