O

Comptroller of the Currency

Administrator of National Banks

Northeastern District

340 Madison Avenue, 5^th^ Floor

New York, New York 10017-2613

**CRA Decision #131**

December 22, 2005 **January 2006**

Ms. Patricia J. Wheeler

Senior Vice President & Senior Attorney

TD Banknorth, National Association

Two Portland Square

Portland, ME 04101

Re: Application to merge Hudson United Bank, Mahwah, New Jersey, with
and into TD Banknorth, National Association, Portland, Maine, under the
charter and title of the latter.

Control Numbers: 2005 NE 02 032 Charter Number: 24096

Dear Ms. Wheeler:

On December 22, 2005, the Comptroller of the Currency (OCC) approved
your proposal to merge Hudson United Bank (Hudson) into TD Banknorth,
National Association, (TD Banknorth). This approval is granted based on
a thorough review of all information available, including commitments
and representations made in the application, merger agreement, and those
of your representatives.

Review of Statutory Factors

The merger of Hudson into TD Banknorth is legally authorized as an
interstate merger transaction under the Riegle-Neal Act, 12 U.S.C. §§
215a-1 and 1831u. The OCC reviewed the proposed transaction under the
criteria of the Bank Merger Act, 12 U.S.C. § 1828(c), and applicable OCC
regulations and policies. Among other matters, we found that the
proposed transaction would not have anticompetitive effects. The OCC
also considered the financial and managerial resources of the banks,
their future prospects, and the convenience and needs of the communities
to be served.[^1] In addition, the Bank Merger Act requires the OCC to
consider ". . . the effectiveness of any insured depository institution
involved in the proposed merger transaction in combating money
laundering activities, including in overseas branches," 12 U.S.C. § 1828
(c) (11).[^2] We considered these factors and found them consistent with
approval under the statutory provisions.

In addition, the Community Reinvestment Act ("CRA") requires the OCC to
take into account the applicants' record of helping to meet the credit
needs of the community, including low- and moderate-income ("LMI")
neighborhoods, when evaluating certain applications, including merger
transactions that are subject to the Bank Merger Act. 12 U.S.C. § 2903;
12 C.F.R. § 25.29. The OCC considers the CRA performance evaluation of
each institution involved in the transaction. A review of the record of
these applicants and other information available to the OCC as a result
of its regulatory responsibilities revealed no evidence that the
applicants' records of helping to meet the credit needs of their
communities, including LMI neighborhoods, is less than satisfactory.

TD Banknorth's latest CRA public Performance Evaluation ("PE"), dated
July 9, 2001 and issued by the OCC, assigned an "Outstanding"
rating.[^3] The PE disclosed an excellent responsiveness to the credit
needs of its assessment areas; an excellent distribution of home
mortgage loans to borrowers of different incomes; an excellent service
delivery system that is very accessible to geographies and individuals
of different income levels in its assessment area; and an excellent
record of providing community development services. With respect to fair
lending, the PE indicated that an analysis of most recent Home Mortgage
Disclose Act ("HMDA"), Small Business, and Small Farm lending data,
public comments and consumer complaint information revealed no fair
lending risk factors requiring further investigation.[^4] The OCC is
currently conducting a CRA examination of TD Banknorth. While the
results of that examination have not been completed, the OCC is unaware
of any substantive deficiencies with the bank's CRA performance.

Hudson's latest CRA PE, dated February 10, 2005 and prepared by the
Federal Deposit Insurance Corporation, assigned a "Satisfactory" rating.
With respect to lending, the PE disclosed a good responsiveness to the
credit needs of the assessment area; good penetration throughout the
assessment area; and excellent penetration among retail customers of
different income levels and business customers of different sizes. With
respect to investments, the PE indicated the significant volume of
investments purchased represented a very good responsiveness to the
affordable housing and small business needs of individuals and
businesses. The PE also noted that Hudson provided a relatively high
level of community development services throughout the assessment area.

In sum, the applicants' records of CRA performance are consistent with
approval of the proposed transaction.

**Review of Comments**

The OCC received comments from two community organizations opposing the
merger.[^5] One commenter expressed concerns that TD Banknorth has not
reinvested in lower income and minority communities, possessed no
experience in the urban inner city, and has not developed working
relationships with community-based organizations. TD Banknorth disputed
those concerns, indicating that it had worked with community-based
organizations to meet local needs and is an active community development
lender and investor. The bank referenced its latest CRA PE for the
details of such activities. As noted earlier, TD Banknorth recently
underwent a CRA examination in which the OCC found no substantive
deficiencies with the bank's CRA performance. TD Banknorth's application
also noted that it participated in a number of affordable housing
initiatives since its last CRA PE. These included participation in
programs for first time home buyers that provide below market interest
rates and other flexible underwriting criteria and community development
lending to rehabilitate or construct affordable housing. TD Banknorth
further indicated it was planning to increase lending opportunities in
neighborhoods. TD Banknorth believes the acquisition of Hudson will help
to advance penetration into LMI neighborhoods.

TD Banknorth indicated it is already working to assess community
development and reinvestment needs in Hudson's market area. TD Banknorth
agreed with the commenter that a strong community development program is
needed in the urban metropolitan areas served by Hudson and is committed
to developing a greater understanding of those new markets. TD
Banknorth's proposed CEO for the New Jersey, Pennsylvania, and New York
area, is committed to hiring a Community Development manager to focus on
developing and implementing community development plans and initiatives.
In Connecticut, TD Banknorth's state president will also meet with
community leaders and develop plans and initiatives for that area. In
addition, TD Banknorth represented that it would offer direct mortgage
lending in these areas, thus re-establishing a channel for originating
loans that Hudson had eliminated.

Using 2004 data, the commenter expressed concerns with TD Banknorth's
allegedly low level of lending to minorities as well as its denial rates
for minorities when compared to the denial rates for whites. [^6] TD
Banknorth responded that when compared to peer banks, its overall denial
rates to minorities were comparable. In two Metropolitan Statistical
Areas ("MSAs"), TD Banknorth acknowledged that its number of
applications from certain minorities was low and of concern.[^7]
However, TD Banknorth noted that for the first six month of 2005, its
lending to minorities had improved. TD Banknorth mentioned that many of
the communities are newer markets that were entered through
acquisitions. TD Banknorth also indicated it maintains a strong fair
lending training, review, and monitoring program to ensure that its
lending practices result in neither discrimination nor disparate impact
on protected minority applicants and borrowers.[^8]

One of the commenters expressed concerns with potential branch closings
in lower income communities resulting from the merger. TD Banknorth
indicated that four branches will be consolidated with nearby existing
branches. Only one of these branches is located in an LMI area, and will
be consolidated with a branch less then 700 yards away.[^9]

**Request for Public Hearing**

One of the commenters also requested that the OCC conduct a public
hearing. After careful consideration, the OCC has determined not to
conduct a hearing on this merger application.[^10]

The general standard the OCC applies to determine whether to hold a
public hearing is contained in 12 C.F.R. § 5.11(b), which provides:

The OCC generally grants a hearing request only if the OCC determines
that written submissions would be insufficient or that a hearing would
otherwise benefit the decision-making process. The OCC also may order a
hearing if it concludes that a hearing would be in the public interest.

The commenter requested a public hearing in order to discuss Hudson's
record with respect to money laundering, subprime lending, and branch
closings. However, the commenter did not indicate why written
submissions would be insufficient to make an adequate presentation of
the issues or facts to the OCC. The OCC determined that the proposed
testimony would not provide the OCC with relevant information on the
pending application.

#### Conclusion Regarding Statutory Factors

Based on the reasons set forth above, the OCC has determined that
approval of the application is consistent under the Bank Merger Act, 12
U.S.C. § 1828(c), and the CRA.

**Subsidiaries and Non-conforming Assets**

Hudson has a number of subsidiaries that will become subsidiaries of the
Resulting Bank. TD Banknorth requests OCC approval for the Resulting
Bank to retain these subsidiaries. Except for one group of related
subsidiaries (discussed below), all of the subsidiaries conduct
activities that are permissible for national banks by statute,
regulations, and prior OCC precedent.

Hudson has three subsidiaries that were acquired through foreclosure in
satisfaction of debts previously contracted. These subsidiaries engage
in activities that are impermissible for national banks. TD Banknorth
requested a divesture period of two years to divest these non-conforming
subsidiaries:

-   United Cogen Fuels LLC, a Delaware limited liability company, was
    formed to acquire through foreclosure, the real property and
    personal property assets of a biomass cogeneration facility located
    in North Carolina.

-   United Gasco LLC and UC Investments, Inc., New Jersey limited
    liability corporations, are engaged in the extraction and conversion
    of landfill gas into electricity, which is sold to utilities.

The Resulting Bank may retain these subsidiaries up to two years,
consistent with OCC policy to permit national banks resulting from a
merger to have a reasonable period of time to divest any nonconforming
activities. Accordingly, the Resulting Bank must divest these entities
within two years from the date of the merger.

TD Banknorth has also requested permission for the Resulting Bank to
retain certain assets of Hudson that do not conform to the requirements
for assets acquired and held by national banks. These non-conforming
assets are real estate properties that Hudson acquired in satisfaction
of debts previously contracted in loan workouts. The OCC will permit TD
Banknorth to retain these DPC assets subject to the requirements
applicable to national banks.

## 

## Consummation Procedures 

The district office must be advised in writing in advance of the desired
effective date for the merger so it may issue the necessary
certification letter. The effective date must follow the applicable
Department of Justice's injunction period and any other required
regulatory approval.

The OCC will issue a letter certifying consummation of the transaction
when we receive:

-   An executed merger agreement with Articles of Association for the
    resulting bank attached.

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-   A Secretary's Certificate from each institution, certifying that the
    shareholder approvals have been obtained, if required.

Please refer to the "[Business Combinations]{.underline}" booklet for
the required steps to complete the merger. If the merger is not
consummated within one year from the approval date, the approval shall
automatically terminate, unless the OCC grants an extension of the time
period.

This approval and the activities and communications by OCC employees in
connection with the filing do not constitute a contract, express or
implied, or any other obligation binding upon the OCC, the United
States, any agency or entity of the United States, or any officer or
employee of the United States, and do not affect the ability of the OCC
to exercise its supervisory, regulatory, and examination authorities
under applicable law and regulations. The foregoing may not be waived or
modified by any employee or agent of the OCC or the United States.

All correspondence regarding this application should reference the
control number. If you have any questions, contact me at (212) 790-4055
or e-mail sandya.reddy@occ.treas.gov.

Sincerely,

/s/ Sandya Reddy

Sandya Reddy

Acting Director for District Licensing

Enclosures: Survey Letter

[^1]: One commenter expressed concerns with a pending lawsuit in
    Illinois in which The Toronto-Dominion Bank ("TDBank"), the Canadian
    parent company of TD Banknorth, is among a group of defendants. This
    lawsuit does not involve TD Banknorth nor does it impact TD
    Banknorth's financial or managerial resources.

[^2]: One commenter expressed concerns with recent anti-money laundering
    issues at Hudson, which were the subject of a Cease and Desist Order
    issued by the Federal Deposit Insurance Corporation ("FDIC") on May
    24, 2004. The OCC notes that the anti-money laundering issues
    identified by the FDIC have been resolved. The FDIC lifted Hudson's
    Cease and Desist Order on September 9, 2005 after the FDIC found the
    bank to be in full compliance with the remedial provisions of the
    Order and the relevant laws and regulations.

[^3]: The PE was issued under the name Peoples Heritage Bank, NA. Since
    that PE was issued, Peoples Heritage Bank, NA has undergone numerous
    mergers and acquisitions. In each of those transactions, the OCC
    considered the CRA records of the banks involved and found approval
    under the CRA consistent with approval.

[^4]: Prior to the bank's conversion to a national bank in June 2000,
    the FDIC examiners performed a comprehensive fair lending
    examination and found no violations of the substantive provisions of
    the anti-discrimination laws and regulations.

[^5]: While the comments were received after the close of the public
    comment period, the OCC considered the comments in evaluating this
    application.

[^6]: It is important to note that HMDA data alone are not adequate to
    provide a basis for concluding that a bank is engaged in lending
    discrimination or in indicating whether its level of lending is
    sufficient. HMDA data do not take into consideration borrower
    creditworthiness, housing prices, and other factors relevant in each
    of the individual markets, nor do they fully reflect the range of a
    bank's lending activities or efforts. Nevertheless, denial and
    pricing disparities are of concern to the OCC and are evaluated in
    fair lending examinations. The OCC has carefully examined the 2004
    HMDA data for national banks and their subsidiaries, including TD
    Banknorth, and has incorporated the results of the analysis into the
    OCC's supervisory strategy for upcoming fair lending examinations.

[^7]: TD Banknorth noted that in the New Haven and Hartford MSAs, the
    bank's overall volume of business was too low to be statistically
    valid. TD Banknorth disputed the figures cited by the commenter in
    the Boston MSA and indicated its denial ratio for Latinos was less
    than the standard industry ratio.

[^8]: The commenter also raised a concern that TD Banknorth was enabling
    "fringe finance" companies due to the fact that the bank had made a
    loan to a pawn shop. TD Banknorth indicated that it has performed a
    review of these types of businesses, determined that many of them
    are locally-owned businesses serving their communities, and has
    opted to serve these types of businesses provided they meet TD
    Banknorth's stringent standards. TD Banknorth obtains representation
    and warranties from these businesses that they are properly licensed
    and operate in compliance with applicable laws, including applicable
    fair lending and consumer protection laws.

[^9]: TD Banknorth is required to adhere to the Federal Deposit
    Insurance Act and the agencies' Joint Policy Statement Regarding
    Branch Closings. See 12 U.S.C. § 1831r-l, 64 Fed. Reg. 34,844(1999).
    Any branch closings resulting from this merger will be considered in
    the bank's next CRA examination.

[^10]: The same commenter requested an extension of the comment period.
    However, the OCC determined not to grant an extension of the comment
    period, because the commenter did not demonstrate that additional
    time was necessary to develop factual information, and no
    extenuating circumstances were present. *See* 12 C.F.R. §
    5.10(b)(2)(ii), (iii). While the OCC did not extend the public
    comment period, the OCC considered all comments received after the
    close of the comment period.