By Scott Miller
smiller@scbiznews.com
Published May 18, 2010
TD Bank Financial Group could look to buy other struggling banks in South Carolina after acquiring The South Financial Group Inc. of Greenville.
The Canadian bank already has been aggressive with its entrance in the Florida market, acquiring four banks there in less than 60 days. That includes South Financial’s Florida subsidiary Mercantile Bank.
“When we enter any market, our goal is always to be in the top three in deposit share and top three in store count,” said Fred Graziano, executive vice president and head of retail banking for TD Bank.
That could be accomplished through acquisitions or branch construction, he said. Additionally, the bank will keep longer hours than competitors, possibly remaining open seven days a week to attract customers, Graziano said.
TD Bank announced Monday that it agreed to purchase South Financial for about $192 million, anticipating about $1 billion in future losses on the South Financial portfolio. If the South Financial acquisition is approved by federal regulators and shareholders this summer, TD will add $9.8 billion in deposits and pick up 176 branches: 83 in South Carolina, 66 in Florida and 27 in North Carolina.
Previous coverage
Canadian bank to buy South Financial Group
South Financial needed $800 to remain independent
To rank among the top three in South Carolina, TD Bank would need an additional $1 billion in deposits and another 30 branches. The top three banks in South Carolina form 37% of the deposit market share, according to figures from the Federal Deposit Insurance Corp. Wachovia Bank has $11.46 billion in deposits, or 16.42% market share; Bank of America, $8.08 billion and 11.57% share; and BB&T Corp., $6.32 billion and 9.06% market share.
With the South Financial acquisition, TD Bank ranks fifth in number of stores and fourth in deposits with $5.5 billion, according to the bank’s analysis.
TD Bank ranks much lower on the list in North Carolina, at 18th in number of branches and 21st in deposits. There, TD Bank would need more than 250 additional branches and $30 billion in deposits.
TD Bank, or Toronto-Dominion, has the capital to fund growth in the Carolinas and sacrificed very little in acquiring South Financial, said Tony Plath, a banking professor at the University of North Carolina at Charlotte.
TD bought South Financial without FDIC assistance for about $192 million. That includes $61 million for shareholders and $130.6 million to purchase the $347 million in preferred shares that the U.S. Treasury acquired as part of the Troubled Asset Relief Program.
“It would be more expensive for Toronto-Dominion to take all of its employees to lunch at Starbucks,” Plath said. “Let’s face it, South Financial is a rounding error on their balance sheet. They could do another 20 of these deals and not break a sweat.”
TD Bank Financial Group has $567 billion in assets and 74,000 employees worldwide. It is the sixth-largest bank in North America by branches and serves more than 18 million customers around the globe.
Last month, TD Bank bought three shuttered Florida banks – Riverside National Bank, First Federal Bank of North Florida and AmericanFirst Bank – for $3.8 billion from the FDIC.
“I think TD will look to make others deals in the Carolinas and Georgia. They’re going to go after other weak, under-capitalized banks,” Plath said. “I think you’ll see them acquire a half dozen in Georgia, North Carolina and South Carolina in the next two years. They want scale and they want position in the market.”
South Financial President and CEO Lynn Harton hinted as much when announcing the merger Monday. Harton will remain with TD Bank in Greenville after the acquisition is finalized.
“Beyond stability, this is a growth story for our employees, our customers,” Harton said, saying the acquisition completes TD Bank’s link from the Northeast to Florida. “They’re a growing company. We’re a key piece of that, but we’re certainly not the last piece of that.”
Graziano said bank acquisitions are just one option.
“That’s a strategy where if something compelling comes along, we would do it,” he said. “If we never get the opportunity to make an acquisition, that’s OK. We’ll build out by finding sites and building out a network.”
TD Bank had been in negotiations with South Financial since December 2009. Graziano wouldn’t comment on whether or not TD Bank has had similar discussions with other S.C. banks.
“But like most banks, we’re always looking at opportunities,” he said.
TD Bank still is evaluating specific markets within South Carolina for expansion, Graziano said.
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