Annual Report 2003 Close Report
Financial Highlights
To Our Shareholders
Management's Discussion and Analysis
Financial Results
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Glossary of financial and banking terms


Acceptances: A bill of exchange or negotiable instrument drawn by the borrower for payment at maturity and accepted by a bank. Acceptances constitute a guarantee of payment by the Bank.

Assets under administration and management: Assets owned by customers, for which the Bank provides management, operational support and/or custodial services. These assets are not reported on the Bank’s Consolidated Balance Sheet.

Average earning assets: The average of deposits with banks, loans and securities based on daily balances for the period ending October 31 in each fiscal year.

Basis point: A measurement unit defined as one hundredth of one percent.

Capital asset pricing model: A model that describes the relationship between risk and expected return for securities. The model states that the expected return of a security or portfolio equals the rate on a risk-free security plus a risk premium.

Commitments to extend credit: Represent unutilized portions of authorizations to extend credit in the form of loans, customers’ liability under acceptances, guarantees and letters of credit.

Current replacement cost: The estimated amount that would be paid or received by the Bank if the rights and obligations under contract were assigned to another counterparty.

Derivative financial instruments: See individual definitions of foreign exchange forwards, forward rate agreements, futures, options and swaps.

Dividend yield: Dividends per common share divided by current year’s opening market price per common share.

Documentary and commercial letters of credit: 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.

Earnings per share, basic: Net income less preferred share dividends divided by the average number of common shares outstanding.

Earnings per share, diluted: Net income less preferred share dividends divided by the average number of common shares outstanding adjusted for the dilutive effects of stock options.

Economic profit: Economic profit is a tool to measure shareholder value creation. Economic profit is the Bank’s operating cash basis net income applicable to common shares after providing a charge for invested capital.

Efficiency ratio: Non-interest expenses as a percentage of total revenue. The efficiency ratio measures the efficiency of the Bank’s operations.

Foreign exchange forwards: Contracts to buy or sell foreign currencies on a specified future date at a predetermined fixed rate.

Forward rate agreements: Contracts fixing an interest rate to be paid or received on a notional principal of specified maturity commencing on a specified future date.

Futures: Contracts to buy or sell a security at a predetermined price on a specified future date. Each contract is between the Bank and the organized exchange on which the contract is traded.

Guarantees and standby letters of credit: Irrevocable 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.

Hedging: A risk management technique intended to mitigate the Bank’s exposure to fluctuations in interest rates, foreign currency exchange rates, or other market factors. The elimination or reduction of such exposure is accomplished by engaging in capital markets activities to establish offsetting positions.

Impaired loans: Loans where, in management’s opinion, 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.

Invested capital: Invested capital is equal to common equity plus the cumulative amount of goodwill and intangible assets amortized as of the reporting date.

Location of ultimate risk: The location of residence of the customer or, if guaranteed, the guarantor. However, where the customer or guarantor is a branch office, the location of residence of the head office is used, and where most of the customer’s or guarantor’s assets or the security for the asset are situated in a different country, that country is deemed to be the location of ultimate risk. Foreign currency assets are not necessarily utilized in or repaid from the geographic areas in which they are included.

Mark-to-market: The valuation at market rates, as at the balance sheet date, of securities and derivatives held for trading purposes.

Master netting agreements: Legal agreements between two parties that have multiple derivative contracts with each other that provide for the net settlement of all contracts through a single payment, in a single currency, in the event of default on or termination of any one contract.

Net interest income: The difference between the interest and dividends earned from loans and securities, and the interest paid on deposits and other liabilities.

Net interest rate margin: Net interest income as a percentage of average earning assets.

Notional principal: A reference amount on which payments for derivative financial instruments are based.

Options: Contracts in which the writer of the option grants the buyer the future right, but not the obligation, to buy or to sell, a security, exchange rate, interest rate, or other financial instrument or commodity at a predetermined price, at or by a specified future date.

Provision for credit losses: Amount added to the allowance for credit losses to bring it to a level that management considers adequate to absorb all credit related losses in its portfolio.

Return on common shareholders’ equity: Net income applicable to common shareholders as a percentage of average common shareholders’ equity. A broad measurement of a bank’s effectiveness in employing shareholders’ funds.

Risk-weighted assets: Assets calculated by applying a regulatory predetermined risk-weight factor to the face amount of each asset. The face amount of off-balance sheet instruments are converted to balance sheet (or credit) equivalents, using specified conversion factors, before the appropriate risk-weights are applied. The risk-weight factors are established by the Superintendent of Financial Institutions Canada to convert assets and off-balance sheet exposures to a comparable risk level.

Securities purchased under resale agreements: The purchase of a security, normally a government bond, with the commitment by the buyer to resell the security to the original seller at a specified price.

Securities sold under repurchase agreements: The sale of a security with the commitment by the seller to repurchase the security at a specified price.

Securitization: The process by which financial assets, mainly loans, are transferred to a trust, which normally issues a series of different classes of asset-backed securities to investors to fund the purchase of loans. The Bank normally accounts for these transfers as a sale, provided certain conditions are met, and accordingly, the loans are removed from the Consolidated Balance Sheet.

Swaps: Contracts that involve the exchange of fixed and floating interest rate payment obligations and/or currencies on a notional principal for a specified period of time.

Taxable equivalent basis (TEB): Net interest income is adjusted to recognize non-taxable or tax exempt income such as dividends at their equivalent before tax value. This permits uniform measurement and comparison of net interest income.

Total market return: The change in market price plus dividends paid during the year as a percentage of the current year’s opening market price per common share.