TD Bank 2010 Annual Report Download - page 47

TD BANK GROUP ANNUAL REPORT 2010 MANAGEMENT’S DISCUSSION AND ANALYSIS 45
Specific Allowance
The Bank establishes specific allowances for impaired loans when the
estimated realizable value of the loan is less than its recorded value,
based on discounting expected future cash flows. Specific allowances
for loan losses are established to reduce the book value of loans to
their estimated realizable amounts.
Specific allowances for the non-retail portfolio and for debt securities
classified as loans are borrower-specific and reviewed quarterly. Specific
allowances for the retail portfolio are calculated on an aggregate basis
using a formula that captures recent loss experience, historical default
rates and the type of collateral pledged.
During 2010, specific allowances increased by $119 million, or 21%,
resulting in a total specific allowance of $677 million. Debt securities
classified as loans represented $140 million, or 21%, of the total
specific allowance in 2010. Allowances for credit losses are more fully
described in Note 3 to the 2010 Consolidated Financial Statements.
ALLOWANCE FOR CREDIT LOSSES
Total allowance for credit losses consists of specific and general allow-
ances carried on the Consolidated Balance Sheet. The allowance is
increased by the provision for credit losses, and decreased by write-offs
net of recoveries. The Bank maintains the allowance at levels that
management believes is adequate to absorb all credit-related losses in
the lending portfolio. Individual problem accounts, general economic
conditions, loss experience, as well as the sector and geographic mix
of the lending portfolio are all considered by management in assessing
the appropriate allowance levels.
(millions of Canadian dollars, except as noted) Percentage of total
2010 2009 2008 2010 2009 2008
Gross Net Net Net
impaired Specific impaired impaired impaired
loans
allowance loans loans loans
Canada
Atlantic provinces $ 20 $ 5 $ 15 $ 11 $ 11 0.5% 0.6% 1.3%
British Columbia1 98 24 74 50 37 2.7 2.8 4.6
Ontario1 509 169 340 429 308 12.2 24.5 38.3
Prairies1 132 32 100 98 50 3.6 5.6 6.2
Québec 68 17 51 47 36 1.9 2.7 4.5
Total Canada2 827 247 580 635 442 20.9 36.2 54.9
United States
Florida 57 10 47 78 13 1.7 4.4 1.6
New England3 570 113 457 255 109 16.4 14.5 13.5
New Jersey 268 53 215 192 66 7.7 11.0 8.2
New York 210 49 161 240 81 5.8 13.7 10.1
Pennsylvania 151 37 114 84 40 4.1 4.8 5.0
Other 169 28 141 73 54 5.1 4.2 6.7
Total United States2 1,425 290 1,135 922 363 40.8 52.6 45.1
International
Other 1 – 1 – – – – –
Total international 1 – 1 – – – – –
Total, excluding other loans 2,253 537 1,716 1,557 805 61.7 88.8 100.0
Other loans 1,203 140 1,063 196 – 38.3% 11.2% – %
Total $ 3,456 $ 677 $ 2,779 $ 1,753 $ 805 100.0% 100.0% 100.0%
Net impaired loans as a % of net loans4 1.00% 0.67% 0.35%
IMPAIRED LOANS NET OF SPECIFIC ALLOWANCE FOR LOAN LOSSES BY GEOGRAPHY
TABLE 28
1
The territories are included as follows: Yukon is included in British Columbia;
Nunavut is included in Ontario; and Northwest Territories is included in the
Prairies region.
2 Includes trading loans that the Bank intends to sell immediately or in the near term
with a fair value of $188 million (2009 – $140 million) and amortized cost of
$188 million (2009 – $142 million), and loans designated as trading under the fair
value option of $85 million (2009 – $210 million) and amortized cost of $86 million
(2009 – $226 million). No allowance is recorded for trading loans or loans designated
as trading under the fair value option.
3
The states included in New England are as follows: Connecticut, Maine,
Massachusetts,
New Hampshire, and Vermont.
4
Includes customers’ liability under acceptances.