TD Bank 2012 Annual Report Download - page 54

TD BANK GROUP ANNUAL REPORT 2012 MANAGEMENT’S DISCUSSION AND ANALYSIS52
(millions of Canadian dollars) October 31, 2012
Allowance for Allowance for
Unpaid counterparty- individually Carrying Percentage of
principal Carrying specific insignificant value net of unpaid principal
balance
1
value credit losses credit losses allowance balance
FDIC-assisted acquisitions $ 1,070 $ 1,002 $ 5 $ 54 $ 943 88.1%
South Financial 2,719 2,519 26 12 2,481 91.2
Other2 283 246 – 1 245 86.6
Total ACI loan portfolio $ 4,072 $ 3,767 $ 31 $ 67 $ 3,669 90.1%
October 31, 2011
FDIC-assisted acquisitions $ 1,452 $ 1,347 $ 8 $ 22 $ 1,317 90.7%
South Financial 4,117 3,695 22 5 3,668 89.1
Chrysler Financial 540 518 – 3 515 95.4
Total ACI loan portfolio $ 6,109 $ 5,560 $ 30 $ 30 $ 5,500 90.0%
October 31, 2012
(millions of Canadian dollars) October 31, 2011
Unpaid principal balance1 Unpaid principal balance1
Past due contractual status
Current and less than 30 days past due $ 3,346 82.2% $ 5,061 82.8%
30–89 days past due 182 4.5 237 3.9
90 or more days past due 544 13.3 811 13.3
Total ACI loans $ 4,072 100.0% $ 6,109 100.0%
Geographic region
Florida $ 2,079 51.0% $ 2,834 46.4%
South Carolina 1,278 31.4 1,993 32.6
North Carolina 427 10.5 729 11.9
Other U.S./Canada 288 7.1 553 9.1
Total ACI loans $ 4,072 100.0% $ 6,109 100.0%
ACQUIRED CREDIT-IMPAIRED LOAN PORTFOLIO
TABLE 40
ACQUIRED CREDIT-IMPAIRED LOANS – KEY CREDIT STATISTICS
TABLE 41
EXPOSURE TO ACQUIRED CREDIT-IMPAIRED LOANS (ACI)
ACI loans are loans with evidence of credit quality deterioration since
origination for which it is probable at the purchase date that the Bank
will be unable to collect all contractually required principal and interest
payments. Evidence of credit quality deterioration as of the acquisition
date may include statistics such as past due status and credit scores.
ACI loans are recorded at fair value upon acquisition and the applicable
accounting guidance prohibits carrying over or recording allowance for
loan losses in the initial accounting.
ACI loans were acquired through the South Financial acquisition,
the FDIC-assisted acquisitions, which include FDIC covered loans
subject to loss sharing agreements with the FDIC, the Chrysler
Financial acquisition, and the acquisition of the MBNA Canada credit
card portfolio. The following table presents the unpaid principal
balance, carrying value, allowance for counterparty-specific credit
losses, allowance for individually insignificant credit losses and the net
carrying value as a percentage of the unpaid principal balance for ACI
loans as at October 31, 2012.
1 Represents contractual amount owed net of charge-offs since inception of loan.
2 Other includes the ACI loan portfolios of Chrysler Financial and MBNA Canada.
1 Represents contractual amount owed net of charge-offs since inception of loan.
During the year ended October 31, 2012, the Bank recorded $114 million
of provision for credit losses on ACI loans. The following table provides
key credit statistics by past due contractual status and geographic
concentrations based on ACI loans unpaid principal balance.
EXPOSURE TO NON-AGENCY COLLATERALIZED MORTGAGE
OBLIGATIONS (CMO)
Due to the acquisition of Commerce Bancorp Inc., the Bank has
exposure to non-agency CMOs collateralized primarily by Alt-A and
Prime Jumbo mortgages, most of which are pre-payable fixed-rate
mortgages without rate reset features. At the time of acquisition, the
portfolio was recorded at fair value, which became the new cost basis
for this portfolio.
These securities are classified as loans and carried at amortized
cost using the effective interest rate method, and are evaluated for
loan losses on a quarterly basis using the incurred credit loss model.
The impairment assessment follows the loan loss accounting model,
where there are two types of allowances against credit losses –
counterparty-specific and collectively assessed. Counterparty-specific
allowances represent individually significant loans, such as the Bank’s
business and government loans and debt securities classified as loans,
which are assessed for whether impairment exists at the counterparty-
specific level. Collectively assessed allowances consist of loans for
which no impairment is identified on a counterparty-specific level and
are grouped into portfolios of exposures with similar credit risk charac-
teristics to collectively assess if impairment exists at the portfolio level.
The allowance for losses that are incurred but not identified as at
October 31, 2012 was US$156 million. The total provision for credit
losses recognized in 2012 was US$12 million compared to
US$51 million in 2011.