TD Bank 2009 Annual Report Download - page 109

TD BANK FINANCIAL GROUP ANNUAL REPORT 2009 FINANCIAL RESULTS 105
a) Commerce Bancorp, Inc.
On March 31, 2008, the Bank acquired 100% of the outstanding
shares of Commerce Bancorp, Inc. (Commerce) for total consideration
of $8,510 million, primarily paid in cash and common shares in the
amount of $2,167 million and $6,147 million, respectively. Each share
of Commerce was exchanged for 0.4142 of a Bank common share and
US$10.50 in cash, resulting in the issuance of 83.3 million common
shares of the Bank. The value of the 83.3 million common shares was
determined based on the average market price of the Bank’s common
shares over the two-day period before and after the terms of the
acquisition were agreed to and announced. The results of Commerce’s
operations are included with TD Bank, N.A. and are reported in U.S.
Personal and Commercial Banking.
The following table presents the fair values of the assets and liabili-
ties of Commerce as of the date of acquisition.
Fair Value of Identifiable Net Assets Acquired
(millions of Canadian dollars)
Assets acquired
Cash and cash equivalents $ 408
Securities 25,154
Loans 18,171
Intangibles
Core deposit intangibles 1,505
Other identifiable intangibles 9
Land, buildings and equipment 1,917
Future income tax assets 377
Other assets 3,272
50,813
Less: Liabilities assumed
Deposits 47,271
Obligations related to securities sold
under repurchase agreements 105
Accrued restructuring costs 127
Other liabilities 1,074
48,577
Fair value of identifiable net assets acquired 2,236
Goodwill 6,274
Total purchase consideration $ 8,510
During the year ended October 31, 2009, goodwill decreased by
$56 million from $6,330 to $6,274 million, primarily due to the
comple tion of the valuation of the loan portfolio and a corresponding
future income tax liability. The purchase price allocation, including
the valuation of the assets and liabilities, was completed and finalized
on March 31, 2009.
Goodwill arising from the acquisition is not amortized but assessed
for impairment at least annually and when an event or change in
circumstances indicates that there may be an impairment. Finite life
intangible assets are amortized on an economic life basis over four
to 14 years, based on their estimated useful lives.
b) TD AMERITRADE Holding Corporation
On January 24, 2009, the limit in the Bank’s beneficial ownership of
TD AMERITRADE Holding Corporation (TD Ameritrade) under the
Stockholders Agreement increased from 39.9% to 45%. Pursuant to
the terms of the Stockholders Agreement, the Bank will not exercise
the voting rights in respect of any shares held in excess of the 45%
limit. The Bank’s ownership in TD Ameritrade fluctuated throughout
the year due to continued repurchase activity by TD Ameritrade, the
settlement of the amended hedging arrangement with Lillooet, and the
issuance of shares by TD Ameritrade in connection with its acquisition
of thinkorswim Group Inc. The Bank reports its investment in TD Amer-
itrade using the equity method of accounting. As at October 31, 2009,
the Bank’s reported investment in TD Ameritrade was 45.1% of the
issued and outstanding shares of TD Ameritrade.
During the year, TD Ameritrade’s repurchase activity temporarily
increased the Bank’s ownership position in TD Ameritrade to 47.5%.
The issuance of shares by TD Ameritrade in connection with its
acquisition of thinkorswim Group Inc. decreased the Bank’s ownership
position in TD Ameritrade from 47.5% to 45.2%. Lillooet was a VIE
and the Bank was its primary beneficiary. The Bank had a hedging
arrangement with Lillooet which provided the Bank with price protec-
tion should the Bank decide to increase its beneficial ownership in
TD Ameritrade in 2009. On March 2, 2009, the Bank took delivery of
27 million shares in settlement of its amended hedging arrangement
with Lillooet at a hedged cost to the Bank of US$515 million. Upon
the settlement of the hedging arrangement, the Bank ceased to be
the primary beneficiary of Lillooet and ceased to consolidate Lillooet’s
financial statements. The replacement of the amended hedge arrange-
ment with the direct ownership of the 27 million shares had no material
impact on the financial position or results of operations of the Bank.
c) TD Banknorth
Interchange Financial Services Corporation
TD Banknorth completed its acquisition of Interchange Financial
Services Corporation (Interchange) January 1, 2007 for a total cash
consideration of $545 million (US$468.1 million), financed primarily
through TD Banknorth’s sale of 13 million of its common shares to the
Bank at a price of US$31.17 per share for $472 million (US$405 million).
The acquisition of Interchange by TD Banknorth contributed the
follow ing assets and liabilities of Interchange to the Bank’s Consoli-
dated Balance Sheet at the date of acquisition: $1,283 million of
personal/business loans and mortgages, $495 million of goodwill and
intangibles, $123 million of other assets, $1,332 million of deposits,
and $97 million of other liabilities. TD Banknorth consolidates the finan-
cial results of Interchange.
Going-private Transaction
On April 20, 2007, the Bank completed its privatization of TD Banknorth.
Under this transaction, the Bank acquired all of the outstanding common
shares of TD Banknorth that it did not already own for US$32.33
per TD Banknorth share for a total cash consideration of $3.7 billion
(US$3.3 billion). The acquisition was accounted for by the purchase
method. On closing, TD Banknorth became a wholly-owned subsidiary
of the Bank and TD Banknorth’s shares were delisted from the New
York Stock Exchange.
As a result of the transaction, there was a net increase in goodwill
and intangibles on the Bank’s Consolidated Balance Sheet at the date
of completion of the transaction of approximately $1.5 billion. Other
purchase consideration allocation adjustments were not significant.
ACQUISITIONS, DISPOSITIONS AND OTHER
NOTE 7
OTHER FINANCING TRANSACTIONS
The Bank enters into transactions with major U.S. corporate clients
through VIEs as a means to provide them with cost efficient financing.
Under these transactions, as at October 31, 2009, the Bank provided
approximately $2.0 billion (2008 – $2.1 billion) in financing to these
VIEs. The Bank has received guarantees from or has recourse to major
U.S. banks with A+ credit ratings on an S&P equivalent basis, fully cover-
ing its investments in these VIEs (2008 – AA). At inception or through
recent restructuring of the transactions, the counterparties posted
collateral with AAA ratings on an S&P equivalent basis in favour of the
Bank and the Bank purchased credit protection to further reduce its
exposure to the U.S. banks. As at October 31, 2009, these VIEs had
assets totalling approximately $10.6 billion (2008 – $10.6 billion).
As at October 31, 2009, the Bank’s maximum total exposure to loss
before considering guarantees, recourse, collateral and credit default
swap (CDS) was approximately $2.0 billion (2008 – $2.1 billion).
As at October 31, 2009, the Bank's net exposure to the U.S. banks
after taking into account collateral and CDS was approximately
$383.6 million (2008 – $960 million). The transactions provide the
Bank or the counterparties discretion to exit the transactions on
short notice.