TD Bank 2012 Annual Report Download - page 46

TD BANK GROUP ANNUAL REPORT 2012 MANAGEMENT’S DISCUSSION AND ANALYSIS44
IMPAIRED LOANS
An impaired loan is any loan when there is objective evidence that there
has been a deterioration of credit quality to the extent that the Bank no
longer has reasonable assurance as to the timely collection of the full
amount of principal and interest. Excluding debt securities classified as
loans, FDIC covered loans and other acquired credit-impaired loans,
gross impaired loans increased $25 million, or 1% over 2011. Gross
impaired loan formations increased year over year by $646 million,
primarily driven by the acquisition of the MBNA Canada credit card
portfolio and reclassifications of certain past due accounts in Canada
and performing loans in the U.S.
In Canada, net impaired loans increased by $118 million, or 13%
in 2012 primarily due to an adjustment on certain past due home
equity lines of credit accounts, and the acquisition of the MBNA
Canada credit card portfolio. Residential mortgages, consumer instal-
ment and other personal loans, and credit cards, generated impaired
loans net of counterparty-specific and individually insignificant allow-
ances of $910 million, an increase of $74 million, or 9%, over 2011.
Business and government loans generated $132 million in net impaired
loans, an increase of $44 million, or 50%, over 2011. Business and
government impaired loans were distributed across industry sectors.
In the U.S., net impaired loans decreased by $81 million, or 7% in
2012 primarily due to continued improvement in business and govern-
ment loans offset by volume growth and one-time reclassifications of
personal loans in line with regulatory guidance. Business and govern-
ment loans generated $663 million in net impaired loans, a decrease
of $233 million, or 26%, over 2011. Business and government
impaired loans were highly concentrated in the real estate sector. Net
impaired loan decreases across industry sectors in 2012 were due to
improved credit quality. Residential mortgages, consumer instalment
and other personal loans, and credit cards, generated net impaired
loans of $395 million, an increase of $152 million, or 63%, over 2011,
due primarily to volume growth and one-time reclassifications of
certain performing loans in line with regulatory guidance.
Geographically, 50% of total impaired loans net of counterparty-
specific and individually insignificant allowances were generated in
Canada and 50% in the U.S. Net impaired loans in Canada were
concentrated in Ontario, which represented 24% of total net impaired
loans, up from 20% in 2011. U.S. net impaired loans were concen-
trated in New Jersey and New York, representing 12% and 7% of
net impaired loans, flat with 12% and 7% respectively, in 2011.
(millions of Canadian dollars) 2012 2011
Personal, business and government loans1,2
Balance at beginning of period $ 2,493 $ 2,535
Additions 4,256 3,610
Return to performing status, repaid or sold (2,261) (2,015)
Write-offs (1,969) (1,629)
Foreign exchange and other adjustments (1) (8)
Balance at end of period $ 2,518 $ 2,493
1 Excludes FDIC covered loans and other acquired credit-impaired loans. For
additional information refer to the “Exposure to Acquired Credit-Impaired Loans”
discussion and table in this section of the document and Note 7 to the 2012
Consolidated Financial Statements.
2 Excludes debt securities classified as loans. For additional information refer
to the “Exposure to Non-agency Collateralized Mortgage Obligations” section
of this document and Note 7 to the 2012 Consolidated Financial Statements.
CHANGES IN GROSS IMPAIRED LOANS
AND ACCEPTANCES
TABLE 33