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TD BANK FINANCIAL GROUP ANNUAL REPORT 2006 Financial Results
82
New Securitization Activity
(millions of Canadian dollars) 2006 2005 2004
Residential Credit Commercial Residential Credit Commercial
mortgage Personal card mortgage mortgage Personal card mortgage
loans loans loans loans Total loans loans loans loans Total Total
Gross proceeds $6,349 $6,741 $4,200 $633 $17,923 $5,928 $ 4,208 $5,200 $661 $15,997 $14,598
Retained interests 99 69 66 7 241 131 30 95 – 256 236
Cash flows received on
retained interests 220 73 148 – 441 197 50 167 4 418 386
1Represents monthly payment rate for secured personal and credit card loans.
2The excess spread for credit card loans reflects the net portfolio yield,
which is interest earned less funding costs and losses.
3There are no expected credit losses for residential mortgage loans as the
loans are government-guaranteed.
Key Assumptions
2006 2005 2004
Residential Credit Commercial Residential Credit Commercial Residential Credit Commercial
mortgage Personal card mortgage mortgage Personal card mortgage mortgage Personal card mortgage
loans loans loans loans loans loans loans loans loans loans loans loans
Prepayment rate120.0% 6.1% 43.9% 8.4% 20.0% 5.9% 41.6% 2.1% 20.0% 5.9% 40.0% 3.3%
Excess spread2.6 1.1 13.1 .8 .7 1.1 13.2 –.7 1.1 12.4 –
Discount rate 6.0 4.3 5.6 5.6 5.2 3.2 4.0 9.8 5.1 2.8 4.4 9.8
Expected credit losses3– – 2.3 .1 – – 2.9 .1 – – 3.0 .1
The key assumptions used to value the retained interests are
shown in the table below.
The following table summarizes the impact of securitizations on
the Bank’s Consolidated Statement of Income.
Sensitivity of Key Assumptions to Adverse Changes
(millions of Canadian dollars)
Residential Commercial
Mortgage Personal Credit card mortgage
2006 loans loans loans loans
Fair value of retained
interests $237 $ 73 $ 7 $ 8
Discount rate 6.0% 4.3% 5.6% 5.6%
+10% $ (2) $ (1) $ – $ (1)
+20% (3) (1) – (1)
Prepayment rate 20.0% 6.1% 43.9% 8.5%
+10% $(6) $ (7) $ (1) $ –
+20% (12) (12) (1) –
Expected credit losses –% –% 2.3% .1%
+10% $ – $ (1) $–$–
+20% – (1) (1) –
During 2006, there were maturities of previously securitized loans
and receivables of $7,984 million (2005 – $8,632 million, 2004 –
$9,033 million). As a result, the net proceeds from loan securiti-
zations were $9,939 million (2005 – $7,365 million, 2004 –
$5,564 million).
The following table presents key economic assumptions and
the sensitivity of the current fair value of retained interests
originated during the year to two adverse changes in each key
assumption as at October 31, 2006. As the sensitivity is hypothet-
ical, it should be used with caution.
Securitization Gains and Income on Retained Interests
(millions of Canadian dollars) 2006 2005 2004
Residential Credit Commercial Residential Credit Commercial
mortgage Personal card mortgage mortgage Personal card mortgage
loans loans loans loans Total loans loans loans loans Total Total
Gain (loss) on sale $(5) $ 54 $ 63 $7 $119 $42 $22 $ 90 $12 $166 $134
Income on retained interests 87 55 85 – 227 122 50 76 – 248 256
Total $82 $109 $148 $7 $346 $164 $72 $166 $12 $414 $390
The following table presents information about gross impaired
loans and net write-offs for components of reported and
securitized financial assets as at October 31.
Loans Managed
(millions of Canadian dollars) 2006 2005
Gross Net Gross Net
Loans1impaired loans write offs Loans1impaired loans write offs
Type of loan
Mortgage loans $ 69,730 $ 16 $ 2 $ 68,168 $ 19 $ 7
Personal loans 76,343 159 420 71,430 131 382
Other loans 42,452 243 57 36,519 205 (111)
Total loans reported and securitized 188,525 418 479 176,117 355 278
Less: loans securitized 27,917 7 25 23,874 6 36
Total loans reported on the Consolidated Balance Sheet $ 160,608 $411 $454 $152,243 $349 $242
1Net of allowance for credit losses.