TD buys S.C.-based South Financial bank

TD Bank Financial Group Inc. continued its expansion in the Southeast, agreeing to pay $191.6 million for South Financial Group Inc., a troubled South Carolina bank with $12.4 billion in assets, TD said Monday.

The price is made up of $130.6 million to retire the U.S. Treasury's $347 million investment in South Financial and 28 cents a share, or $61 million, to South Financial stockholders, who may also choose to receive 0.004 shares of TD stock for each of their shares.

The deal, expected to close this summer, will significantly boost TD's presence in Florida and give the Toronto bank that has U.S. headquarters in Cherry Hill and Portland, Maine, its first branches in the Carolinas.

"We like the markets. We saw what it did for us in Florida," Bharat Masrani, TD Bank's president and chief executive officer, said in an interview, adding that TD would have 169 branches in deposit-rich Florida, up from nine three years ago. South Financial will account for 66 of them.

South Financial Group, which operates 176 branches under the names Carolina First in North and South Carolina and Mercantile in Florida, was ordered in May by federal bank regulators to raise a significant amount of capital after losing $1.3 billion since the beginning of 2008. That figure included $900 million in loan losses, but TD still plans to write off an additional $1 billion of South Financial's $8 billion in loans when the deal closes.

TD is growing ever more familiar with battered Southern banks. Last month, it bought three failed Florida banks with $3.8 billion in assets and 69 branches in a deal aided by the Federal Deposit Insurance Corp.

"These are great transactions from our perspective," Masrani said. TD Financial Group, with $567 billion in assets, has the capital to keep pursuing deals if they make sense, he said.

Analysts at the investment bank Morgan Keegan & Co. Inc. said they expected acquisition activity to accelerate in the Southeast, where many banks were badly damaged by the collapse in residential real estate since 2006.