Dive Brief:

• Regulatory scrutiny of TD’s anti-money laundering practices led to the termination of the Canadian lender’s planned $13.4 billion acquisition of First Horizon, The Wall Street Journal reported Monday, citing sources familiar with the matter.
• TD’s five-year, $50 billion community benefits plan that promised to boost residential lending in low- to moderate-income areas, has also become a casualty of the scrapped deal, according to American Banker.
• “TD works diligently to prevent criminals from using the bank for illegal activity, to strengthen its risk management programs on an ongoing basis, and to protect the interests of our customers, the bank, and the financial system,” a TD spokesperson said in a statement to the Journal.

Dive Insight:

TD and Memphis, Tennessee-based First Horizon called off their proposed deal last week, blaming “uncertainty” as to when the transaction might gain regulatory approval.

The Office of the Comptroller of the Currency and the Federal Reserve’s reluctance to sign off on the deal, in light of TD’s handling of suspicious customer transactions, contributed to the tie-up’s demise, sources told the Journal.

Despite TD’s vows to make its AML policies more comprehensive and timely, it wasn’t enough to win over regulators, a source told the Journal.

TD did not respond to Banking Dive’s request for comment.

Meanwhile, the community benefits plan, announced in February, was contingent on completion of the merger, a TD spokesperson told American Banker.

The bank plans to continue its dialogue with the National Community Reinvestment Coalition, which led roughly 60 organizations in negotiating the plan with the bank.

"We have valued the opportunity to work with community groups across our footprint over the past year to better understand their concerns and priorities," the TD spokesperson said.

The now-scrapped acquisition of First Horizon would have boosted TD from the eighth-largest bank in the U.S. to the sixth and given it a presence in several new markets, especially in the Southeast.

As part of the plan, TD had pledged to open at least 25 new branches and 25 ATMs in low- to moderate-income or majority-nonwhite markets over the next five years. (The bank announced a plan last year to open 15 new branches in Charlotte, North Carolina, by 2025.)

TD also committed to a 65% increase in residential mortgage loans to LMI and nonwhite borrowers; $7.75 billion in lending to businesses with less than $1 million in annual revenue; and $17.5 billion in community and ecenomic development loans.

"The smart institutions, and I would count TD among them, know and understand that, even absent a merger, it's better to have a plan in place to be ready for if and when they do buy another bank," NCRC CEO Jesse Van Tol told American Banker.

The First Horizon deal was first announced in February 2022, but encountered several delays.

The banks in February extended the merger’s termination date until May 27. 

TD warned three weeks later that it did not expect to obtain the necessary regulatory approvals by then, and could no longer predict a closing date for the deal.