Rating agency DBRS Limited is generally positive on last week’s acquisition of the assets and liabilities of three failed Florida banks by Toronto-Dominion Bank (TSX:TD).
In a comment note issued Monday, DBRS says that the acquisition of the assets and liabilities of Riverside National Bank of Florida, First Federal Bank of North Florida and AmericanFirst Bank in a transaction assisted by the U.S. Federal Deposit Insurance Corp., don’t have rating implications for TD.
DBRS says that the transactions pose “limited downside credit risk” as there is a loss-sharing agreement in place with the FDIC, which has a share in 50% of the loan losses up to certain thresholds and then 80% in excess of those thresholds, it notes.
They also have no material impact on earnings and a minimal impact on capital, DBRS says, noting that TD purchased $3.8 billion in assets, including $2.1 billion in loss-covered loans, and assumed $3.1 billion in deposits.
“The acquisitions will accelerate TD’s growth strategy in the fast-growing market of Florida by adding 69 branches, predominately in central Florida and along the Treasure Coast, that are geographically complementary to TD’s existing Florida banking franchise, for a total of approximately 100 locations. There is very little overlap of stores,” it notes. It also says that the purchases are consistent with TD’s long-term plans to maintain its conservative retail/wholesale mix strategy.
DBRS believes one of the challenges facing TD is the conversion of all three banks, “but the bank has a breadth of experience in this area,” it says.
IE