TD Bank 2012 Annual Report Download - page 162

TD BANK GROUP ANNUAL REPORT 2012 FINANCIAL RESULTS160
Pearlman Litigation
TD Bank, N.A. (as successor to Carolina First Bank) was named a
defendant by multiple plaintiffs in three lawsuits in multiple jurisdic-
tions arising from alleged damages sustained from a Ponzi scheme and
other fraudulent activities allegedly orchestrated by Louis J. Pearlman.
Two of these lawsuits were settled in 2012: Groom, et al. v. TD
Bank, N.A. (settled September 8, 2012) and Kapila v. TD Bank, N.A.
(settled March 28, 2012).
The third lawsuit, America Bank of St. Paul v. TD Bank, N.A., was
filed in federal court on August 26, 2009. On December 1, 2011, a
jury returned a verdict of approximately US$13.6 million in compensa-
tory damages against TD Bank N.A. On March 6, 2012, the judge
awarded a further US$3.1 million in prejudgment interest against
TD Bank N.A. on a post-trial motion. This matter is now on appeal to
the 8th Circuit Court of Appeals.
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. See the Guarantees section below for
further details.
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
facilities the Bank provides to its securitization conduits is included
in Note 9.
The values of credit instruments reported below represent the maxi-
mum amount of additional credit that the Bank could be obligated to
extend should contracts be fully utilized.
Credit Instruments
(millions of Canadian dollars) October 31 October 31 November 1
2012 2011 2010
Financial and performance standby letters of credit $ 15,802 $ 14,445 $ 14,117
Documentary and commercial letters of credit 279 271 262
Commitments to extend credit1
Original term to maturity of one year or less 31,845 25,789 23,159
Original term to maturity of more than one year 50,016 42,518 42,734
Total $ 97,942 $ 83,023 $ 80,272
1
Commitments to extend credit exclude personal lines of credit and credit card
lines, which are unconditionally cancellable at the Bank’s discretion at any time.
Assets that can be Repledged or Sold
(millions of Canadian dollars) October 31 October 31 November 1
2012 2011 2010
Trading loans, securities, and other $ 29,929 $ 22,435 $ 18,149
Available-for-sale securities – 131 298
Other assets 120 150 305
Total $ 30,049 $ 22,716 $ 18,752
In addition, the Bank is committed to fund $249 million (October 31,
2011 – $345 million; November 1, 2010 – $423 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 commitments
for premises and for equipment, where the annual rental is in excess
of $100 thousand, is estimated at $687 million for 2013; $681 million
for 2014; $626 million for 2015; $569 million for 2016; $508 million
for 2017; and $2,665 million for 2018 and thereafter.
Future minimum finance lease commitments where the annual
payment is in excess of $100 thousand, is estimated at $29 million
for 2013; $29 million for 2014; $16 million for 2015; $11 million for
2016; $6 million for 2017; and $32 million for 2018 and thereafter.
The premises and equipment net rental expense, included under
non-interest expenses in the Consolidated Statement of Income,
was $914 million for the year ended October 31, 2012 (2011 –
$877 million).
Pledged Assets and Collateral
In the ordinary course of business, securities and other assets are
pledged against liabilities or contingent liabilities, including repurchase
agreements, securitization liabilities, and securities borrowing transac-
tions. Assets are also 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. As at October 31, 2012, securities and other assets with
a carrying value of $142.2 billion (October 31, 2011 – $118.1 billion;
November 1, 2010 – $100.3 billion) were pledged as collateral in
respect of these transactions. See Note 8, Transfer of Financial Assets,
for further details. Certain consumer instalment and other personal
loan assets were also pledged in respect of covered bonds issued by
the Bank. For details, see Note 9, Special Purpose Entities.
Assets transferred by the Bank where the transferee has the right
to sell or repledge are as follows: