TD Bank 2014 Annual Report Download - page 164

TD BANK GROUP ANNUAL REPORT 2014 FINANCIAL RESULTS162
Collateral
As at October 31, 2014, the fair value of financial collateral held
against loans that were past due but not impaired was $155 million
(October 31, 2013 – $172 million). In addition, the Bank also holds
non-financial collateral as security for loans. The fair value of non-
financial collateral is determined at the origination date of the loan.
A revaluation of non-financial collateral is performed if there has been
a significant change in the terms and conditions of the loan and/or
the loan is considered impaired. Management considers the nature
of the collateral, seniority ranking of the debt, and loan structure
in assessing the value of collateral. These estimated cash flows are
reviewed at least annually, or more frequently when new information
indicates a change in the timing or amount expected to be received.
GROSS IMPAIRED DEBT SECURITIES CLASSIFIED AS LOANS
As at October 31, 2014, impaired loans exclude $1.2 billion
(October 31, 2013 – $1.2 billion) of gross impaired debt securities
classified as loans. Subsequent to any recorded impairment,
interest income continues to be recognized using the EIRM which
was used to discount the future cash flows for the purpose of
measuring the credit loss.
ACQUIRED CREDIT-IMPAIRED LOANS
ACI loans are comprised of commercial, retail and FDIC covered loans,
from the acquisitions of South Financial, FDIC-assisted, Chrysler
Financial, and the credit card portfolios of MBNA Canada (MBNA),
Target Corporation (Target), and Aeroplan, and had outstanding
unpaid principal balances of $6.3 billion, $2.1 billion, $874 million,
$327 million, $143 million, and $32 million, respectively, and fair
values of $5.6 billion, $1.9 billion, $794 million, $129 million,
$85 million, and $10 million, respectively, at the acquisition dates.
Acquired Credit-Impaired Loans
(millions of Canadian dollars) As at
October 31 October 31
2014 2013
FDIC-assisted acquisitions
Unpaid principal balance1 $ 699 $ 836
Credit related fair value adjustments2 (18) (27)
Interest rate and other related premium/(discount) (21) (22)
Carrying value 660 787
Counterparty-specific allowance3 (2) (5)
Allowance for individually insignificant impaired loans3 (49) (55)
Carrying value net of related allowance –
FDIC-assisted acquisitions4 609 727
South Financial
Unpaid principal balance1 1,090 1,700
Credit related fair value adjustments2 (19) (33)
Interest rate and other related premium/(discount) (25) (48)
Carrying value 1,046 1,619
Counterparty-specific allowance3 (6) (19)
Allowance for individually insignificant impaired loans3 (40) (38)
Carrying value net of related allowance – South Financial 1,000 1,562
Other5
Unpaid principal balance1 36 105
Credit related fair value adjustments2 (29) (26)
Carrying value 7 79
Allowance for individually insignificant impaired loans3 – –
Carrying value net of related allowance – Other 7 79
Total carrying value net of related allowance –
Acquired credit-impaired loans $ 1,616 $ 2,368
1
Represents contractual amount owed net of charge-offs since the acquisition
of the loan.
2
Credit related fair value adjustments include incurred credit losses on acquisition
and are not accreted to interest income.
3
Management concluded as part of the Bank’s assessment of the ACI loans that it
was probable that higher than estimated principal credit losses would result in a
decrease in expected cash flows subsequent to acquisition. As a result, counter-
party-specific and individually insignificant allowances have been recognized.
4
Carrying value does not include the effect of the FDIC loss sharing agreement.
5
Includes Chrysler Financial, MBNA, Target, and Aeroplan.
FDIC COVERED LOANS
As at October 31, 2014, the balance of FDIC covered loans was
$660 million (October 31, 2013 – $787 million) and was recorded in
Loans on the Consolidated Balance Sheet. As at October 31, 2014, the
balance of indemnification assets was $60 million (October 31, 2013 –
$81 million) and was recorded in Other assets on the Consolidated
Balance Sheet.
LOANS PAST DUE BUT NOT IMPAIRED
A loan is classified as past due when a borrower has failed to make
a payment by the contractual due date.
The following table summarizes loans that are contractually past due
but not impaired as at October 31. U.S. Retail may grant a grace
period of up to 15 days. As at October 31, 2014, there were $2 billion
(October 31, 2013 – $2 billion) of U.S. Retail loans that were up to
15 days past due and are included in the 1-30 days category in the
following tables.
Loans Past Due but not Impaired1
(millions of Canadian dollars) As at
October 31, 2014
1-30 31-60 61-89
days days days Total
Residential mortgages $ 1,406 $ 724 $ 112 $ 2,242
Consumer instalment and other personal 4,577 666 163 5,406
Credit card 1,254 279 161 1,694
Business and government 1,041 107 53 1,201
Total $ 8,278 $ 1,776 $ 489 $ 10,543
October 31, 2013
Residential mortgages $ 1,560 $ 785 $ 114 $ 2,459
Consumer instalment and other personal 4,770 695 183 5,648
Credit card 956 216 127 1,299
Business and government 974 325 55 1,354
Total $ 8,260 $ 2,021 $ 479 $ 10,760
1 Excludes all ACI loans and debt securities classified as loans.