TD Bank 2009 Annual Report Download - page 140

TD BANK FINANCIAL GROUP ANNUAL REPORT 2009 FINANCIAL RESULTS136
Interest Rate Risk by Currency
(billions of Canadian dollars) Total Over Non-
Floating Within 3 months within 1 year to Over interest
rate 3 months to 1 year 1 year 5 years 5 years sensitive Total
2009
Canadian currency $ (82.0) $ 109.9 $ 5.7 $ 33.6 $ 10.3 $ (4.1) $ (69.3) $ (29.5)
Foreign currency (46.7) 52.4 (12.9) (7.2) 38.6 17.8 (19.7) 29.5
Net position $ (128.7) $ 162.3 $ (7.2) $ 26.4 $ 48.9 $ 13.7 $ (89.0) $ –
2008
Total assets $ 105.8 $ 193.6 $ 45.0 $344.4 $102.5 $ 30.0 $ 86.3 $ 563.2
Total liabilities and shareholders’ equity 185.9 125.6 54.8 366.3 44.5 15.7 136.7 563.2
Net position $ (80.1) $ 68.0 $ (9.8) $(21.9) $ 58.0 $ 14.3 $ (50.4) $ –
LITIGATION
The Bank and its subsidiaries are involved in various legal actions in the
ordinary course of business, many of which are loan related. In manage-
ment’s opinion, the ultimate disposition of these actions, individually or
in the aggregate, will not have a material adverse effect on the financial
condition of the Bank.
COMMITMENTS
Credit-related Arrangements
In the normal course of business, the Bank enters into various commit-
ments and contingent liability contracts. The primary purpose of
these contracts is to make funds available for the financing needs of
customers. The Bank’s policy for requiring collateral security with
respect to these contracts and the types of collateral security held is
generally the same as for loans made by the Bank.
Financial and performance standby letters of credit represent irrevo-
cable assurances that the Bank will make payments in the event that
a customer cannot meet its obligations to third parties and they carry
the same credit risk, recourse and collateral security requirements as
loans extended to customers.
Documentary and commercial letters of credit are instruments issued
on behalf of a customer authorizing a third party to draw drafts on the
Bank up to a certain amount subject to specific terms and conditions.
The Bank is at risk for any drafts drawn that are not ultimately settled
by the customer, and the amounts are collateralized by the assets to
which they relate.
Commitments to extend credit represent unutilized portions of
authorizations to extend credit in the form of loans and customers’
liability under acceptances. A discussion on the types of liquidity facili-
ties the Bank provides to its securitization conduits is included in Note 6.
The values of credit instruments reported below represent the
maximum amount of additional credit that the Bank could be obli-
gated to extend should contracts be fully utilized.
Credit Instruments
(millions of Canadian dollars) 2009 2008
Financial and performance standby
letters of credit $ 13,311 $ 11,882
Documentary and commercial letters of credit 354 483
Commitments to extend credit1
Original term to maturity of one year or less 25,197 32,706
Original term to maturity of more than one year 36,182 35,664
Total $ 75,044 $ 80,735
1Commitments to extend credit exclude personal lines of credit and credit card lines,
which are unconditionally cancellable at the Bank’s discretion at any time.
In addition, the Bank is committed to fund $459 million of private
equity investments.
Long-term Commitments or Leases
The Bank has obligations under long-term non-cancellable leases for
premises and equipment. Future minimum operating lease commit-
ments for premises and for equipment, where the annual rental is
in excess of $100 thousand, is estimated at $569 million for 2010;
$530 million for 2011; $483 million for 2012; $456 million for 2013;
$384 million for 2014; and $1,784 million for 2015 and thereafter.
Future minimum capital lease commitments where the annual
payment is in excess of $100 thousand, is estimated at $20 million
for 2010; $31 million for 2011; $6 million for 2012; $7 million for
2013; $7 million for 2014; and $15 million for 2015 and thereafter.
The premises and equipment net rental expense, included under
non-interest expenses in the Consolidated Statement of Income,
for the year ended October 31, 2009 was $844 million (2008 –
$679 million; 2007 – $582 million).
Pledged Assets, Repurchase Agreements and Collateral
In the ordinary course of business, securities and other assets are
pledged against liabilities. As at October 31, 2009, securities and other
assets with a carrying value of $31 billion (2008 – $41 billion) were
pledged in respect of securities sold short or under repurchase agree-
ments. In addition, as at October 31, 2009, assets with a carrying
value of $8 billion (2008 – $9 billion) were deposited for the purposes
of participation in clearing and payment systems and depositories or
to have access to the facilities of central banks in foreign jurisdictions,
or as security for contract settlements with derivative exchanges or
other derivative counterparties.
In the ordinary course of business, the Bank enters into security
lending arrangements where it agrees to lend unpaid customer securi-
ties, or its own securities, to borrowers on a fully collateralized basis.
Securities lent as at October 31, 2009 amounted to $13 billion (2008 –
$10 billion).
In addition, the Bank may accept financial assets as collateral that
the Bank is permitted to sell or repledge in the absence of default.
These transactions are conducted under terms that are usual and
customary to standard lending, and security borrowing and lending
activities. As at October 31, 2009, the fair value of financial assets
accepted as collateral that the Bank is permitted to sell or repledge in
the absence of default is $23.2 billion (2008 – $24.6 billion). The fair
value of financial assets accepted as collateral that has been sold or
repledged (excluding cash collateral) was $6.3 billion as at October 31,
2009 (2008 – $7.4 billion).
CONTINGENT LIABILITIES, COMMITMENTS, PLEDGED ASSETS, COLLATERAL AND GUARANTEES
NOTE 32