TD Bank 2005 Annual Report Download - page 59

TD BANK FINANCIAL GROUP ANNUAL REPORT 2005 Management’s Discussion and Analysis 55
2005
Within 1 1 to 3 3 to 5 Over 5
(millions of Canadian dollars) year years years years Total
Deposits1$189,972 $30,364 $24,021 $2,624 $246,981
Subordinated notes and debentures 153 1 – 4,984 5,138
Operating lease commitments 319 534 396 580 1,829
Capital trust securities –– 900 – 900
Network service agreements 141 393 123 – 657
Automated banking machines 66 181 124 –371
Total $190,651 $ 31,473 $ 25,564 $ 8,188 $ 255,876
2004
Deposits1$171,155 $ 18,919 $ 15,767 $ 1,052 $ 206,893
Subordinated notes and debentures 5 3 663 4,973 5,644
Operating lease commitments 299 468 346 455 1,568
Capital trust securities – – – 1,250 1,250
Network service agreements 118 331 203 – 652
Automated banking machines 66 190 181 – 437
Total $171,643 $ 19,911 $ 17,160 $ 7,730 $ 216,444
2003
Deposits1,2 $182,880 $ – $ – $ – $ 182,880
Subordinated notes and debentures 157 5 396 5,329 5,887
Operating lease commitments 314 492 329 505 1,640
Capital trust securities – – – 1,250 1,250
Network service agreements 116 216 200 188 720
Total $183,467 $ 713 $ 925 $ 7,272 $ 192,377
As a financial institution, the Bank’sassets and liabilities aresub-
stantially comprised of financial instruments. Financial assets of
the Bank include, but are not limited to, cash resources, invest-
ment and trading securities, loans and derivatives while financial
liabilities include deposits, obligations related to securities sold
short, obligations related to securities sold under repurchase
agreements, derivative instruments and subordinated debt.
The Bank uses financial instruments for both trading and
non-trading activities. The Bank typically engages in trading
activities by the purchase and sale of securities to provide
liquidity and meet the needs of clients and, less frequently, by
taking proprietary trading positions with the objective of earning
aprofit. Trading financial instruments include trading securities
and trading derivatives. Non-trading financial instruments
include the Bank’s lending portfolio, investment securities,
hedging derivatives and financial liabilities. Trading financial
instruments are measured at fair value in the Bank’s
Consolidated Financial Statements while non-trading financial
instruments are carried at cost. This reflects how the Bank
manages its businesses internally. For details on how fair values
of financial instruments aredetermined, refer to the Critical
Accounting Policies and Estimates section on page 66.
The use of financial instruments allows the Bank to earn
profits in interest and fee income. Financial instruments also
create avariety of risks which the Bank manages with its
extensive risk management policies and procedures. The key
risks include interest rate, credit, liquidity, equities and foreign
exchange. For a more detailed description on how the Bank
manages its risk, refer to the Managing Risk section on
pages 57 to 66.
CONTRACTUAL OBLIGATIONS BY REMAINING MATURITY
TABLE 31
GUARANTEES
In the normal course of business, we enter into various guaran-
tee contracts to support our clients. These guarantees, with the
exception of related premiums, are kept off-balance sheet unless
aprovision is needed to cover probable losses. Our significant
types of guarantee products are financial and performance
standby letters of credit, assets sold with recourse, credit
enhancements, written options and indemnification agreements.
Note 20 on page 99 provides detailed information about the
Bank’s guarantees.
COMMITMENTS
The Bank enters into various commitments to meet the financing
needs of the Bank’s clients and to earn fee income. Significant
commitments of the Bank include financial and performance
standby letters of credit, documentary and commercial letters of
credit and commitments to extend credit. These products may
expose the Bank to liquidity, credit and reputational risks. There
are adequate risk management and control processes in place to
mitigate these risks. Credit facility commitment fee is deferred
and recognized in interest income in the Consolidated Statement
of Income when the facility is drawn down. Note 20 of the
Bank’s Consolidated Financial Statements provides detailed infor-
mation about the maximum amount of additional credit the
Bank could be obligated to commit.
CONTRACTUAL OBLIGATIONS
The Bank has contractual obligations to make future payments
on operating and capital lease commitments and certain
purchase obligations. These contractual obligations impact
the Bank’s short-term and long-term liquidity and capital
resource needs. All contracts, with the exception of operating
lease commitments (those where we are committed to purchase
determined volumes of goods and services), are reflected on the
Bank’s Consolidated Balance Sheet. Table 31 below summarizes
our contractual obligations.
GROUP FINANCIAL CONDITION
Financial Instruments
1As the timing of deposits payable on demand, and deposits payable after
notice, is non-specific and callable by the depositor, obligations have been
included as less than one year.
2As the information is not reasonably determinable, all amounts are
disclosed within 1year.