TD Bank 2009 Annual Report Download - page 103

TD BANK FINANCIAL GROUP ANNUAL REPORT 2009 FINANCIAL RESULTS 99
In the following table, unrealized losses for available-for-sale securities
are categorized as “12 months or longer” if for each of the consecutive
12 months preceding October 31, 2009, the fair value of the securities
LOANS
Loans are non-derivative financial assets with fixed or determinable
payments that the Bank does not intend to sell immediately or in the
near term and that are not quoted in an active market. Loans are
accounted for at amortized cost, net of an allowance for loan losses
and net of unearned income, which includes prepaid interest, loan
origination fees, commitment fees, loan syndication fees, and unamor-
tized discounts.
Interest income is recorded on an accrual basis using the effective
interest rate method. Loan origination fees are considered to be
adjustments to loan yield and are deferred and amortized to interest
income over the term of the loan. Using the effective interest rate
method, changes in expected cash flows are recognized as an adjust-
ment to the carrying value of the loan with an offset recognized in
interest income in the reporting period in which the change occurred.
The carrying value is recalculated by computing the present value
of estimated future cash flows at the original effective interest rate
inher ent in the loan.
Commitment fees are amortized to other income over the commit-
ment
period when it is unlikely that the commitment will be called upon;
otherwise, they are deferred and amortized to interest income over the
term of the resulting loan. Loan syndication fees are recognized in other
income upon completion of the financing placement unless the yield
on any loan retained by the Bank is less than that of other comparable
lenders involved in the financing syndicate. In such cases, an appropri-
ate portion of the fee is recognized as a yield adjustment to interest
income over the term of the loan.
ACCEPTANCES
Acceptances represent a form of negotiable short-term debt issued by
customers, which the Bank guarantees for a fee. Revenue is recognized
on an accrual basis.
The potential liability of the Bank under acceptances is reported as a
liability in the Consolidated Balance Sheet. The Bank’s recourse against
the customer in the event of a call on any of these commitments is
reported as an asset of the same amount.
IMPAIRED LOANS
An impaired loan is any loan when there is objective evidence that
there has been a deterioration of credit quality subsequent to the
initial recognition of the loan to the extent that the Bank no longer
has reasonable assurance as to the timely collection of the full amount
of the principal and interest. In addition, loans where a payment is
contractually past due for 90 days are generally classified as impaired.
A deposit with a bank is considered impaired when a payment is
contractually past due for 21 days.
LOANS, IMPAIRED LOANS AND ALLOWANCE FOR CREDIT LOSSES
NOTE 3
Unrealized Loss Positions for Available-for-Sale Securities
(millions of Canadian dollars) 2009
Less than 12 months 12 months or longer Total
Gross Gross Gross
Fair unrealized Fair unrealized Fair unrealized
value losses value losses value losses
Available-for-sale securities
Government and government-related securities
U.S. Federal, state and municipal governments $ – $ – $ 4,199 $ 47 $ 4,199 $ 47
Other OECD government-guaranteed debt – – 9,907 21 9,907 21
Mortgage-backed securities
Residential 8,491 216 1,213 40 9,704 256
8,491 216 15,319 108 23,810 324
Other debt securities
Asset-backed securities
Other asset-backed securities – – 8,162 54 8,162 54
Corporate and other debt – – 6,250 4 6,250 4
– – 14,412 58 14,412 58
Debt securities reclassified from trading 222 42 649 81 871 123
Equity securities
Preferred shares 68 1 206 29 274 30
Common shares 113 16 164 55 277 71
181 17 370 84 551 101
Total $ 8,894 $ 275 $ 30,750 $ 331 $ 39,644 $ 606
Net Securities Gains (Losses)
(millions of Canadian dollars) 2009 2008 2007
Net realized gains (losses)
Available-for-sale securities $ (111) $ 576 $ 364
Write-downs
Available-for-sale securities1(326) (245) (38)
Total $ (437) $ 331 $ 326
was less than the amortized cost. If not, they have been categorized
as “Less than 12 months”. None of these unrealized loss positions are
considered to reflect other-than-temporary impairment.
1
Included in the impairment losses on available-for-sale securities is $88 million
for the year ended October 31, 2009, (three months ended October 31, 2008 –
nil, 2007 – n/a) which related to debt securities in the reclassified portfolio as
described in ‘Reclassification of Certain Debt Securities – 2008
Amendments’
above. These losses were primarily offset by gains on credit protection held
which were recorded in other income.