TD Bank 2009 Annual Report Download - page 56

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TD BANK FINANCIAL GROUP ANNUAL REPORT 2009 MANAGEMENT’S DISCUSSION AND ANALYSIS52
IMPAIRED LOANS
A loan is considered impaired when there is objective evidence
subsequent to the initial recognition of the loan that there has been
a deterioration of credit quality to the extent that management no
longer has reasonable assurance as to the timely collection of the full
amount of principal and interest. See Note 3 to the 2009 Consolidated
Financial Statements for further details on impaired loans.
Gross impaired loans were $2,311 million in 2009, up $1,154 million,
or 100%, over 2008. The addition of debt securities classified as loans
to the credit portfolio in 2009 represented $241 million of this increase,
or 10% of total 2009 gross impaired loans. The inclusion of debt secu-
rities generally reduced 2009 percentage concentrations relative to
2008 concentrations. Excluding debt securities, gross impaired loans
increased $913 million, or 79%, over 2008.
In Canada, residential and personal loans generated net impaired
loans of $382 million, an increase of $67 million, or 21%, over 2008.
Residential mortgages represented the most significant portion of this
increase. Business and government loans generated $253 million in
net impaired loans, an increase of $126 million, or 100%, over 2008.
Business and government impaired loans were distributed across
industry sectors. Impaired loans increases in 2009 were due to higher
residential and personal loan volumes combined with continued
economic weakness which generated elevated default rates across
most portfolios.
In the U.S., residential and personal loans generated net impaired
loans of $171 million, an increase of $73 million, or 74%, over 2008.
Residential mortgages represented the most significant portion of this
increase. Business and government loans generated $751 million in
net impaired loans, an increase of $486 million, or 183%, over 2008.
Business and government impaired loans were highly concentrated
in the real estate sector. Impaired loans increases in 2009 were due to
the recession and continued weakness in the U.S. real estate sector.
Geographically, 36% of total impaired loans net of specific allowance
were generated in Canada and 53% in the U.S. The balance of 11%
was attributed to the debt securities classified as loans. Impaired loans
in Canada were concentrated in Ontario, which represented 25% of
total impaired loans net of specific allowance, down from 38% in
2008. U.S. impaired loans were concentrated in New York and New
Jersey, representing 13% and 11% of net impaired loans, up from
10% and 8% respectively, in 2008.
CHANGES IN GROSS IMPAIRED LOANS
AND ACCEPTANCES
TABLE 26
(millions of Canadian dollars) 2009 2008
Balance at beginning of period $ 1,157 $ 569
Impact due to reporting-period
alignment of U.S. entities 57 –
Additions 4,101 2,404
Return to performing status, repaid or sold (1,370) (905)
Write-offs (1,547) (946)
Foreign exchange and other adjustments (87) 35
Balance at end of period $ 2,311 $ 1,157