What happened

Toronto-Dominion (TD) Bank (TD 0.03%) saw its stock price move higher today, as it was up about 3.1% at 1:10 p.m. ET. It was trading at $62 per share at that time, down roughly 3.9% year to date.

The market was trending higher on Friday, as the S&P 500 was up 61 points (1.5%), the Dow Jones Industrial Average gained 415 points (1.3%), and the Nasdaq Composite rose 225 points (1.9%) at 1:10 p.m. ET.

So what

TD Bank pushed higher on Friday, one day after it agreed to terminate its planned acquisition of First Horizon. TD Bank cited uncertainty as to when regulatory approvals can be obtained as the reason, adding that both parties mutually agreed to terminate the merger. But First Horizon has indeed been hit hard in this banking crisis, as its stock price is down 56% YTD.

Said Bharat Masrani, group president and CEO of TD Bank Group:

This decision provides our colleagues and shareholders with clarity. Though disappointed with the outcome, we move forward with a strong, growing franchise in the United States, servicing more than 10 million customers across our footprint.  

Given the current volatile environment for regional banks, the market seemed to react favorably to the decision, as TD Bank's stock price moved up yesterday, as well as today. 

TD Bank also got a boost Friday when it amended its insured deposit account (IDA) agreement with Charles Schwab to reflect the current market and interest rate environment.

The amended deal extends the agreement by three years, to July 1, 2034, and provides for lower deposit balances in its first six years and higher balances in the latter years. Until September 2025, the aggregate amount of fixed-rate obligations will serve as the floor, and thereafter the floor will be set at $60 billion, up from $50 billion in the existing agreement. For TD Bank, this provides greater certainty around future deposit balances.

Now what

The termination of the First Horizon deal seems like the right call under the current circumstances, and it leaves TD Bank flush with liquidity at a time when it is good to have.

There may be better opportunities down the road for acquisitions to expand in the U.S. market once the dust settles and there is more clarity in the banking industry.

TD Bank remains a good bank stock available at a discounted valuation. Stay tuned for the release of its fiscal second-quarter earnings report on May 25.