APRIL 16, 2010
By ROBIN SIDEL, Wall Street Journal
Canada's TD Bank Financial Group, accelerating its march on the U.S. banking industry, gobbled up the operations of three failed institutions in Florida.
Regulators seized a total of eight banks, marking 50 so far this year that have failed. In addition to the three in Florida, they shuttered two in Michigan and Massachusetts that represented the first failures of the year in those states, two in California, and one in Washington.
Two of the deals call for the Federal Deposit Insurance Corp. to profit if the stock price of the acquiring bank rises over a certain period of time. The FDIC previously has profited from such "value appreciation" instruments and has expressed an intention to do more of them under the right circumstances
In Florida, TD acquired the banking operations of AmericanFirst Bank in Clermont, First Federal Bank of North Florida in Palatka, and Riverside National Bank of Florida in Fort Pierce. The three failed institutions weren't affiliated with one another.
The deals come two years after TD significantly bolstered its U.S. presence by acquiring Commerce Bancorp Inc., of Cherry Hill, N.J., which also had a large presence in Florida.
The acquisitions "add quality stores to our existing retail network in target markets, allow us to accelerate our organic growth in Florida by five years, and come with limited downside credit risk," said Ed Clark, chief executive and president of TD.
The largest of the TD deals was for Riverside National, which has 58 branches in Florida, and had assets of $3.42 billion and deposits of $2.76 billion at the end of 2009. AmericanFirst Bank, with three branches, had $90.5 million in assets and total deposits of $81.9 million at the end of 2009. First Federal, with eight branches, had assets of $393.3 million and total deposits of $324.2 million.
TD is assuming all of the deposits from the three Florida banks and will purchase virtually all of their assets. The Canadian bank also entered a loss-sharing agreement on $2.20 billion of the failed institutions' assets with the FDIC.
The Massachusetts Division of Banks closed Butler Bank, a four-branch institution in Lowell, Mass. People's United Bank of Bridgeport, Conn. agreed to assume Butler's $233.2 million of deposits and essentially all of its $268 million in assets. People's also entered into a loss-sharing agreement with the FDIC on $206.1 million of Butler's assets.
In California, Center Bank of Los Angeles assumed the deposits of Innovative Bank, a four-branch bank in Oakland with $268.9 million in assets. The FDIC and Center Bank entered into a loss-share transaction on $178.1 million of Innovative's assets. In addition, terms of the deal include a "value appreciation instrument" which provides additional money to the FDIC if Center Bank's stock price rises over a certain amount of time.
Also in California, San Francisco-based Union Bank assumed the deposits of Tamalpais Bank in San Rafael, which had seven branches and $628.9 million in assets. Union Bank paid the FDIC a premium of two percent to assume Tamalpais' $487.6 million in deposits and agreed to buy essentially all of the failed bank's assets. The FDIC and Union Bank, N.A. entered into a loss-share transaction on $522.3 million of Tamalpais' assets.
Separately, Whidbey Island Bank, based in Coupeville, Wash., assumed the deposits of City Bank of Lynnwood, which was closed by the Washington Department of Financial Institutions. The failed eight-branch bank had roughly $1.13 billion in assets and $1.02 billion in deposits. Whidbey Island Bank paid the FDIC a premium of one percent to assume the deposits and agreed to buy $704.1 million of the failed bank's assets. The FDIC and Whidbey Island Bank entered into a loss-share transaction on $455.6 million of City Bank's assets.
Elsewhere, the Michigan Office of Financial and Insurance Regulation closed the one-branch Lakeside Community Bank, of Sterling Heights, Mich. A unit of Michigan Community Bancorp, Lakeside had $53 million in assets and $52.3 million in deposits at the end of 2009.
The FDIC entered into an agreement with First Michigan Bank, of Troy Mich., to accept Lakeside's direct deposits from the federal government, such as Social Security and Veterans' payments. The FDIC was unable to find another financial institution to take over Lakeside's banking operations.
The FDIC estimated that the total cost of the eight bank failures to its deposit insurance fund would be $984.7 million.