TD Bank 2009 Annual Report Download - page 105

TD BANK FINANCIAL GROUP ANNUAL REPORT 2009 FINANCIAL RESULTS 101
Allowance for Credit Losses
(millions of Canadian dollars) 2009 2008 2007
Specific General Specific General
allowance allowance Total allowance allowance Total Total
Allowance for credit losses at beginning of year, as previously reported $ 352 $ 1,184 $ 1,536 $ 203 $ 1,092 $ 1,295 $ 1,317
Impact due to transition adjustment on adoption
of financial instruments amendments –9595 ––––
Impact due to reporting-period alignment of U.S. entities122 29 51 ––––
Acquisitions2––––––14
Provision for credit losses31,614 866 2,480 934 129 1,063 645
Write-offs4(1,547) – (1,547) (946) – (946) (763)
Recoveries 109 – 109 124 – 124 135
Foreign exchange and other adjustments 8 (93) (85) 37 (37) – (53)
Allowance for credit losses at end of year $ 558 $ 2,081 $ 2,639 $ 352 $ 1,184 $ 1,536 $ 1,295
Consisting of:
Allowance for loan losses5$ 558 $ 1,810 $ 2,368 $ 352 $ 1,184 $ 1,536 $ 1,295
Allowance for credit losses for off-balance sheet instruments5– 271 271 ––––
Allowance for credit losses at end of year $ 558 $ 2,081 $ 2,639 $ 352 $ 1,184 $ 1,536 $ 1,295
Loans Past Due but not Impaired
(millions of Canadian dollars) 2009 2008
1 to 31 to 61 to 1 to 31 to 61 to
30 days 60 days 89 days Total 30 days 60 days 89 days Total
Residential mortgages $ 861 $ 387 $ 67 $ 1,315 $ 807 $ 357 $ 63 $ 1,227
Consumer instalment and other personal 3,600 627 163 4,390 3,234 570 131 3,935
Credit card 355 79 49 483 381 75 41 497
Business and government 2,248 517 200 2,965 2,729 256 80 3,065
Total $ 7,064 $ 1,610 $ 479 $ 9,153 $ 7,151 $ 1,258 $ 315 $ 8,724
1The impact due to the alignment of reporting period of U.S. entities consists of
the following: provision for credit losses – $80 million; write-offs – $35 million;
recoveries – nil; and other – $6 million.
2All loans acquired from Commerce were recorded at their fair value on the date
of acquisition which takes into consideration the credit quality of the loans.
As a result, an allowance for credit losses was not recorded on acquisition.
3Includes $250 million related to debt securities classified as loans for 2009.
4For the year ended October 31, 2009, there were no write-offs related to
restructured loans (2008 – nil; 2007 – nil).
5Effective 2009, the allowance for credit losses for off-balance sheet instruments
is recorded in other liabilities. Prior year balances have not been reclassified.
Loans Past Due but not Impaired
A loan is classified as past due when a borrower has failed to make
a payment by the contractual due date, taking into account the grace
period, if applicable. The grace period represents the additional time
period beyond the contractual due date during which a borrower may
make the payment without the loan being classified as past due. The
grace period varies depending on the product type and the borrower.
Debt securities classified as loans are considered to be contractually
past due when actual cash flows are less than those cash flows estimated
at acquisition. As at October 31, 2009, no debt securities classified as
loans are contractually past due but not impaired.
Collateral
As at October 31, 2009, the fair value of financial collateral held
against loans that were past due but not impaired was $45 million
(2008 – $23 million). In addition, the Bank also holds non-financial
collateral as security for loans. The fair value of non-financial collateral
is determined at the origination date of the loan. A revaluation of
non-financial collateral is performed if there has been a significant
The table below presents loans that are past due but not impaired,
and generally, these amounts exclude loans that fall within the allowed
grace period. Although U.S. Personal and Commercial Banking may
grant a grace period of up to 15 days, there were $1.4 billion as at
October 31, 2009 (2008 – $2.6 billion) of U.S. Personal and Commercial
Banking loans that were past due up to 15 days that are included in
the 1-30 days category in the table below.
change in the terms and conditions of the loan and/or the loan
is considered impaired. For impaired loans, an assessment of the
collateral is taken into consideration when estimating the net
realizable amount of the loan.
The carrying value of loans renegotiated during the year ended
October 31, 2009, that would otherwise have been impaired, was
$18 million (2008 – $11 million).
Financial assets and financial liabilities, other than those classified
as trading, may be designated as trading under the fair value option
if fair values are reliably measurable, the asset or liability meets one
or more of the criteria set out below, and the asset or liability is so
designated by the Bank on initial recognition. Financial instruments
designated as trading under the fair value option and related interest
and dividend income are accounted for on the same basis as securities
classified as trading.
The Bank may designate financial assets and financial liabilities as
trading when the designation:
i) eliminates or significantly reduces valuation or recognition inconsis-
tencies that would otherwise arise from measuring financial assets
or financial liabilities, or recognizing gains and losses on them, on
different bases; or
ii) applies to groups of financial assets, financial liabilities or combina-
tions thereof that are managed, and their performance evaluated, on
a fair value basis in accordance with a documented risk management
or investment strategy, and where information about the groups of
financial instruments is reported to management on that basis.
FINANCIAL INSTRUMENTS DESIGNATED AS TRADING UNDER THE FAIR VALUE OPTION
NOTE 4