The Toronto-Dominion Bank is buying the retail loan book of Citizens Bank of Canada, the online banking subsidiary of Vancouver City Savings Credit Union. The British Columbia-based bank will exit the deposit and loan business to focus solely on its Visa credit card line and its foreign exchange for non-retail clients business.

The deal, announced Aug. 5, sees TD buy most of Citizens Bank’s residential mortgages, consumer loans, and real estate-secured lines of credit. Terms of the deal were not disclosed.

Citizens Bank borrowers will see their mortgages and loans transferred to TD Canada Trust by early 2010. Meanwhile, deposit holders will be required to transfer out and close accounts with Citizens Bank over the next several months. B.C.-resident customers will have the option of transferring deposit accounts to Vancity Savings.

Citizens Bank, which has 30,000 customers, was launched in 1997 as one of the country’s first branchless banks, featuring higher interest rates and generally lower fees, as well as a strong social responsibility mandate. In the years since, other players have entered the branchless bank market, and most of the big banks today offer lower-cost online banking options.

“We pioneered online banking in Canada, but it’s become a crowded marketplace,” said Tamara Vrooman, Vancity’s president and CEO in a statement announcing the sale. “In a national, online market, we were unable to achieve the scale necessary to succeed.”

Vancity received interest from more than one bidder, but TD’s offer was the best fit for Citizens Bank customers, said Vancity spokesperson Karen Berkhout.

Vancity will close the three boutique Citizens Bank branches, located in Vancouver, Calgary, and Toronto, in December.

The sale of Citizens Bank loan book comes two weeks after another Vancity divestiture. In late July, Vancity announced it had sold its Vancity Insurance Services Ltd. unit, which provides home, auto, travel and business insurance through 17 branches in Vancouver and Victoria, to Co-operators Group Ltd., the Guelph, Ont.-based insurer.