The Boston Business Journal reports that TD Bank Financial Group, the parent of TD Bank, said Monday it has struck a deal to acquire a money-losing South Carolina-based bank with an elevated amount of problem loans on its balance sheet.
Editor’s note: TD Bank is a DDIFO Sponsor.
As part of the deal, Toronto-based TD Bank Financial said it will inject an estimated 250 million Canadian dollars ($241.7 million) in capital to stabilize the operations of acquisition target, The South Financial Group.
In addition, TD Bank Financial (NYSE: TD) said it will pay about $61 million in cash or common stock for South Financial Group (Nasdaq: TSFG) of Greenville, S.C. Before the deal is completed, the U.S. Treasury also will sell to TD its $347 million of South Financial preferred stock and discharge all accrued but unpaid dividends for total cash consideration of about $131 million.
Though South Financial Group has had a problem with troubled loans, TD Bank Financial emphasized that deal adds 176 branches to its footprint in the Southeast, including 66 in the Florida market.
“This is a relatively small acquisition and exactly the kind of unassisted transaction that we’ve said we’re comfortable doing,” TD Financial Group CEO Ed Clark said in a press release.
At the end of March, South Financial had $8 billion in loans and nearly $10 billion in deposits on its balance sheet.
Since the beginning of 2008, however, South Financial’s operations have generated more than $1.3 billion in losses, TD Bank said. The losses stem mostly from residential construction and land development loans.
The bank recently entered into a consent order with the Federal Deposit Insurance Corp. and was told to raise capital and pare problem loans. The bank is not considered to be well-capitalized by bank regulators.
The South Carolina-based bank lost $85.8 million in the first quarter, compared with a net loss of nearly $194 million in the year-earlier period.
The bank set aside $95.1 million for anticipated loan losses, down from $171 million in the year-earlier period.
Nonperforming assets, as a percentage of total assets, were 4.17 percent at the bank.
Read more: TD Bank buys S.C.-based South Financial – Boston Business Journal