TD Bank 2011 Annual Report Download - page 121

TD BANK GROUP ANNUAL REPORT 2011 FINANCIAL RESULTS 119
b) U.S. Personal and Commercial Banking Acquisitions
in Fiscal 2010
On April 16, 2010, the Bank acquired certain assets and assumed
liabilities of Riverside National Bank of Florida (“Riverside”), First
Federal Bank of North Florida (“First Federal”) and AmericanFirst Bank
(“AmericanFirst”) in FDIC-assisted transactions. In addition, the Bank
entered into loss sharing agreements with the FDIC whereby the FDIC
shares in the losses on loans and certain real estate assets. Under the
terms of the loss sharing agreements, the FDIC reimburses the Bank
for 50% of losses up to a threshold level for each bank ($449 million
for Riverside, $59 million for First Federal and $18 million for Ameri-
canFirst) and 80% of losses thereafter. The term of the loss sharing
agreements is ten years from the date of acquisition for single family
residential mortgages and five years (plus three years where only
recoveries will be shared) for other loans and real estate assets. At the
end of the loss sharing periods, the Bank may be required to make a
payment to the FDIC based on the actual losses incurred in relation to
the FDIC Intrinsic Loss Estimate as defined in the loss sharing agreements.
On September 30, 2010, the Bank acquired 100% of the outstand-
ing common shares of The South Financial Group, Inc. (South Financial)
for total consideration to common shareholders of approximately
$64 mil lion paid in cash and common shares in the amount of $11 mil -
lion and $53 million, respectively. Each common share of South Financial
was exchanged for US $0.28 cash or 0.004 of a Bank common share,
resulting in the issuance of approximately 720 thousand common
shares of the Bank. In addition, immediately prior to completion of the
transaction, the United States Department of the Treasury sold the
Bank its South Financial preferred stock and the associated warrant
acquired under the Treasury’s Capital Purchase Program and
discharged all accrued but unpaid dividends on that stock for total
cash consideration of approximately $134 million.
The acquisitions were accounted for by the purchase method. The
results from these acquisitions have been consolidated with the Bank’s
results for the years ended October 31, 2011 and 2010. The results
are included with TD Bank, N.A. and are reported in the U.S. Personal
and Commercial Banking segment. As at the acquisition dates, the
acquisitions contributed $2,184 million of net cash and cash equiva-
lents, $8,457 million of loans, $115 million of identifiable intangibles,
$4,021 million of other assets, $12,298 million of deposits and
$2,550 million of other liabilities to the Bank’s Consolidated Balance
Sheet. Included in loans is $2,127 million of covered loans. The esti-
mated fair value for loans reflects the expected credit losses at the
acquisition date.
During the period from the acquisition date to October 31, 2011,
goodwill decreased by $45 million to $271 million, primarily due to
the completion of the valuation of the loan portfolio. During 2011,
the purchase price allocation for Riverside, First Federal, AmericanFirst
and South Financial acquisitions were completed and finalized.
c) TD Ameritrade Holding Corporation
As at October 31, 2011, the Bank’s reported investment in TD Ameri-
trade Holding Corporation (TD Ameritrade) was 44.96% (October 31,
2010 – 45.93%) of the issued and outstanding shares of TD Ameritrade.
On August 6, 2010 and October 31, 2011, the Stockholders Agree-
ment was amended in each case such that: (i) the Bank has until
January 24, 2014 to reduce its ownership in TD Ameritrade to 45% if
the Bank’s ownership interest exceeds 45% as a result of authorized
repurchases of common stock by TD Ameritrade; (ii) the Bank is required
to commence reduction of its ownership in TD Ameritrade and continue
its reduction as long as it can be executed at a price per share equal to
or greater than the Bank’s then-applicable average carrying value per
share of TD Ameritrade; and (iii) in connection with stock repurchases
by TD Ameritrade, the Bank’s ownership interest in TD Ameritrade will
not exceed 48%.
In accordance with the Bank’s previously disclosed intention, the
Bank sold 17.3 million shares of TD Ameritrade during the year and
recognized a gain of $8.1 million on this sale.
GOODWILL AND OTHER INTANGIBLES
NOTE 9
GOODWILL
Goodwill represents the excess purchase price paid on acquisitions over
the fair value assigned to identifiable net assets including identifiable
intangible assets. Goodwill is not amortized but is assessed for impair-
ment at least annually and when an event or change in circumstances
indicates that there may be an impairment. Goodwill is allocated to
reporting units that are either the operating business segment or the
reporting unit below the segment. Goodwill impairment is identified
by comparing the carrying value of the reporting unit with its fair
value. Impairment in goodwill is charged to the Consolidated Statement
of Income in the period in which the impairment is identified. No
impairment write-downs were required for the years ended October 31,
2011, 2010, and 2009.
Goodwill by Segment
(millions of Canadian dollars) Canadian Personal U.S. Personal
and Commercial Wealth and Commercial Wholesale
Banking Management Banking Banking Corporate Total
2011
Carrying value of goodwill at beginning of year $ 1,216 $ 587 $ 11,560 $ 150 $ 947 $ 14,460
Goodwill arising on acquisitions 5 – 2021 – – 207
Foreign currency translation adjustments and other – (1) (290) – – (291)
Carrying value of goodwill at end of year $ 1,221 $ 586 $ 11,472 $ 150 $ 947 $ 14,376
2010
Carrying value of goodwill at beginning of year $ 1,216 $ 591 $ 12,115 $ 146 $ 947 $ 15,015
Goodwill arising on acquisitions – – 3162 4 – 320
Foreign currency translation adjustments and other – (4) (871) – – (875)
Carrying value of goodwill at end of year $ 1,216 $ 587 $ 11,560 $ 150 $ 947 $ 14,460
1 Primarily relates to goodwill arising from the acquisition of Chrysler Financial of
$242 million and a $45 million decrease in goodwill for Riverside, First Federal,
AmericanFirst and South Financial acquisitions. See Note 8 for further details.
2 Consists of goodwill arising from the Riverside, First Federal, AmericanFirst and
South Financial acquisitions.