TD Bank 2014 Annual Report Download - page 47

TD BANK GROUP ANNUAL REPORT 2014 MANAGEMENT’S DISCUSSION AND ANALYSIS 45
default insurance on lower loan-to-value ratio loans. The insurance
is provided by either government-backed entities or other approved
private mortgage insurers.
The Bank regularly performs stress tests on its real estate lending
portfolio as part of its overall stress testing program. This is done
with a view to determine the extent to which the portfolio would be
vulnerable to a severe downturn in economic conditions. The effect
of severe changes in house prices, interest rates, and unemployment
levels are among the factors considered when assessing the impact on
credit losses and the Bank’s overall profitability. A variety of portfolio
segments, including dwelling type and geographical regions, are exam-
ined during the exercise to determine whether specific vulnerabilities
exist. Based on the Bank’s most recent reviews, potential losses on all
real estate secured lending exposures are considered manageable.
Real Estate Secured Lending
Retail real estate secured lending includes mortgages and lines of
credit to North American consumers to satisfy financing needs ranging
from home purchases to refinancing. Credit policies in Canada and
strategies are aligned with the Bank’s risk appetite and meet all regula-
tory requirements. While the Bank retains first lien on the majority
of properties held as security, there is a small portion of loans with
second liens, but most of these are behind a TD mortgage that is in
first position. Credit policies in Canada ensure that the combined
exposure of all uninsured facilities on one property does not exceed
80% of the collateral value at origination. Lending at a higher loan-
to-value ratio is permitted by legislation but requires default insurance.
This insurance is contractual coverage for the life of eligible facilities
and protects the Bank’s real estate secured lending portfolio against
potential losses caused by borrower default. The Bank also purchases
(millions of Canadian dollars, As at
except as noted) Residential mortgages Home equity lines of credit Total
Insured3 Uninsured Insured3 Uninsured Insured3 Uninsured
October 31, 2014
Canada
Atlantic provinces $ 4,110 2.3% $ 1,398 0.8% $ 649 1.1% $ 822 1.4% $ 4,759 2.0% $ 2,220 0.9%
British Columbia4 20,660 11.8 11,408 6.5 3,720 6.2 7,278 12.2 24,380 10.4 18,686 8.0
Ontario4 56,967 32.5 26,371 15.1 12,226 20.6 18,394 30.9 69,193 29.5 44,765 19.1
Prairies4 27,658 15.8 9,067 5.2 5,267 8.8 6,873 11.5 32,925 14.0 15,940 6.8
Quebec 12,442 7.1 5,044 2.9 2,035 3.4 2,304 3.9 14,477 6.2 7,348 3.1
Total Canada 121,837 69.5 53,288 30.5 23,897 40.1 35,671 59.9 145,734 62.1 88,959 37.9
United States 753 23,034 9 11,791 762 34,825
Total $ 122,590 $ 76,322 $ 23,906 $ 47,462 $ 146,496 $ 123,784
October 31, 2013
Canada
Atlantic provinces $ 4,077 2.5% $ 1,076 0.7% $ 698 1.1% $ 774 1.3% $ 4,775 2.1% $ 1,850 0.8%
British Columbia4 21,166 12.9 9,896 6.0 4,209 6.8 7,454 12.1 25,375 11.2 17,350 7.7
Ontario4 57,942 35.3 20,940 12.7 13,697 22.2 17,635 28.7 71,639 31.7 38,575 17.1
Prairies4 26,645 16.2 6,628 4.0 5,821 9.5 6,768 11.0 32,466 14.4 13,396 5.9
Quebec 12,066 7.3 3,953 2.4 2,300 3.7 2,225 3.6 14,366 6.4 6,178 2.7
Total Canada 121,896 74.2 42,493 25.8 26,725 43.3 34,856 56.7 148,621 65.8 77,349 34.2
United States 603 20,828 9 10,757 612 31,585
Total $ 122,499 $ 63,321 $ 26,734 $ 45,613 $ 149,233 $ 108,934
REAL ESTATE SECURED LENDING1,2
TABLE 28
The following table provides a summary of the Bank’s residential
mortgages by remaining amortization period. All figures are calculated
based on current customer payment behaviour in order to properly
reflect the propensity to prepay by borrowers. The current customer
payment basis accounts for any accelerated payments made to
date and projects remaining amortization based on existing balance
outstanding and current payment terms.
As at
<5 5– <10 10– <15 15– <20 20– <25 25– <30 30– <35 >=35
years years years years years years years years Total
October 31, 2014
Canada 11.9% 4.3% 7.7% 11.7% 27.9% 27.6% 8.9% –% 100.0%
United States 2.3 1.9 18.8 2.9 10.4 63.0 0.6 0.1 100.0
Total 10.7% 4.0% 9.0% 10.6% 25.9% 31.8% 7.9% 0.1% 100.0%
October 31, 2013
Canada 10.8% 4.3% 8.2% 11.7% 24.6% 26.0% 14.3% 0.1% 100.0%
United States 2.6 1.3 21.6 2.0 8.3 63.1 1.1 – 100.0
Total 9.9% 4.0% 9.8% 10.6% 22.6% 30.2% 12.8% 0.1% 100.0%
1 Geographic location based on the address of the property mortgaged.
2 Excludes loans classified as trading as the Bank intends to sell the loans immedi-
ately or in the near term, and loans designated at fair value through profit or loss
for which no allowance is recorded.
1 Excludes loans classified as trading as the Bank intends to sell the loans
immediately or in the near term, and loans designated at fair value through
profit or loss for which no allowance is recorded.
2 Percentage based on outstanding balance.
3 Default insurance is contractual coverage for the life of eligible facilities whereby
the Bank’s exposure to real estate secured lending, all or in part, is protected
against potential losses caused by borrower default. It is provided by either govern-
ment-backed entities or other approved private mortgage insurers.
4 T
he territories are included as follows: Yukon is included in British Columbia; Nunavut
is included in Ontario; and Northwest Territories is included in the Prairies region.
RESIDENTIAL MORTGAGES BY REMAINING AMORTIZATION1,2
TABLE 29