This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

TD Bank Buys South Financial, U.S. Taxpayers Win

CHERRY HILL, N.J. ( TheStreet) -- The deal reached by TD Bank Financial Group (TD - Get Report) to purchase The South Financial Group (TSFG) with significant assistance from the Treasury points to a potentially big change in how large, troubled banks will be resolved.

The South Financial Group's main subsidiary is Carolina First Bank of Greenville, S.C. The bank was not included in the most recent version of TheStreet's Bank Watch List of undercapitalized institutions because its Tier 1 leverage ratio was 7.13% and its total risk-based capital ratio stood at 10.55% as of March 31, putting it above the 5% and 10% levels required for most banks to be considered well capitalized by regulators.

However, in a recent filing with the Securities and Exchange Commission, South Financial said the bank was "no longer deemed to be 'well capitalized'" because of an April 30 order from state regulators and the Federal Deposit Insurance Corp. requiring the bank to raise its capital ratios to 8% and 12% respectively within 120 days.

The South Financial Group posted a first-quarter net loss of $80.6 million on April 20 after losing $676.3 million in 2009, mainly from charge-offs of delinquent construction loans and commercial loans, and it had $12.4 billion in total assets at quarter's end, down from $13.3 billion at the same time a year earlier.

Late Monday, TD Bank agreed to pay about $61 million, or 28 cents a share, for South Financial's common stock, which closed at 30 cents yesterday. While TD Bank CEO Ed Clark touted the deal as "exactly the kind of unassisted transaction that we've said we're comfortable doing," he meant unassisted by the FDIC, which would have absorbed losses if the bank had failed.

Portraying this deal as "unassisted," however, was a stretch as there was significant assistance from the Treasury, which agreed to sell $347 million worth of South Financial preferred stock and warrants to TD for just $130.6 million. South Financial had issued the preferred shares to the Treasury in return for bailout money provided in December 2008 via the Troubled Assets Relief Program, or TARP. The compromise on the TARP monies looks like the trade-off for doing the deal before South Financial's situation deteriorated further.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
SBCF $15.70 0.00%
TD $43.24 0.00%
AAPL $93.24 0.00%
FB $117.81 0.00%
GOOG $701.43 0.00%


Chart of I:DJI
DOW 17,660.71 +9.45 0.05%
S&P 500 2,050.63 -0.49 -0.02%
NASDAQ 4,717.0940 -8.5450 -0.18%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs