##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended March 31, 2006
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File Number: 000-51179
 TD BANKNORTH INC.
 
  Delaware
    
    01-0437984(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)Two Portland Square, Portland, Maine
    
    04112(Address of principal executive offices)
    
    (Zip Code)
  
  þ o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
 o þ
  Common stock, par value $.01 per share
    
    228,024,714(Class)
    
    (Outstanding)
 Available
on the Web @ www.tdbanknorth.com




---



##### 



PAGEPART I. FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Balance Sheets
    
    
    3Consolidated Statements of Income
    
    
    4Consolidated Statements of Changes in Shareholders Equity
    
    
    5Consolidated Statements of Cash Flows
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    23Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    55Item 4. Controls and Procedures
    
    
    55PART II. OTHER INFORMATION
    
    
    55Item 1. Legal Proceedings
    
    
    55Item 1A. Risk Factors
    
    
    55Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    56Item 3. Defaults Upon Senior Securities
    
    
    56Item 4. Submission of Matters to a Vote of Security Holders
    
    
    56Item 5. Other Information
    
    
    57Item 6. Exhibits
    
    
    57Signatures
    
    
    58Exhibits
    
    
    59EX-31.1 Section 302 Certification of CEOEX-31.2 Section 302 Certification of CFOEX-32.1 Section 906 Certification of CEOEX-32.2 Section 906 Certification of CFO
  2




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##### Table of Contents



TD BANKNORTH INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
(In thousands, except share data) (Unaudited)
 Successor
    
    
    SuccessorMarch 31, 2006
    
    
    December 31, 2005AssetsCash and due from banks
    
    $
    836,108
    
    
    $
    758,751Federal funds sold and other short-term investments
    
    
    10,712
    
    
    
    10,507Securities purchased under agreements to resell
    
    
    3,200,000
    
    
    
    Securities available for sale, at market value
    
    
    2,251,530
    
    
    
    4,419,877Securities
held to maturity (fair value of $61,001 and $64,487 at March 31, 2006 and December 31, 2005, respectively)
    
    
    60,026
    
    
    
    64,126Loans held for sale
    
    
    25,233
    
    
    
    31,398Loans and leases:Residential real estate mortgages
    
    
    2,902,999
    
    
    
    2,878,323Commercial real estate mortgages
    
    
    8,708,106
    
    
    
    6,776,837Commercial business loans and leases
    
    
    6,365,259
    
    
    
    4,278,048Consumer loans and leases
    
    
    7,269,035
    
    
    
    6,186,519Credit card
receivables
    
    
    375,113
    
    
    
    Total loans and leases
    
    
    25,620,512
    
    
    
    20,119,727Less: Allowance for loan and lease losses
    
    
    276,342
    
    
    
    223,030Net loans and leases
    
    
    25,344,170
    
    
    
    19,896,697Premises and equipment, net
    
    
    460,021
    
    
    
    331,912Goodwill
    
    
    6,015,756
    
    
    
    4,547,604Identifiable intangible assets
    
    
    848,880
    
    
    
    668,365Bank-owned life insurance
    
    
    767,043
    
    
    
    572,847Other assets
    
    
    1,052,715
    
    
    
    793,269Total assets
    
    $
    40,872,194
    
    
    $
    32,095,353Liabilities and Shareholders EquityDeposits:Savings accounts
    
    $
    4,368,767
    
    
    $
    2,653,233Money market and NOW accounts
    
    
    9,898,522
    
    
    
    7,819,812Certificates of deposit
    
    
    6,716,414
    
    
    
    5,132,117Brokered deposits
    
    
    270,061
    
    
    
    63,953Noninterest-bearing deposits
    
    
    5,616,850
    
    
    
    4,603,533Total deposits
    
    
    26,870,614
    
    
    
    20,272,648Short-term borrowings
    
    
    3,585,428
    
    
    
    3,685,540Long-term debt
    
    
    1,645,096
    
    
    
    1,238,430Deferred tax liability on identifiable intangible assets
    
    
    337,557
    
    
    
    261,932Other liabilities
    
    
    273,276
    
    
    
    152,930Total liabilities
    
    
    32,711,971
    
    
    
    25,611,480Commitments and contingenciesShareholders Equity:Preferred stock (par value $0.01 per share, 5,000,000 shares authorized,
none issued)
    
    
    
    
    
    
    Common stock (par value $0.01 per share, 400,000,000 shares authorized,
Issued - 250,910,577 in 2006 and 188,426,630 in 2005)
    
    
    2,509
    
    
    
    1,884Common stock, Class B (par value $0.01 per share, authorized and
issued 1 share in 2006 and 2005)
    
    
    
    
    
    
    Paid-in capital
    
    
    8,740,326
    
    
    
    6,833,677Retained earnings
    
    
    177,867
    
    
    
    152,494Unearned compensation
    
    
    (756
    )
    
    
    (1,131
    )Treasury stock, at cost (22,960,060 shares in 2006 and 14,761,415
shares in 2005)
    
    
    (715,009
    )
    
    
    (469,010
    )Accumulated other comprehensive loss
    
    
    (44,714
    )
    
    
    (34,041
    )Total shareholders equity
    
    
    8,160,223
    
    
    
    6,483,873Total liabilities and shareholders equity
    
    $
    40,872,194
    
    
    $
    32,095,353
  3




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##### Table of Contents



TD BANKNORTH INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME
 Successor
    
    
    Successor
    
    
    PredecessorThree Months Ended
    
    
    March 1, 2005 to
    
    
    January 1, 2005 toMarch 31, 2006
    
    
    March 31, 2005
    
    
    February 28, 2005Interest and dividend income:Interest and fees on loans and leases
    
    $
    378,698
    
    
    $
    95,664
    
    
    $
    176,949Interest and dividends on securities
    
    
    77,801
    
    
    
    19,848
    
    
    
    51,183Total interest and dividend income
    
    
    456,499
    
    
    
    115,512
    
    
    
    228,132Interest expense:Interest on deposits
    
    
    106,682
    
    
    
    14,750
    
    
    
    30,694Interest on borrowed funds
    
    
    67,373
    
    
    
    12,814
    
    
    
    32,654Total interest expense
    
    
    174,055
    
    
    
    27,564
    
    
    
    63,348Net interest income
    
    
    282,444
    
    
    
    87,948
    
    
    
    164,784Provision for loan and lease losses
    
    
    6,900
    
    
    
    1,000
    
    
    
    1,069Net interest income after provision
for loan and lease losses
    
    
    275,544
    
    
    
    86,948
    
    
    
    163,715Noninterest income:Deposit services
    
    
    38,479
    
    
    
    9,823
    
    
    
    18,359Insurance agency commissions
    
    
    15,839
    
    
    
    5,640
    
    
    
    8,252Merchant and electronic banking income, net
    
    
    15,636
    
    
    
    5,363
    
    
    
    7,751Wealth management services
    
    
    11,348
    
    
    
    3,545
    
    
    
    6,959Bank-owned life insurance
    
    
    7,288
    
    
    
    1,929
    
    
    
    4,169Investment planning services
    
    
    5,142
    
    
    
    1,874
    
    
    
    2,815Net securities losses
    
    
    (90
    )
    
    
    (3,928
    )
    
    
    (46,548
    )Loans held for sale  Lower of cost or market adjustment
    
    
    
    
    
    
    
    
    
    
    (7,500
    )Change in unrealized loss on derivatives
    
    
    
    
    
    
    (8,175
    )
    
    
    Other noninterest income
    
    
    24,197
    
    
    
    6,190
    
    
    
    9,104117,839
    
    
    
    22,261
    
    
    
    3,361Noninterest expense:Compensation and employee benefits
    
    
    125,210
    
    
    
    32,891
    
    
    
    67,977Occupancy
    
    
    24,296
    
    
    
    6,490
    
    
    
    11,411Equipment
    
    
    14,884
    
    
    
    4,397
    
    
    
    8,440Data processing
    
    
    15,233
    
    
    
    3,800
    
    
    
    7,233Advertising and marketing
    
    
    8,191
    
    
    
    2,322
    
    
    
    4,373Amortization of identifiable intangible assets
    
    
    37,666
    
    
    
    9,934
    
    
    
    1,561Merger and restructuring costs
    
    
    19,818
    
    
    
    3,927
    
    
    
    27,264Prepayment penalties on borrowings
    
    
    
    
    
    
    3
    
    
    
    6,300Other noninterest expense
    
    
    31,738
    
    
    
    8,899
    
    
    
    15,887277,036
    
    
    
    72,663
    
    
    
    150,446Income before income tax expense
    
    
    116,347
    
    
    
    36,546
    
    
    
    16,630Provision for income taxes
    
    
    38,799
    
    
    
    12,919
    
    
    
    6,182Income from continuing operations
    
    
    77,548
    
    
    
    23,627
    
    
    
    10,448Discontinued operationsLoss from discontinued operations
    
    
    (2,599
    )
    
    
    
    
    
    
    Income tax benefit
    
    
    1,257
    
    
    
    
    
    
    
    Loss from
discontinued operations, net of tax
    
    
    (1,342
    )
    
    
    
    
    
    
    Net income
    
    $
    76,206
    
    
    $
    23,627
    
    
    $
    10,448Basic earnings per share:Income from continuing operations
    
    $
    0.37
    
    
    $
    0.13
    
    
    $
    0.06Loss from
discontinued operations, net of tax
    
    
    (0.01
    )
    
    
    
    
    
    
    Net income
    
    $
    0.36
    
    
    $
    0.13
    
    
    $
    0.06Diluted earnings per share:Income from continuing operations
    
    $
    0.37
    
    
    $
    0.13
    
    
    $
    0.06Loss from
discontinued operations, net of tax
    
    
    (0.01
    )
    
    
    
    
    
    
    Net income
    
    $
    0.36
    
    
    $
    0.13
    
    
    $
    0.06Weighted average shares outstanding:Basic
    
    
    209,690
    
    
    
    180,581
    
    
    
    184,964Dilutive effect of stock options
    
    
    754
    
    
    
    924
    
    
    
    1,783Diluted
    
    
    210,444
    
    
    
    181,505
    
    
    
    186,747
  4




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##### Table of Contents



TD BANKNORTH INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(In thousands) (Unaudited)
 AccumulatedCommon
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    OtherShares
    
    Common
    
    Paid-in
    
    Retained
    
    Unearned
    
    Treasury
    
    ComprehensiveOutstanding
    
    Stock
    
    Capital
    
    Earnings
    
    Compensation
    
    Stock
    
    Income (Loss)
    
    TotalBalances
at December 31, 2005 (Successor)
    
    
    173,665
    
    
    $
    1,884
    
    
    $
    6,833,677
    
    
    $
    152,494
    
    
    ($
    1,131
    )
    
    ($
    469,010
    )
    
    ($
    34,041
    )
    
    $
    6,483,873Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76,206
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76,206Change in unrealized losses on securities, net of
reclassification adjustment net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,947
    )
    
    
    (14,947
    )Change in unrealized gains on cash flow hedges, net of
reclassification adjustment net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,274
    
    
    
    4,274Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65,533Common stock issued for acquisitions
    
    
    32,859
    
    
    
    329
    
    
    
    965,065
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    965,394Common stock issued to The Toronto-Dominion Bank
for acquisitions
    
    
    29,625
    
    
    
    296
    
    
    
    941,494
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    941,790Treasury stock issued for employee benefit
plans, including tax benefit of $0.4 million
    
    
    301
    
    
    
    
    
    
    
    (1,827
    )
    
    
    
    
    
    
    
    
    
    
    9,471
    
    
    
    
    
    
    
    7,644Stock option compensation expense
    
    
    
    
    
    
    
    
    
    
    1,917
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,917Treasury stock purchased
    
    
    (8,500
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (255,470
    )
    
    
    
    
    
    
    (255,470
    )Decrease in unearned compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    375
    
    
    
    
    
    
    
    
    
    
    
    375Cash dividends declared ($0.22 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50,833
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50,833
    )Balances
at March 31, 2006 (Successor)
    
    
    227,950
    
    
    $
    2,509
    
    
    $
    8,740,326
    
    
    $
    177,867
    
    
    ($
    756
    )
    
    ($
    715,009
    )
    
    ($
    44,714
    )
    
    $
    8,160,223Balances at December 31, 2004 (Predecessor)
    
    
    179,298
    
    
    $
    1,917
    
    
    $
    1,763,572
    
    
    $
    1,677,802
    
    
    $
    
    
    
    ($
    265,020
    )
    
    ($
    2,157
    )
    
    $
    3,176,114Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,448
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,448Change in unrealized gains on securities, net of
reclassification adjustment net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,463
    
    
    
    2,463Change in unrealized losses on cash flow hedges, net of
reclassification adjustment net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,714
    )
    
    
    (7,714
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,197Common stock issued for acquisitions
    
    
    6,152
    
    
    
    61
    
    
    
    199,764
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    199,825Treasury stock issued for employee benefit
plans, including tax benefit of $16.0 million
    
    
    2,978
    
    
    
    
    
    
    
    7,489
    
    
    
    
    
    
    
    
    
    
    
    63,879
    
    
    
    
    
    
    
    71,368Cash dividends declared ($0.20 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37,383
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37,383
    )Balances at February 28, 2005 (Predecessor)
    
    
    188,428
    
    
    $
    1,978
    
    
    $
    1,970,825
    
    
    $
    1,650,867
    
    
    $
    
    
    
    ($
    201,141
    )
    
    
    ($7,408
    )
    
    $
    3,415,121Balances at March 1, 2005 (Successor)
    
    
    188,428
    
    
    $
    1,884
    
    
    $
    6,836,487
    
    
    $
    
    
    
    ($
    2,256
    )
    
    $
    
    
    
    $
    
    
    
    $
    6,836,115Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,627
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,627Change in unrealized losses on securities, net of
reclassification adjustment net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (26,902
    )
    
    
    (26,902
    )Change in unrealized losses on cash flow hedges, net of
reclassification adjustment net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (288
    )
    
    
    (288
    )Comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,563
    )Treasury stock issued for employee benefit
plans, including tax benefit of $0.2 million
    
    
    80
    
    
    
    
    
    
    
    (445
    )
    
    
    
    
    
    
    
    
    
    
    2,794
    
    
    
    
    
    
    
    2,349Treasury stock purchased
    
    
    (15,300
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (486,408
    )
    
    
    
    
    
    
    (486,408
    )Balances at March 31, 2005 (Successor)
    
    
    173,208
    
    
    $
    1,884
    
    
    $
    6,836,042
    
    
    $
    23,627
    
    
    ($
    2,256
    )
    
    ($
    483,614
    )
    
    ($
    27,190
    )
    
    $
    6,348,493
  5




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##### Table of Contents



TD BANKNORTH INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Unaudited)
 Successor
    
    
    Successor
    
    
    PredecessorThree Months Ended
    
    
    March 1, 2005 to
    
    
    January 1, 2005 toMarch 31, 2006
    
    
    March 31, 2005
    
    
    February 28, 2005Cash flows from operating activities:Net income
    
    $
    76,206
    
    
    $
    23,627
    
    
    $
    10,448Loss from discontinued operations, net of tax
    
    
    (1,342
    )
    
    
    
    
    
    
    Income from continuing operations
    
    
    77,548
    
    
    
    23,627
    
    
    
    10,448Adjustments to reconcile net income to net cash provided by operating activities:Provision for loan and lease losses
    
    
    6,900
    
    
    
    1,000
    
    
    
    1,069Depreciation of banking premises and equipment
    
    
    14,451
    
    
    
    4,034
    
    
    
    7,807Net amortization of premium and discounts
    
    
    (1,710
    )
    
    
    2,275
    
    
    
    3,703Amortization of intangible assets
    
    
    37,666
    
    
    
    9,934
    
    
    
    1,561Provision for deferred tax expense
    
    
    4,800
    
    
    
    4,200
    
    
    
    2,000Unearned compensation
    
    
    375
    
    
    
    
    
    
    
    Stock-based compensation expense
    
    
    1,917
    
    
    
    
    
    
    
    Net losses (gains) realized from sales of securities and loans
    
    
    (17
    )
    
    
    3,928
    
    
    
    46,548Lower of cost or market adjustment on loans held for sale
    
    
    
    
    
    
    
    
    
    
    7,500Prepayment penalties on borrowings
    
    
    
    
    
    
    3
    
    
    
    6,300Net losses (gains) realized from sales of loans held for sale
    
    
    
    
    
    
    (204
    )
    
    
    (616
    )Increase in cash surrender value of bank owned life insurance
    
    
    (7,288
    )
    
    
    (1,929
    )
    
    
    (4,169
    )Proceeds from sales of loans held for sale
    
    
    84,953
    
    
    
    40,171
    
    
    
    72,258Residential loans originated and purchased for sale
    
    
    (78,591
    )
    
    
    (43,251
    )
    
    
    (58,800
    )Net decrease (increase) in other assets
    
    
    (66,019
    )
    
    
    (155
    )
    
    
    47,443Net increase (decrease) in other liabilities
    
    
    38,136
    
    
    
    (31,982
    )
    
    
    (26,510
    )Net cash provided by operating activities
    
    
    113,121
    
    
    
    11,651
    
    
    
    116,542Cash flows from investing activities:Proceeds from sales of securities available for sale
    
    
    2,942,125
    
    
    
    
    
    
    
    83,271Proceeds from sales of securities as part of deleveraging program
    
    
    2,528,541
    
    
    
    374,488
    
    
    
    2,461,701Proceeds from maturities and principal repayments of securities available for sale
    
    
    275,756
    
    
    
    67,710
    
    
    
    190,117Purchases of securities available for sale
    
    
    (899,363
    )
    
    
    (325,436
    )
    
    
    (969,979
    )Purchase of securities under reverse repurchase agreements
    
    
    (3,200,000
    )
    
    
    
    
    
    
    Proceeds from maturities and principal repayments of securities held to maturity
    
    
    4,100
    
    
    
    2,084
    
    
    
    4,670Net
(increase) decrease in loans and leases
    
    
    (309,188
    )
    
    
    1,921
    
    
    
    (222,430
    )Proceeds from sales of portfolio loans
    
    
    925
    
    
    
    
    
    
    
    Net (additions) decrease to premises and equipment
    
    
    (21,128
    )
    
    
    (1,875
    )
    
    
    798Proceeds from policy coverage on bank-owned life insurance
    
    
    19
    
    
    
    217
    
    
    
    141Cash used in business acquisitions
    
    
    (941,874
    )
    
    
    
    
    
    
    Cash acquired from acquisitions
    
    
    238,562
    
    
    
    
    
    
    
    130,685Net cash provided by investing activities
    
    
    618,475
    
    
    
    119,109
    
    
    
    1,678,974Cash flows from financing activities:Net (decrease) in deposits
    
    
    (294,472
    )
    
    
    (249,259
    )
    
    
    (160,662
    )Net (decrease) increase in short-term borrowings
    
    
    (587,245
    )
    
    
    790,621
    
    
    
    2,102,739Payments on short-term borrowings as part of deleveraging program
    
    
    
    
    
    
    (374,491
    )
    
    
    (1,461,701
    )Proceeds from long-term debt
    
    
    
    
    
    
    
    
    
    
    8,467Payments for long-term debt
    
    
    (412,401
    )
    
    
    (16,939
    )
    
    
    (474,664
    )Payments for long-term debt as part of deleveraging program
    
    
    
    
    
    
    
    
    
    
    (1,006,300
    )Excess tax benefits from stock-based compensation
    
    
    (448
    )
    
    
    (211
    )
    
    
    (16,049
    )Treasury stock issued for employee benefit plans
    
    
    7,644
    
    
    
    2,349
    
    
    
    71,368Issuance of stock to The Toronto-Dominion Bank
    
    
    941,790
    
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    (255,470
    )
    
    
    (486,408
    )
    
    
    Cash dividends paid to shareholders
    
    
    (50,833
    )
    
    
    
    
    
    
    (37,383
    )Net cash (used in) financing activities
    
    
    (651,435
    )
    
    
    (334,338
    )
    
    
    (974,185
    )Cash flows from discontinued operationsOperating activities
    
    
    (2,599
    )
    
    
    
    
    
    
    Net cash (used in) discontinued operations
    
    
    (2,599
    )
    
    
    
    
    
    
    Increase (decrease) in cash and cash equivalents
    
    
    77,562
    
    
    
    (203,578
    )
    
    
    821,331Cash and cash equivalents at beginning of period
    
    
    769,258
    
    
    
    747,637
    
    
    
    (73,694
    )Cash and cash equivalents at end of period
    
    $
    846,820
    
    
    $
    544,059
    
    
    $
    747,637In conjunction with the purchase
acquisitions detailed in Note 3 to the unaudited Consolidated Financial Statements, assets were
acquired and liabilities were assumed as follows:Fair value of assets acquired
    
    $
    10,296,043
    
    
    $
    32,462,141
    
    
    $
    1,618,940Fair value of liabilities assumed
    
    
    8,388,774
    
    
    
    25,626,026
    
    
    
    1,422,658Supplemental cash flow disclosuresCash paid for interest
    
    $
    157,569
    
    
    $
    22,673
    
    
    $
    68,238Cash paid (received) for income taxes
    
    
    11,172
    
    
    
    (24,960
    )
    
    
    (779
    )
  6




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##### Table of Contents



TD BANKNORTH INC. AND SUBSIDIARIES
 
 Notes to Consolidated Financial Statements
March 31, 2006
(In thousands, except per share data and as noted) (Unaudited)
 Note 1  Basis of Presentation
    Note 2  Accounting Changes
  Accounting for Share-Based Payment Transactions
  7




---



##### Table of Contents



Accounting for Servicing of Financial Assets
  Accounting for Certain Hybrid Financial Instruments
  Accounting Changes and Error Corrections
  Other-Than-Temporary Impairments of Certain Investments
  8




---



##### Table of Contents



Note 3
 Acquisitions
  Transaction-Related ItemsBalance at
    
    
    
    
    
    Identifiable
    
    
    
    
    
    
    
    
    
    TotalAcquisition
    
    Acquisition Date
    
    
    
    
    
    Intangible
    
    Cash
    
    Shares
    
    Purchase(Dollars and shares in millions)
    
    Date
    
    Assets
    
    Equity
    
    Goodwill
    
    Assets
    
    Paid
    
    Issued
    
    PriceHudson United Bancorp
    
    
    1/31/2006
    
    
    $
    8,771.0
    
    
    $
    518.3
    
    
    $
    1,465.4
    
    
    $
    222.5
    
    
    $
    941.8
    
    
    
    32.9
    (1)
    
    $
    1,907.3BostonFed Bancorp, Inc.
    
    
    1/21/2005
    
    
    $
    1,467.8
    
    
    $
    102.7
    
    
    $
    138.2
    
    
    $
    13.2
    
    
    $
    0.3
    
    
    
    6.2
    
    
    $
    200.2
 
 (1)
    
    Shares issued does not include the 29.6 million shares of common stock sold by us to The
Toronto-Dominion Bank to fund the cash paid by us in connection with the acquisition of
Hudson.  Assets:Investments
    
    $
    2,699,382Loans and leases, net
    
    
    5,154,478Premises and equipment
    
    
    121,794Goodwill
    
    
    1,465,405Other intangible assets
    
    
    222,466Cash and due from banks
    
    
    235,997Bank-owned life insurance
    
    
    156,476Other assets
    
    
    240,045Total assets acquired
    
    
    10,296,043Liabilities:Deposits
    
    
    6,897,621Borrowings
    
    
    1,311,605Other liabilities
    
    
    179,548Total liabilities assumed
    
    
    8,388,774Net assets acquired
    
    $
    1,907,269
  9




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##### Table of Contents



Successor
    
    
    Successor
    
    
    PredecessorThree Months Ended
    
    
    March 1, 2005 to
    
    
    January 1, 2005 toMarch 31, 2006
    
    
    March 31, 2005
    
    
    February 28, 2005Net interest income
    
    $
    309,169
    
    
    $
    115,994
    
    
    $
    220,725Provision for loan and lease losses
    
    
    8,900
    
    
    
    2,500
    
    
    
    4,069Net interest income after provision
for loan and lease losses
    
    
    300,269
    
    
    
    113,494
    
    
    
    216,656Noninterest
income
    
    
    126,925
    
    
    
    32,501
    
    
    
    24,672Noninterest expense (1)
    
    
    316,135
    
    
    
    99,520
    
    
    
    199,202Income before income tax expense
    
    
    111,059
    
    
    
    46,475
    
    
    
    42,126Provision for income taxes
    
    
    41,186
    
    
    
    14,893
    
    
    
    12,720Income from continuing operations
    
    
    69,873
    
    
    
    31,582
    
    
    
    29,406Loss from discontinued operations, net of tax
    
    
    (1,342
    )
    
    
    
    
    
    
    Net income
    
    $
    68,531
    
    
    $
    31,582
    
    
    $
    29,406Basic earnings per shareIncome from continuing operations
    
    $
    0.31
    
    
    $
    0.13
    
    
    $
    0.12Loss from
discontinued operations, net of tax
    
    $
    (0.01
    )
    
    $
    0.00
    
    
    $
    0.00Net income
    
    $
    0.30
    
    
    $
    0.13
    
    
    $
    0.12Diluted earnings per shareIncome from continuing operations
    
    $
    0.31
    
    
    $
    0.13
    
    
    $
    0.12Loss from
discontinued operations, net of tax
    
    $
    (0.01
    )
    
    $
    0.00
    
    
    $
    0.00Net income
    
    $
    0.30
    
    
    $
    0.13
    
    
    $
    0.12
 
 (1)
    
    Includes $9.0 million of merger costs recorded by Hudson
in January 2006. Note 4
 Discontinued Operations
   Note 5
 Stock Compensation Plans
 General
  10




---



##### Table of Contents



Successor
    
    
    PredecessorMarch 1, 2005 to
    
    
    January 1, 2005 toMarch 31, 2005
    
    
    February 28, 2005Net Income, as reported
    
    $
    23,627
    
    
    $
    10,448Add: Stock-based employee compensation
expense included in reported
net income, net of related tax effects
    
    
    524
    
    
    
    Deduct: Total stock-based employee
compensation expense determined under
fair value based method for all awards,
net of related tax effects:Effect of accelerated vesting of stock options in
connection with The Toronto-Dominion Bank transaction
    
    
    
    
    
    
    (9,293
    )Other
    
    
    (670
    )
    
    
    (2,159
    )Pro forma net income
    
    $
    23,481

    
(
    $
    1,004
    )Earnings per shareBasic  As reported
    
    $
    0.13
    
    
    $
    0.06Pro forma
    
    $
    0.13
    


    $
    (0.01
    )Diluted  As reported
    
    $
    0.13
    
    
    $
    0.06Pro forma
    
    $
    0.13
    


    $
    (0.01
    )
 Stock Options
    11




---



##### Table of Contents



SuccessorMarch 1, toDecember 31, 2005Weighted average fair value
    
    $
    5.30Expected dividend yield
    
    
    2.56
    %Risk-free interest rate
    
    
    4.32
    %Expected life
    
    7.50 yearsVolatility
    
    
    14.11
    %
  WeightedWeighted
    
    Average
    
    AggregateNumber of
    
    Average
    
    Remaining
    
    IntrinsicShares
    
    Exercise Price
    
    Term
    

Value
(000s)Outstanding at January 1, 2006
    
    
    10,228,728
    
    
    $
    26.75Granted
    
    
    
    
    
    
    Granted in acquisitions
    
    
    259,270
    
    
    
    19.78Exercised
    
    
    (211,481
    )
    
    
    24.03Cancelled and forfeited
    
    
    (89,490
    )
    
    
    30.02Outstanding at March 31, 2006
    
    
    10,187,027
    
    
    $
    26.61
    
    
    7.38 years
    
    $
    27,962
    (2)Options exercisable at March 31, 2006
    
    
    6,220,654
    
    
    $
    24.91
    
    
    6.31 years
    
    $
    27,592
    (2)Outstanding at January 1, 2005
    
    
    9,080,456
    
    
    $
    22.87Granted
    
    
    
    
    
    
    Exercised (1)
    
    
    (2,730,249
    )
    
    
    19.34Cancelled and forfeited
    
    
    (30,519
    )
    
    
    26.97Outstanding at February 28, 2005
    
    
    6,319,688
    
    
    $
    24.37Granted
    
    
    2,141,149
    
    
    
    31.24Exercised
    
    
    (88,230
    )
    
    
    25.36Cancelled and forfeited
    
    
    (924
    )
    
    
    28.59Outstanding at March 31, 2005
    
    
    8,371,683
    
    
    $
    26.12
    
    
    8.05 years
    
    $
    42,762
    (3)Options exercisable at March 31, 2005
    
    
    5,163,161
    
    
    $
    24.13
    
    
    6.85 years
    
    $
    36,624
    (3)
 
 (1)
    
    Increase in options exercised in advance of the transaction with The Toronto-Dominion
Bank.(2)
    
    Based on the closing stock price on March 31, 2006 of
$29.34.(3)
    
    Based on the closing stock price on March 31, 2005 of
$31.22.   12




---



##### Table of Contents



WeightedAverageGrant-DateNonvested Options
    
    Options
    
    Fair ValueNonvested at January 1, 2006
    
    
    4,705,537
    
    
    $
    5.44Granted
    
    
    
    
    
    
    Vested
    
    
    (653,295
    )
    
    
    5.46Forfeited
    
    
    (85,869
    )
    
    
    5.30Nonvested at March 31, 2006
    
    
    3,966,373
    
    
    
    5.44Nonvested as of January 1, 2005
    
    
    3,842,852
    
    
    $
    7.10Granted
    
    
    
    
    
    
    Vested
    
    
    (37,450
    )
    
    
    7.14Forfeited
    
    
    (27,092
    )
    
    
    7.19Nonvested at February 28, 2005
    
    
    3,778,310
    
    
    
    7.10Granted
    
    
    2,141,149
    
    
    
    5.46Vested (1)
    
    
    (2,710,013
    )
    
    
    7.19Forfeited
    
    
    (924
    )
    
    
    5.95Nonvested at March 31, 2005
    
    
    3,208,522
    
    
    
    5.93
 
 (1)
    
    Accelerated vesting of stock options in connection with the transaction with The
Toronto-Dominion Bank. Restricted Stock and Restricted Stock Units
    WeightedRestricted Stock
    
    Averageand Restricted
    
    Grant-DateRestricted Stock and Restricted Stock Units
    
    Stock Units
    
    Fair ValueNonvested at January 1, 2006
    
    
    1,336,510
    
    
    $
    30.06Granted
    
    
    277,824
    
    
    
    29.93Vested
    
    
    
    
    
    
    Forfeited
    
    
    (54,039
    )
    
    
    29.94Nonvested at March 31, 2006
    
    
    1,560,295
    
    
    
    30.04Exercisable at March 31, 2006
    
    
    30,355
    
    
    
    30.48Outstanding at March 1, 2005
    
    
    
    
    
    
    Granted
    
    
    662,336
    
    
    
    31.30Vested
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Outstanding at March 31, 2005
    
    
    662,336
    
    
    
    31.30Exercisable at March 31, 2005
    
    
    
    
    
    
    
 13




---



##### Table of Contents



Employee Stock Purchase Plan
   Employee Stock Purchase Plan (1)Shares
    
    Shares
    
    AveragePurchased
    
    Available
    
    Price
    
    ExpenseJanuary 1, 2006 to March 31, 2006 (Successor)
    
    
    30,943
    
    
    
    841,104
    
    
    $
    29.35
    
    
    $
    45March 1, 2005 to March 31, 2005 (Successor)
    
    
    
    
    
    
    1,008,251
    
    
    $
    
    
    
    $
    
    (2)January 1, 2005 to February 28, 2005 (Predecessor)
    
    
    43,674
    
    
    
    1,008,251
    
    
    $
    26.55
    
    
    $
    205
    (2)
 
 (1)
    
    The maximum number of shares which may be issued under the Employee Stock Purchase Plan, as
amended, is 2,852,000.(2)
    
    Pro forma expense. Note 6
 Securities Purchased under Agreements to Resell
  Note 7
 Securities Available for Sale
  14




---



##### Table of Contents



Less than 1 year
    
    
    More than 1 year
    
    
    TotalNumber of
    
    
    Fair
    
    
    Unrealized
    
    
    Number of
    
    
    Fair
    
    
    Unrealized
    
    
    Number of
    
    
    Fair
    
    
    UnrealizedAvailable for Sale:
    
    Investments
    
    
    Value
    
    
    Losses
    
    
    Investments
    
    
    Value
    
    
    Losses
    
    
    Investments
    
    
    Value
    
    
    LossesU. S. Government obligations and
obligations of U.S. Government
agencies and corporations
    
    
    4
    
    
    $
    402,379
    
    
    $
    2,295
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    
    4
    
    
    $
    402,379
    
    
    $
    2,295Tax-exempt bonds and notes
    
    
    72
    
    
    
    40,689
    
    
    
    598
    
    
    
    56
    
    
    
    25,069
    
    
    
    486
    
    
    
    128
    
    
    
    65,758
    
    
    
    1,084Other bonds and notes
    
    
    67
    
    
    
    117,333
    
    
    
    1,234
    
    
    
    20
    
    
    
    28,891
    
    
    
    334
    
    
    
    87
    
    
    
    146,224
    
    
    
    1,568Mortgage-backed securities
    
    
    562
    
    
    
    1,077,173
    
    
    
    31,757
    
    
    
    315
    
    
    
    189,728
    
    
    
    5,703
    
    
    
    877
    
    
    
    1,266,901
    
    
    
    37,460Collateralized mortgage obligations
    
    
    7
    
    
    
    78,194
    
    
    
    1,619
    
    
    
    10
    
    
    
    2,165
    
    
    
    23
    
    
    
    17
    
    
    
    80,359
    
    
    
    1,642Equity securities
    
    
    1
    
    
    
    129
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    129
    
    
    
    12713
    
    
    $
    1,715,897
    
    
    $
    37,515
    
    
    
    401
    
    
    $
    245,853
    
    
    $
    6,546
    
    
    
    1,114
    
    
    $
    1,961,750
    
    
    $
    44,061
   Note 8
 Goodwill and Other Intangible Assets
  Other
    
    
    TotalCore Deposit
    
    
    Identifiable
    
    
    IdentifiableGoodwill
    
    
    Intangibles
    
    
    Intangibles (1)
    
    
    IntangiblesBalance, December 31, 2005
    
    $
    4,547,604
    
    
    $
    476,840
    
    
    $
    191,525
    
    
    $
    668,365Recorded during the year
    
    
    1,465,404
    
    
    
    176,549
    
    
    
    45,917
    
    
    
    222,466Amortization expense
    
    
    
    
    
    
    (33,223
    )
    
    
    (4,443
    )
    
    
    (37,666
    )Adjustment of purchase accounting estimates
    
    
    2,748
    
    
    
    
    
    
    
    (4,285
    )
    
    
    (4,285
    )Balance, March 31, 2006
    
    $
    6,015,756
    
    
    $
    620,166
    
    
    $
    228,714
    
    
    $
    848,880Estimated Annual Amortization Expense:Remaining 2006
    
    
    
    
    
    $
    104,509
    
    
    $
    14,009
    
    
    $
    118,5182007
    
    
    
    
    
    
    110,029
    
    
    
    17,950
    
    
    
    127,9792008
    
    
    
    
    
    
    86,670
    
    
    
    16,903
    
    
    
    103,5732009
    
    
    
    
    
    
    70,220
    
    
    
    16,273
    
    
    
    86,4932010
    
    
    
    
    
    
    56,725
    
    
    
    15,519
    
    
    
    72,244Thereafter
    
    
    
    
    
    
    192,013
    
    
    
    145,703
    
    
    
    337,716
 
 (1)
    
    Other identifiable intangible assets include $2,357 related to the minimum pension liability
that is not amortized. 15




---



##### Table of Contents



March 31, 2006Gross Carrying
    
    
    Accumulated
    
    
    Net CarryingAmount
    
    
    Amortization
    
    
    AmountIdentifiable intangible assets:Core deposit intangibles
    
    $
    742,549
    
    
    $
    122,383
    
    
    $
    620,166Other identifiable intangibles:Loan relationship intangibles
    
    
    133,534
    
    
    
    6,277
    
    
    
    127,257Other identifiable intangibles
    
    
    113,988
    
    
    
    12,531
    
    
    
    101,457247,522
    
    
    
    18,808
    
    
    
    228,714Total
    
    $
    990,071
    
    
    $
    141,191
    
    
    $
    848,880
 Note 9
 Deposits
  Note
10  Short-term Borrowings
  March 31, 2006
    
    
    December 31, 2005Securities sold under agreements to repurchase  retail
    
    $
    1,588,593
    
    
    $
    1,668,139Federal funds purchased
    
    
    1,694,473
    
    
    
    1,563,000Treasury, tax and loan notes
    
    
    2,362
    
    
    
    54,401Federal Home Loan Bank advances
    
    
    300,000
    
    
    
    400,000$
    3,585,428
    
    
    $
    3,685,540
 Note
11  Long-term Debt
  March 31, 2006
    
    
    December 31, 2005Federal Home Loan Bank advances
    
    $
    144,050
    
    
    $
    151,609Securities sold under agreements to repurchase  retail
    
    
    119,320
    
    
    
    107,952Junior subordinated debentures issued to affiliated trusts
    
    
    527,511
    
    
    
    366,237Subordinated debt due 2006
    
    
    25,163
    
    
    
    Subordinated debt due 2011
    
    
    223,969
    
    
    
    225,188Subordinated debt due 2012
    
    
    218,572
    
    
    
    Subordinated debt due 2022
    
    
    231,164
    
    
    
    232,158Senior notes 3.75%, due 2008
    
    
    149,038
    
    
    
    148,914Other long-term debt
    
    
    6,309
    
    
    
    6,372Total
    
    $
    1,645,096
    
    
    $
    1,238,430
  16




---



##### Table of Contents



Note
12  Changes in Accumulated Other Comprehensive Income
  Successor
    
    Successor
    
    PredecessorThree Months Ended
    
    March 1, 2005 to
    
    January 1, 2005 toMarch 31, 2006
    
    March 31, 2005
    
    February 28, 2005Pre-tax
    
    Tax
    
    Net of
    
    Pre-tax
    
    Tax
    
    Net of
    
    Pre-tax
    
    Tax
    
    Net ofAmount
    
    Effect
    
    Tax
    
    Amount
    
    Effect
    
    Tax
    
    Amount
    
    Effect
    
    TaxChange in:Change in unrealized gain (loss) on
securities available for sale
    
    
    ($23,085
    )
    
    $
    8,080
    
    
    
    ($15,005
    )
    
    
    ($45,307
    )
    
    $
    15,852
    
    
    ($
    29,455
    )
    
    ($
    42,769
    )
    
    $
    14,975
    
    
    ($
    27,794
    )Change in unrealized gain (loss) on
cash flow hedges
    
    
    2,869
    
    
    
    (1,004
    )
    
    
    1,865
    
    
    
    (226
    )
    
    
    79
    
    
    
    (147
    )
    
    
    (7,851
    )
    
    
    (48
    )
    
    
    (7,899
    )Reclassification adjustment for
losses (gains) realized in net income
    
    
    3,796
    
    
    
    (1,329
    )
    
    
    2,467
    
    
    
    3,711
    
    
    
    (1,299
    )
    
    
    2,412
    
    
    
    46,834
    
    
    
    (16,392
    )
    
    
    30,442Net change in unrealized gains (losses)
    
    
    ($16,420
    )
    
    $
    5,747
    
    
    
    ($10,673
    )
    
    
    ($41,822
    )
    
    $
    14,632
    
    
    ($
    27,190
    )
    
    ($
    3,786
    )
    
    ($
    1,465
    )
    
    ($
    5,251
    )
 Note 13   Allowance for Loan and Lease Losses
   Impaired loans associated with:The Toronto-Dominion Bank
    
    HudsonTransaction
    
    Acquisition
    
    TotalContractually required principal payments receivable at acquisition
    
    $
    84,078
    
    
    $
    14,526
    
    
    $
    98,604Cash flows expected to be collected at acquisition
    
    
    42,925
    
    
    
    11,897
    
    
    
    54,822Basis in acquired loans at acquisition
    
    
    42,925
    
    
    
    11,897
    
    
    
    54,822Carrying value of loans at March 31, 2006
    
    
    7,826
    
    
    
    8,422
    
    
    
    16,248
  Note 14   Balance Sheet Restructuring and Deleveraging
  17




---



##### Table of Contents



Note 15   Other Noninterest Income
  Successor
    
    
    Successor
    
    
    PredecessorThree Months Ended
    
    
    March 1, 2005 to
    
    
    January 1, 2005 toMarch 31, 2006
    
    
    March 31, 2005
    
    
    February 28, 2005Loan fee income
    
    $
    12,392
    
    
    $
    2,372
    
    
    $
    4,549Mortgage banking services income
    
    
    1,235
    
    
    
    404
    
    
    
    923Covered call premiums
    
    
    922
    
    
    
    1,658
    
    
    
    1,412Venture capital gains (write-downs)
    
    
    508
    
    
    
    (106
    )
    
    
    (297
    )Income on restricted stock
    
    
    4,583
    
    
    
    908
    
    
    
    1,487Miscellaneous income
    
    
    4,557
    
    
    
    954
    
    
    
    1,030Total
    
    $
    24,197
    
    
    $
    6,190
    
    
    $
    9,104
  Successor
    
    
    Successor
    
    
    PredecessorThree Months Ended
    
    
    March 1, 2005 to
    
    
    January 1, 2005 toMarch 31, 2006
    
    
    March 31, 2005
    
    
    February 28, 2005Mortgage banking services incomeGains on sales and fee income
    
    $
    643
    
    
    $
    452
    
    
    $
    460Net effect of derivatives
    
    
    62
    
    
    
    (247
    )
    
    
    159705
    
    
    
    205
    
    
    
    619Residential mortgage servicing income
    
    
    530
    
    
    
    199
    
    
    
    304$
    1,235
    
    
    $
    404
    
    
    $
    923
 Note
16  Pension and Other Postretirement Plans
  18




---



##### Table of Contents



Successor
    
    
    Successor
    
    
    PredecessorThree Months Ended
    
    
    March 1, 2005 to
    
    
    January 1, 2005 toComponents of net periodic benefit cost:
    
    March 31, 2006
    
    
    March 31, 2005
    
    
    February 28, 2005Qualified PensionService cost
    
    $
    4,475
    
    
    $
    1,184
    
    
    $
    2,369Interest cost
    
    
    4,270
    
    
    
    1,126
    
    
    
    2,253Expected (gain) on plan assets
    
    
    (7,185
    )
    
    
    (1,836
    )
    
    
    (3,672
    )Recognized actuarial loss
    
    
    
    
    
    
    
    
    
    
    809Net amortization and deferral
    
    
    
    
    
    
    
    
    
    
    (38
    )Net periodic benefit cost
    
    $
    1,560
    
    
    $
    474
    
    
    $
    1,721Nonqualified PensionService cost
    
    $
    236
    
    
    $
    72
    
    
    $
    106Interest cost
    
    
    669
    
    
    
    188
    
    
    
    305Amortization of prior service costs
    
    
    312
    
    
    
    132
    
    
    
    Recognized actuarial loss
    
    
    
    
    
    
    
    
    
    
    84Net amortization and deferral
    
    
    
    
    
    
    
    
    
    
    41Net periodic benefit cost
    
    $
    1,217
    
    
    $
    392
    
    
    $
    536Other Postretirement BenefitsService cost
    
    $
    50
    
    
    $
    19
    
    
    $
    37Interest cost
    
    
    339
    
    
    
    107
    
    
    
    214Recognized actuarial loss
    
    
    (64
    )
    
    
    
    
    
    
    36Net amortization and deferral
    
    
    
    
    
    
    
    
    
    
    89Net periodic benefit cost
    
    $
    325
    
    
    $
    126
    
    
    $
    376
  Note
17  Merger and Restructuring Costs
  19




---



##### Table of Contents



Successor
    
    
    Successor
    
    
    PredecessorThree Months Ended
    
    
    March 1, 2005 to
    
    
    January 1, 2005 toMarch 31, 2006
    
    
    March 31, 2005
    
    
    February 28, 2005Restructuring CostsPersonnel costs
    
    $
    10,623
    
    
    $
    
    
    
    $
    Hudson United Bancorp Merger ChargesPersonnel costs
    
    
    69
    
    
    
    
    
    
    
    Systems conversion and integration/customer
communications
    
    
    5,441
    
    
    
    
    
    
    
    Other costs
    
    
    1,786
    
    
    
    
    
    
    
    7,296
    
    
    
    
    
    
    
    The Toronto-Dominion Bank Merger ChargesTransaction costs
    
    
    35
    
    
    
    1,503
    
    
    
    18,148Personnel costs
    
    
    1,424
    
    
    
    890
    
    
    
    2,285Name change
    
    
    293
    
    
    
    24
    
    
    
    2,061Other costs
    
    
    
    
    
    
    41
    
    
    
    2,9411,752
    
    
    
    2,458
    
    
    
    25,435BostonFed Bancorp, Inc. Merger ChargesPersonnel costs
    
    
    12
    
    
    
    451
    
    
    
    673Systems conversion and integration/customer
communications
    
    
    
    
    
    
    358
    
    
    
    987Other costs
    
    
    12
    
    
    
    374
    
    
    
    21124
    
    
    
    1,183
    
    
    
    1,871Other Merger ChargesAmerican Financial Holdings, Inc. Merger Charges
    
    
    7
    
    
    
    162
    
    
    
    117First & Ocean Bancorp Merger Charges
    
    
    
    
    
    
    1
    
    
    
    1Foxborough Savings Bank Merger Charges
    
    
    
    
    
    
    9
    
    
    
    11CCBT Financial Companies, Inc. Merger Charges
    
    
    116
    
    
    
    114
    
    
    
    (171
    )123
    
    
    
    286
    
    
    
    (42
    )Total Merger and Restructuring Costs
    
    $
    19,818
    
    
    $
    3,927
    
    
    $
    27,264
  Purchase
    
    
    
    
    
    
    
    
    
    
    Non-cashAccounting
    
    
    Merger and
    
    
    
    
    
    
    Write DownsBalance
    
    
    Adjustments
    
    
    Restructuring
    
    
    Cash
    
    
    and Other
    
    
    Balance12/31/05
    
    
    at Acquisition
    
    
    Costs
    
    
    Payments
    
    
    Adjustments
    
    
    03/31/06Restructuring costs
    
    $
    
    
    
    $
    
    
    
    $
    10,623
    
    
    $
    
    
    
    $
    
    
    
    $
    10,623Hudson United Bancorp Merger
    
    
    
    
    
    
    46,324
    
    
    
    7,296
    
    
    
    (16,743
    )
    
    
    
    
    
    
    36,877The Toronto-Dominion Bank Merger
    
    
    459
    
    
    
    
    
    
    
    1,752
    
    
    
    (1,846
    )
    
    
    
    
    
    
    365BostonFed Bancorp, Inc. Merger
    
    
    1,935
    
    
    
    
    
    
    
    24
    
    
    
    (101
    )
    
    
    
    
    
    
    1,858CCBT Financial Companies, Inc.
Merger
    
    
    
    
    
    
    
    
    
    
    116
    
    
    
    (116
    )
    
    
    
    
    
    
    American Financial Holdings,
Inc. Merger
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    (7
    )
    
    
    
    
    
    
    Total
    
    $
    2,394
    
    
    $
    46,324
    
    
    $
    19,818
    
    
    ($
    18,813
    )
    
    $
    
    
    
    $
    49,723
 Note
18  Earnings Per Share
  20




---



##### Table of Contents



Successor
    
    Successor
    
    PredecessorThree Months Ended
    
    March 1, 2005 to
    
    January 1, 2005 to(in actual shares)
    
    March 31, 2006
    
    March 31, 2005
    
    February 28,2005Antidilutive effect of
options outstanding
    
    
    2,061,194
    
    
    
    45,254
    
    
    
    
 Note
19  Related Party Transactions
   March 31, 2006Cash and due from banks
    
    $
    4,608Other assets:Positive fair value marks on derivatives
    
    
    16,956Accounts receivable
    
    
    1,574Deferred tax asset
    
    
    1,664Deferred debt issuance costs
    
    
    1,086Interest-bearing deposits from The Toronto-Dominion Bank
    
    
    15,146Other liabilities:Negative fair value marks on derivatives
    
    
    1,930Accumulated other comprehensive income
    
    
    (5,635
    )Broker commissions paid to TD Securities
for common stock repurchases
    
    
    (170
    )Off-balance sheet transactions (notional amounts):Interest rate swaps
    
    
    715,743Foreign exchange forward contracts
    
    
    121,303
    21




---



##### Table of Contents



Note
20  Subsequent Event
    22




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##### Table of Contents



Item 2.
 TD BANKNORTH INC. AND SUBSIDIARIES
 
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
 General
  th
 Executive Overview
 
    
    Diluted earnings per share were $0.36 per share for the three months ended March 31,
2006 as compared to $0.18 per share for the comparable period in 2005. This increase was
primarily attributable to reduced merger and restructuring charges ($0.06 per diluted
share) and reduced losses associated with deleveraging and balance sheet restructuring
programs ($0.22 per diluted share).
    
    We completed the acquisition of Hudson United Bancorp (Hudson) on January 31, 2006.
Acquisitions continue to be an important part of our long-term strategy for growth.
    
    Merger and restructuring costs, including those associated with the acquisition of a
majority of our outstanding shares by The Toronto-Dominion Bank on March 1, 2005, amounted
to $0.13 per share in the first quarter of 2005, as compared to $0.07 per share for the
first quarter of 2006.
    
    In the first quarter of 2006, we implemented a balance sheet restructuring program
whereby we sold $2.5 billion of our mortgage-backed securities and used the proceeds to
purchase shorter-duration investments. These mortgage-backed securities were recorded at
fair value at December 31, 2005. In addition, we sold $2.5 billion of securities acquired
from Hudson in the first quarter of 2006 and used the proceeds to repay a similar amount of
borrowings. These transactions will not have a material effect on our net income in 2006,
and will reduce our interest rate sensitivity. In February 2005, we implemented a
deleveraging program realizing a $41.6 million after-tax loss.
    
    In the first quarter of 2006, we incurred a restructuring charge of $10.6 million ($8.9
million after-tax) as a result of a management restructuring which was implemented in
connection with our acquisition of Hudson.
    
    During February 2006, we repurchased 8.5 million shares of our common stock at an average cost of $30.06 per share.
 23




---



##### Table of Contents




    
    Our total risk-based capital ratio was 11.07% at March 31, 2006 compared to 11.73% at December 31, 2005.
    
    Our tangible equity to tangible assets ratio was 4.80% at March 31, 2006 compared to 4.91% at March 31, 2005.
    
    In April 2006, Standard & Poors Services raised its counterparty credit rating on us to
A-1 from BBB and the counterparty credit ratings on related entities, including TD
Banknorth, NA to A/A-1 from BBB+/A-2.
 Acquisition by The Toronto-Dominion Bank
     24




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##### Table of Contents



Table 1  Selected Income Data
 Successor
    
    
    Combined
    
    
    Successor
    
    
    PredecessorThree Months Ended
    
    
    Three Months Ended
    
    
    March 1, 2005 to
    
    
    January 1, 2005 toMarch 31, 2006
    
    
    March 31, 2005
    
    
    March 31, 2005
    
    
    February 28, 2005Interest and dividend income:Interest and fees on loans and leases
    
    $
    378,698
    
    
    $
    272,613
    
    
    $
    95,664
    
    
    $
    176,949Interest and dividends on securities
    
    
    77,801
    
    
    $
    71,031
    
    
    
    19,848
    
    
    
    51,183Total interest and dividend income
    
    
    456,499
    
    
    
    343,644
    
    
    
    115,512
    
    
    
    228,132Interest expense:Interest on deposits
    
    
    106,682
    
    
    
    45,444
    
    
    
    14,750
    
    
    
    30,694Interest on borrowed funds
    
    
    67,373
    
    
    
    45,468
    
    
    
    12,814
    
    
    
    32,654Total interest expense
    
    
    174,055
    
    
    
    90,912
    
    
    
    27,564
    
    
    
    63,348Net interest income
    
    
    282,444
    
    
    
    252,732
    
    
    
    87,948
    
    
    
    164,784Provision for loan and lease losses
    
    
    6,900
    
    
    
    2,069
    
    
    
    1,000
    
    
    
    1,069Net interest income after provision
for loan and lease losses
    
    
    275,544
    
    
    
    250,663
    
    
    
    86,948
    
    
    
    163,715Noninterest income:Deposit services
    
    
    38,479
    
    
    
    28,182
    
    
    
    9,823
    
    
    
    18,359Insurance agency commissions
    
    
    15,839
    
    
    
    13,892
    
    
    
    5,640
    
    
    
    8,252Merchant and electronic banking income, net
    
    
    15,636
    
    
    
    13,114
    
    
    
    5,363
    
    
    
    7,751Wealth management services
    
    
    11,348
    
    
    
    10,504
    
    
    
    3,545
    
    
    
    6,959Bank-owned life insurance
    
    
    7,288
    
    
    
    6,098
    
    
    
    1,929
    
    
    
    4,169Investment planning services
    
    
    5,142
    
    
    
    4,689
    
    
    
    1,874
    
    
    
    2,815Net securities losses
    
    
    (90
    )
    
    
    (50,476
    )
    
    
    (3,928
    )
    
    
    (46,548
    )Loans held for sale  Lower of cost or market
adjustment
    
    
    
    
    
    
    (7,500
    )
    
    
    
    
    
    
    (7,500
    )Change in unrealized loss on derivatives
    
    
    
    
    
    
    (8,175
    )
    
    
    (8,175
    )
    
    
    Other noninterest income
    
    
    24,197
    
    
    
    15,294
    
    
    
    6,190
    
    
    
    9,104117,839
    
    
    
    25,622
    
    
    
    22,261
    
    
    
    3,361Noninterest expense:Compensation and employee benefits
    
    
    125,210
    
    
    
    100,868
    
    
    
    32,891
    
    
    
    67,977Occupancy
    
    
    24,296
    
    
    
    17,901
    
    
    
    6,490
    
    
    
    11,411Equipment
    
    
    14,884
    
    
    
    12,837
    
    
    
    4,397
    
    
    
    8,440Data processing
    
    
    15,233
    
    
    
    11,033
    
    
    
    3,800
    
    
    
    7,233Advertising and marketing
    
    
    8,191
    
    
    
    6,695
    
    
    
    2,322
    
    
    
    4,373Amortization of identifiable intangible assets
    
    
    37,666
    
    
    
    11,495
    
    
    
    9,934
    
    
    
    1,561Merger and restructuring costs
    
    
    19,818
    
    
    
    31,191
    
    
    
    3,927
    
    
    
    27,264Prepayment penalties on borrowings
    
    
    
    
    
    
    6,303
    
    
    
    3
    
    
    
    6,300Other noninterest expense
    
    
    31,738
    
    
    
    24,786
    
    
    
    8,899
    
    
    
    15,887277,036
    
    
    
    223,109
    
    
    
    72,663
    
    
    
    150,446Income before income tax expense
    
    
    116,347
    
    
    
    53,176
    
    
    
    36,546
    
    
    
    16,630Provision for income taxes
    
    
    38,799
    
    
    
    19,101
    
    
    
    12,919
    
    
    
    6,182Income from continuing operations
    
    
    77,548
    
    
    
    34,075
    
    
    
    23,627
    
    
    
    10,448Discontinued operationsLoss from discontinued operations
    
    
    (2,599
    )
    
    
    
    
    
    
    
    
    
    
    Income tax benefit
    
    
    1,257
    
    
    
    
    
    
    
    
    
    
    
    Loss from
discontinued operations, net of tax
    
    
    (1,342
    )
    
    
    
    
    
    
    
    
    
    
    Net income
    
    $
    76,206
    
    
    $
    34,075
    
    
    $
    23,627
    
    
    $
    10,448Basic earnings per shareIncome from continuing operations
    
    
    $0.37
    
    
    
    $0.19Loss from
discontinued operations, net of tax
    
    
    ($0.01
    )
    
    
    Net Income
    
    
    $0.36
    
    
    
    $0.19Diluted earnings per shareIncome from continuing operations
    
    
    $0.37
    
    
    
    $0.18Loss from
discontinued operations, net of tax
    
    
    ($0.01
    )
    
    
    Net Income
    
    
    $0.36
    
    
    
    $0.18
 Acquisitions
  25




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##### Table of Contents



Table 2  Acquisitions
 DateAcquisition
    
    Acquired
    
    Loans
    
    Deposits(in millions)
    
    (in millions)Hudson United Bancorp
    
    
    1/31/2006
    
    
    $
    5,220
    
    
    $
    6,892BostonFed Bancorp, Inc.
    
    
    1/21/2005
    
    
    $
    1,227
    
    
    $
    1,047
  Selected Quarterly Data
  26




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##### Table of Contents



Table 3  Selected Quarterly Data
 Successor
    
    
    Combined2006
    
    
    2005
    
    
    2005First
    
    
    Fourth
    
    
    Third
    
    
    Second
    
    
    FirstCondensed Income StatementInterest income
    
    
    
    
    
    $
    456,499
    
    
    $
    363,917
    
    
    $
    350,679
    
    
    $
    342,447
    
    
    $
    343,644Interest expense
    
    
    
    
    
    
    174,055
    
    
    
    120,477
    
    
    
    101,682
    
    
    
    89,819
    
    
    
    90,912Net interest income
    
    
    (A
    )
    
    
    282,444
    
    
    
    243,440
    
    
    
    248,997
    
    
    
    252,628
    
    
    
    252,732Provision for loan and lease losses
    
    
    
    
    
    
    6,900
    
    
    
    6,000
    
    
    
    5,500
    
    
    
    3,597
    
    
    
    2,069Net interest income after provision
for loan and lease losses
    
    
    
    
    
    
    275,544
    
    
    
    237,440
    
    
    
    243,497
    
    
    
    249,031
    
    
    
    250,663Noninterest income (1)
    
    
    (B
    )
    
    
    117,839
    
    
    
    60,097
    
    
    
    103,607
    
    
    
    117,272
    
    
    
    25,622Noninterest expense, excluding merger and
restructuring costs (2)
    
    
    (C
    )
    
    
    257,218
    
    
    
    210,700
    
    
    
    210,566
    
    
    
    214,965
    
    
    
    191,918Merger and restructuring costs
    
    
    (D
    )
    
    
    19,818
    
    
    
    4,957
    
    
    
    1,163
    
    
    
    5,368
    
    
    
    31,191Income before income taxes
    
    
    
    
    
    
    116,347
    
    
    
    81,880
    
    
    
    135,375
    
    
    
    145,970
    
    
    
    53,176Income tax expense
    
    
    
    
    
    
    38,799
    
    
    
    26,315
    
    
    
    46,634
    
    
    
    50,375
    
    
    
    19,101Loss from discontinued operations, net of tax
    
    
    
    
    
    
    (1,342
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    
    
    
    
    $
    76,206
    
    
    $
    55,565
    
    
    $
    88,741
    
    
    $
    95,595
    
    
    $
    34,075Weighted average shares outstanding:Basic
    
    
    
    
    
    
    209,690
    
    
    
    173,745
    
    
    
    173,661
    
    
    
    173,428
    
    
    
    183,393Diluted
    
    
    
    
    
    
    210,444
    
    
    
    174,427
    
    
    
    174,398
    
    
    
    174,261
    
    
    
    184,890Basic earnings per shareIncome from continuing operations
    
    
    
    
    
    $
    0.37
    
    
    $
    0.32
    
    
    $
    0.51
    
    
    $
    0.55
    
    
    $
    0.19Loss from discontinued operations, net
    
    
    
    
    (
    $
    0.01
    )
    
    $
    0.00
    
    
    $
    0.00
    
    
    $
    0.00
    
    
    $
    0.00Net income
    
    
    
    
    
    $
    0.36
    
    
    $
    0.32
    
    
    $
    0.51
    
    
    $
    0.55
    
    
    $
    0.19Diluted earnings per shareIncome from continuing operations
    
    
    
    
    
    $
    0.37
    
    
    $
    0.32
    
    
    $
    0.51
    
    
    $
    0.55
    
    
    $
    0.18Loss from discontinued operations, net
    
    
    
    
    (
    $
    0.01
    )
    
    $
    0.00
    
    
    $
    0.00
    
    
    $
    0.00
    
    
    $
    0.00Net income
    
    
    
    
    
    $
    0.36
    
    
    $
    0.32
    
    
    $
    0.51
    
    
    $
    0.55
    
    
    $
    0.18Financial RatiosReturn on average assets (3)
    
    
    
    
    
    
    0.79
    %
    
    
    0.69
    %
    
    
    1.11
    %
    
    
    1.20
    %
    
    
    0.45
    %Return on average equity (3)
    
    
    
    
    
    
    4.07
    %
    
    
    3.42
    %
    
    
    5.44
    %
    
    
    5.98
    %
    
    
    3.09
    %Net interest margin (fully-taxable equivalent) (3)
    
    
    
    
    
    
    3.83
    %
    
    
    3.96
    %
    
    
    4.09
    %
    
    
    4.12
    %
    
    
    3.96
    %Noninterest income as a percent of total income (4)
    
    
    
    
    
    
    29.45
    %
    
    
    19.80
    %
    
    
    29.38
    %
    
    
    31.70
    %
    
    
    9.20
    %Efficiency ratio (5)
    
    
    
    
    
    
    69.21
    %
    
    
    71.05
    %
    
    
    60.05
    %
    
    
    59.57
    %
    
    
    80.15
    %Per Share DataBook value per share
    
    
    
    
    
    $
    35.80
    
    
    $
    37.34
    
    
    $
    37.23
    
    
    $
    37.33
    
    
    $
    36.65Dividends per share
    
    
    
    
    
    $
    0.22
    
    
    $
    0.22
    
    
    $
    0.22
    
    
    $
    0.20
    
    
    $
    0.20
 
 (1)
    
    Noninterest income included net securities losses of $45 million and $50.0 million in the fourth and first quarters of 2005, respectively,
and lower of cost or market adjustments of $7.5 million in the first quarter of 2005 relating to the reclassification of $519 million of
residential loans from held in portfolio to held for sale. These items were incurred as part of balance sheet restructuring/deleveraging programs. Noninterest income also included a change in unrealized loss on derivatives of $8.2 million in March 2005.(2)
    
    Noninterest expense included prepayment penalties on borrowings of $6.3 million in the first quarter of 2005
which were incurred as part of a balance sheet deleveraging program implemented during this period.(3)
    
    Annualized.(4)
    
    Represents noninterest income as a percentage of net interest income plus noninterest income. Noninterest income as a percent of total
income is calculated as (B) divided by (A+B).(5)
    
    Represents noninterest expense as a percentage of net interest income and noninterest income. Efficiency ratio is calculated as (C+D) divided
by (A+B). Net Interest Income
   
    
    the acquisition of Hudson on January 31, 2006;
 27




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##### Table of Contents




    
    changes in the composition of earning assets resulting from deleveraging and restructuring
programs in 2005 and 2006 (loans comprised 79% of average earning assets during the first
quarter of 2006 compared to 76% during the first quarter of 2005);
    
    changes in the composition of interest-bearing liabilities resulting from deleveraging
programs (deposits comprised 76% of average interest-bearing liabilities during the first
quarter of 2006 compared to 72% during the first quarter of 2005) and
    
    an increase in the cost of funds due to rising short-term rates and competitive pricing.
   1 4
  28




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##### Table of Contents



Table 4  Average Balances, Yields and Rates
 Successor
    
    
    Combined2006 First Quarter
    
    
    2005 First QuarterYield/
    
    
    
    
    
    
    
    
    
    
    Yield/Average Balance
    
    
    Interest
    
    
    Rate (1)
    
    
    Average Balance
    
    
    Interest
    
    
    Rate (1)Loans and leases (2):Residential real estate mortgages
    
    $
    2,916,912
    
    
    $
    40,270
    
    
    
    5.52
    %
    
    $
    3,806,469
    
    
    $
    48,796
    
    
    
    5.13
    %Commercial real estate mortgages
    
    
    7,996,632
    
    
    
    132,202
    
    
    
    6.70
    %
    
    
    6,447,894
    
    
    
    94,777
    
    
    
    5.96
    %Commercial business loans and leases
    
    
    5,722,504
    
    
    
    94,361
    
    
    
    6.71
    %
    
    
    4,018,664
    
    
    
    55,996
    
    
    
    5.65
    %Consumer loans and leases
    
    
    6,908,585
    
    
    
    105,468
    
    
    
    6.19
    %
    
    
    5,501,291
    
    
    
    74,238
    
    
    
    5.47
    %Credit card loans
    
    
    243,287
    
    
    
    7,843
    
    
    
    13.07
    %
    
    
    
    
    
    
    
    
    
    
    Total loans and leases
    
    
    23,787,920
    
    
    
    380,144
    
    
    
    6.48
    %
    
    
    19,774,318
    
    
    
    273,807
    
    
    
    5.60
    %Investment securities (3)
    
    
    5,634,703
    
    
    
    71,306
    
    
    
    5.06
    %
    
    
    6,107,346
    
    
    
    71,496
    
    
    
    4.68
    %Securities purchased under agreements to resell
    
    
    585,556
    
    
    
    7,197
    
    
    
    4.92
    %
    
    
    
    
    
    
    
    
    
    
    Federal funds sold and other short-term investments
    
    
    23,813
    
    
    
    140
    
    
    
    2.39
    %
    
    
    11,427
    
    
    
    83
    
    
    
    2.96
    %Total earning assets
    
    
    30,031,992
    
    
    
    458,787
    
    
    
    6.18
    %
    
    
    25,893,091
    
    
    
    345,386
    
    
    
    5.38
    %Bank-owned life insurance
    
    
    697,668
    
    
    
    
    
    
    
    
    
    
    
    545,954Goodwill
    
    
    5,509,988
    
    
    
    
    
    
    
    
    
    
    
    2,517,379Identifiable intangible assets
    
    
    801,665
    
    
    
    
    
    
    
    
    
    
    
    301,197Other noninterest-earning assets
    
    
    1,944,528
    
    
    
    
    
    
    
    
    
    
    
    1,447,883Total assets
    
    $
    38,985,841
    
    
    
    
    
    
    
    
    
    
    $
    30,705,504Interest-bearing deposits:Regular savings
    
    $
    3,708,031
    
    
    
    9,266
    
    
    
    1.01
    %
    
    $
    2,643,204
    
    
    
    1,881
    
    
    
    0.29
    %NOW and money market accounts
    
    
    9,172,611
    
    
    
    48,613
    
    
    
    2.15
    %
    
    
    8,088,136
    
    
    
    20,962
    
    
    
    1.05
    %Certificates of deposit
    
    
    6,226,033
    
    
    
    46,456
    
    
    
    3.03
    %
    
    
    4,698,450
    
    
    
    21,967
    
    
    
    1.90
    %Brokered deposits
    
    
    211,689
    
    
    
    2,347
    
    
    
    4.50
    %
    
    
    65,860
    
    
    
    634
    
    
    
    3.90
    %Total interest-bearing deposits
    
    
    19,318,364
    
    
    
    106,682
    
    
    
    2.24
    %
    
    
    15,495,650
    
    
    
    45,444
    
    
    
    1.19
    %Borrowed funds
    
    
    6,250,112
    
    
    
    67,373
    
    
    
    4.36
    %
    
    
    6,154,440
    
    
    
    45,468
    
    
    
    2.99
    %Total interest-bearing liabilities
    
    
    25,568,476
    
    
    
    174,055
    
    
    
    2.76
    %
    
    
    21,650,090
    
    
    
    90,912
    
    
    
    1.70
    %Non-interest bearing deposits
    
    
    5,166,252
    
    
    
    
    
    
    
    
    
    
    
    4,221,735Deferred tax liability related to
identifiable intangible assets
    
    
    315,498
    
    
    
    
    
    
    
    
    
    
    
    105,419Other liabilities
    
    
    334,445
    
    
    
    
    
    
    
    
    
    
    
    250,610Shareholders equity
    
    
    7,601,170
    
    
    
    
    
    
    
    
    
    
    
    4,477,650Total liabilities and shareholders equity
    
    $
    38,985,841
    
    
    
    
    
    
    
    
    
    
    $
    30,705,504Net earning assets
    
    $
    4,463,516
    
    
    
    
    
    
    
    
    
    
    $
    4,243,001Net interest income (fully-taxable equivalent)
    
    
    
    
    
    
    284,732
    
    
    
    
    
    
    
    
    
    
    
    254,474Less: fully-taxable equivalent adjustments
    
    
    
    
    
    
    (2,288
    )
    
    
    
    
    
    
    
    
    
    
    (1,742
    )Net interest income
    
    
    
    
    
    $
    282,444
    
    
    
    
    
    
    
    
    
    
    $
    252,732Net interest rate spread (fully-taxable equivalent)
    
    
    
    
    
    
    
    
    
    
    3.42
    %
    
    
    
    
    
    
    
    
    
    
    3.68
    %Net interest margin (fully-taxable equivalent)
    
    
    
    
    
    
    
    
    
    
    3.83
    %
    
    
    
    
    
    
    
    
    
    
    3.96
    %
 
 (1)
    
    Annualized.(2)
    
    Loans and leases include loans held for sale.(3)
    
    Includes securities available for sale and held to maturity. 29




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##### Table of Contents



Table 5   Rate /Volume Analysis
 Three Months EndedMarch 31, 2006 (Successor) vs. Three Months EndedMarch 31, 2005 (Combined)Increase (decrease) due toTotalVolume (1)
    
    Rate
    
    ChangeInterest income:Loans and leases
    
    $
    59,935
    
    
    $
    46,402
    
    
    $
    106,337Investment securities
    
    
    (14,775
    )
    
    
    14,585
    
    
    
    (190
    )Securities purchased under agreements to
resell
    
    
    7,197
    
    
    
    
    
    
    
    7,197Federal funds sold and
other short-term investments
    
    
    69
    
    
    
    (12
    )
    
    
    57Total interest income
    
    
    52,426
    
    
    
    60,975
    
    
    
    113,401Interest expense:Interest-bearing deposits:Regular savings
    
    
    1,030
    
    
    
    6,355
    
    
    
    7,385NOW and money market accounts
    
    
    3,138
    
    
    
    24,513
    
    
    
    27,651Certificates of deposit
    
    
    8,657
    
    
    
    15,832
    
    
    
    24,489Brokered deposits
    
    
    1,602
    
    
    
    111
    
    
    
    1,713Total interest-bearing deposits
    
    
    14,427
    
    
    
    46,811
    
    
    
    61,238Borrowed funds
    
    
    718
    
    
    
    21,187
    
    
    
    21,905Total interest expense
    
    
    15,145
    
    
    
    67,998
    
    
    
    83,143Net interest income (fully taxable equivalent)
    
    $
    37,281
    
    
    ($
    7,023
    )
    
    $
    30,258
 
 (1)
    
    Volume increases include the effects of the acquisition of Hudson United
Bancorp on January 31, 2006 and BostonFed Bancorp, Inc. on January 21, 2005.  30




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##### Table of Contents



Table 6  Analysis of Net Interest Income
 Successor
    
    
    CombinedThree Months Ended
    
    
    Three Months EndedMarch 31, 2006
    
    
    March 31, 2005
    
    
    ChangeComponents of net interest incomeIncome on earning assets (fully-taxable equivalent)
    
    $
    458,787
    
    
    $
    345,386
    
    
    $
    113,401Expense on interest-bearing liabilities
    
    
    174,055
    
    
    
    90,912
    
    
    
    83,143Net interest income (fully-taxable equivalent)
    
    
    284,732
    
    
    
    254,474
    
    
    
    30,258Less: fully-taxable equivalent adjustments
    
    
    (2,288
    )
    
    
    (1,742
    )
    
    
    (546
    )Net interest income, as reported
    
    $
    282,444
    
    
    $
    252,732
    
    
    $
    29,712Average balancesLoans and leases
    
    $
    23,787,920
    
    
    $
    19,774,318
    
    
    $
    4,013,602Investment securities
    
    
    5,634,703
    
    
    
    6,107,346
    
    
    
    (472,643
    )Securities purchased under agreements to resell
    
    
    585,556
    
    
    
    
    
    
    
    585,556Federal funds sold and other short-term investments
    
    
    23,813
    
    
    
    11,427
    
    
    
    12,386Total earning assets
    
    
    30,031,992
    
    
    
    25,893,091
    
    
    
    4,138,901Total interest-bearing liabilities
    
    
    25,568,476
    
    
    
    21,650,090
    
    
    
    3,918,386Net earning assets
    
    $
    4,463,516
    
    
    $
    4,243,001
    
    
    $
    220,515Average yields and rates paidEarning assets yield (fully-taxable equivalent)
    
    
    6.18
    %
    
    
    5.38
    %
    
    
    0.80
    %Rate paid on interest-bearing liabilities
    
    
    2.76
    %
    
    
    1.70
    %
    
    
    1.06
    %Net interest rate spread (fully-taxable equivalent)
    
    
    3.42
    %
    
    
    3.68
    %
    
    
    (0.26
    %)Net interest margin (fully-taxable equivalent)
    
    
    3.83
    %
    
    
    3.96
    %
    
    
    (0.13
    %)
 Provision and Allowance for Loan and Lease Losses
   Noninterest Income
   31




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##### Table of Contents



Table 7  Noninterest Income
 Successor
    
    
    CombinedThree Months Ended
    
    
    Three Months Ended
    
    

ChangeMarch 31, 2006
    
    
    March 31, 2005
    
    
    Amount
    
    
    PercentNoninterest income:Deposit services
    
    $
    38,479
    
    
    $
    28,182
    
    
    $
    10,297
    
    
    
    37
    %Insurance agency commissions
    
    
    15,839
    
    
    
    13,892
    
    
    
    1,947
    
    
    
    14
    %Merchant and electronic banking income, net
    
    
    15,636
    
    
    
    13,114
    
    
    
    2,522
    
    
    
    19
    %Wealth management services
    
    
    11,348
    
    
    
    10,504
    
    
    
    844
    
    
    
    8
    %Bank-owned life insurance
    
    
    7,288
    
    
    
    6,098
    
    
    
    1,190
    
    
    
    20
    %Investment planning services
    
    
    5,142
    
    
    
    4,689
    
    
    
    453
    
    
    
    10
    %Net securities gains (losses)
    
    
    (90
    )
    
    
    (50,476
    )
    
    
    50,386
    
    
    
    N/MLoans held for sale  lower of cost or
market adjustment
    
    
    
    
    
    
    (7,500
    )
    
    
    7,500
    
    
    
    N/MChange in unrealized loss on derivatives
    
    
    
    
    
    
    (8,175
    )
    
    
    8,175
    
    
    
    N/MOther noninterest income:Loan fee income
    
    
    12,392
    
    
    
    6,921
    
    
    
    5,471
    
    
    
    79
    %Covered call option premiums
    
    
    922
    
    
    
    3,070
    
    
    
    (2,148
    )
    
    
    (70
    %)Mortgage banking services income
    
    
    1,235
    
    
    
    1,327
    
    
    
    (92
    )
    
    
    (7
    %)Venture capital income (write-downs)
    
    
    508
    
    
    
    (403
    )
    
    
    911
    
    
    
    N/MIncome on restricted stock
    
    
    4,583
    
    
    
    2,395
    
    
    
    2,188
    
    
    
    91
    %Miscellaneous income
    
    
    4,557
    
    
    
    1,984
    
    
    
    2,573
    
    
    
    130
    %Total other noninterest income
    
    
    24,197
    
    
    
    15,294
    
    
    
    8,903
    
    
    
    58
    %Total noninterest income
    
    $
    117,839
    
    
    $
    25,622
    
    
    $
    92,217
    
    
    
    360
    %
 
 N/M   not meaningful      32




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##### Table of Contents



Noninterest Expense
   33




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##### Table of Contents



Table 8  Noninterest Expense
 Successor
    
    
    CombinedThree Months Ended
    
    
    Three Months Ended
    
    
    ChangeMarch 31, 2006
    
    
    March 31, 2005
    
    
    Amount
    
    
    PercentNoninterest expense:Compensation and employee benefits
    
    $
    125,210
    
    
    $
    100,868
    
    
    $
    24,342
    
    
    
    24
    %Occupancy
    
    
    24,296
    
    
    
    17,901
    
    
    
    6,395
    
    
    
    36
    %Equipment
    
    
    14,884
    
    
    
    12,837
    
    
    
    2,047
    
    
    
    16
    %Data processing
    
    
    15,233
    
    
    
    11,033
    
    
    
    4,200
    
    
    
    38
    %Advertising and marketing
    
    
    8,191
    
    
    
    6,695
    
    
    
    1,496
    
    
    
    22
    %Amortization of identifiable
intangible assets
    
    
    37,666
    
    
    
    11,495
    
    
    
    26,171
    
    
    
    228
    %Merger and restructuring costs
    
    
    19,818
    
    
    
    31,191
    
    
    
    (11,373
    )
    
    
    (36
    %)Prepayment penalties on borrowings
    
    
    
    
    
    
    6,303
    
    
    
    (6,303
    )
    
    
    N/MOther noninterest expense:Professional fees
    
    
    5,509
    
    
    
    5,183
    
    
    
    326
    
    
    
    6
    %Telephone
    
    
    3,932
    
    
    
    3,697
    
    
    
    235
    
    
    
    6
    %Office supplies
    
    
    3,061
    
    
    
    2,579
    
    
    
    482
    
    
    
    19
    %Postage and freight
    
    
    3,671
    
    
    
    2,874
    
    
    
    797
    
    
    
    28
    %Courier
    
    
    2,404
    
    
    
    1,528
    
    
    
    876
    
    
    
    57
    %Miscellaneous loan costs
    
    
    1,205
    
    
    
    1,285
    
    
    
    (80
    )
    
    
    (6
    %)Deposits and other assessments
    
    
    1,241
    
    
    
    1,076
    
    
    
    165
    
    
    
    15
    %Miscellaneous
    
    
    10,715
    
    
    
    6,564
    
    
    
    4,151
    
    
    
    63
    %Total other noninterest expense
    
    
    31,738
    
    
    
    24,786
    
    
    
    6,952
    
    
    
    28
    %Total noninterest expense
    
    $
    277,036
    
    
    $
    223,109
    
    
    $
    53,927
    
    
    
    24
    %
 
 N/M  not meaningful     34




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##### Table of Contents



Discontinued Operations
  Taxes
   Comprehensive Income
  35




---



##### Table of Contents



FINANCIAL CONDITION
   Securities Purchased under Agreements to Resell
  Securities
   Loans and Leases
  36




---



##### Table of Contents



Deposits
   37




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##### Table of Contents



Other Funding Sources
       38




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##### Table of Contents



Table 9   Subordinated Debt
 Issuance
    
    Balance at
    
    
    Interest
    
    
    MaturityDate
    
    3/31/2006
    
    
    Rate
    
    
    DateSeptember 20, 2005
    
    $
    231,164
    (1)
    
    
    4.64
    %
    
    
    9/20/2022May 6, 2002
    
    
    218,572
    
    
    
    7.00
    %
    
    
    5/6/2012June 22, 2001
    
    
    223,969
    
    
    
    7.63
    %
    
    
    6/15/2011September 1, 1996
    
    
    25,163
    
    
    
    8.20
    %
    
    
    9/1/2006$
    698,868
 
 (1)
    
    Issued Can$270 million and are unconditionally guaranteed by The Toronto-Dominion Bank.  Off-Balance Sheet Arrangements
    Table 10  Contractual Obligations and Other Commitments  Successor
 Payments Due By PeriodLess than
    
    
    1 - 3
    
    
    4 -5
    
    
    After 5Contractual Obligations (1)
    
    Total
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    YearsLong-term debt
    
    $
    1,638,792
    
    
    $
    166,900
    
    
    $
    175,485
    
    
    $
    88,050
    
    
    $
    1,208,357Capital lease obligations
    
    
    6,304
    
    
    
    149
    
    
    
    1,055
    
    
    
    1,468
    
    
    
    3,632Total long-term debt
    
    
    1,645,096
    
    
    
    167,049
    
    
    
    176,540
    
    
    
    89,518
    
    
    
    1,211,989Operating lease obligations
    
    
    207,509
    
    
    
    40,913
    
    
    
    65,949
    
    
    
    43,569
    
    
    
    57,078Pension plan contribution (2)
    
    
    30,311
    
    
    
    30,311
    
    
    
    
    
    
    
    
    
    
    
    Other
benefit plan payments 
estimated
    
    
    61,289
    
    
    
    4,581
    
    
    
    11,130
    
    
    
    19,099
    
    
    
    26,479Other vendor obligations (3)
    
    
    81,641
    
    
    
    12,470
    
    
    
    8,595
    
    
    
    6,565
    
    
    
    54,011Total contractual obligations
    
    $
    2,025,846
    
    
    $
    255,324
    
    
    $
    262,214
    
    
    $
    158,751
    
    
    $
    1,349,557
 
 (1)
    
    Other liabilities which are short term in nature are not included in this table.(2)
    
    Funding requirements for pension benefits after 2006 are excluded due to the significant variability in
the assumptions required to project the timing of future cash contributions.(3)
    
    Includes our commitment for the naming rights for the TD Banknorth Garden. 39




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##### Table of Contents



Total
    
    

Amount
of Commitment Expiration  Per PeriodAmounts
    
    
    Less than
    
    
    1 - 3
    
    
    4 -5
    
    
    After 5Other commitments
    
    Committed
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    YearsUnused portions on lines of
credit
    
    $
    8,191,025
    
    
    $
    3,207,726
    
    
    $
    862,203
    
    
    $
    244,229
    
    
    $
    3,876,867Standby letters of credit
    
    
    676,908
    
    
    
    125,829
    
    
    
    145,656
    
    
    
    127,480
    
    
    
    277,943Commercial letters of credit
    
    
    54,002
    
    
    
    36,286
    
    
    
    11,254
    
    
    
    2,550
    
    
    
    3,912Commitments to originate loans
    
    
    2,166,663
    
    
    
    1,381,101
    
    
    
    394,335
    
    
    
    111,699
    
    
    
    279,528Other commitments
    
    
    245,716
    
    
    
    12,194
    
    
    
    11,521
    
    
    
    3,287
    
    
    
    218,714Total commitments
    
    $
    11,334,314
    
    
    $
    4,763,136
    
    
    $
    1,424,969
    
    
    $
    489,245
    
    
    $
    4,656,964
 Total
    
    

Amount
of Commitment Expiration  Per PeriodAmounts
    
    
    Less than
    
    
    1 - 3
    
    
    4 -5
    
    
    After 5Derivative Financial Instruments
    
    Committed
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    YearsInterest rate swaps (notional amount):Commercial loan swap program:Interest rate swaps with commercial
borrowers (1)
    
    $
    1,403,402
    
    
    $
    13,250
    
    
    $
    110,890
    
    
    $
    248,006
    
    
    $
    1,031,256Interest rate swaps with dealers (2)
    
    
    1,403,402
    
    
    
    13,250
    
    
    
    110,890
    
    
    
    248,006
    
    
    
    1,031,256Interest rate caps with commercial
borrowers
    
    
    50,306
    
    
    
    
    
    
    
    24,980
    
    
    
    5,000
    
    
    
    20,326Interest rate caps with dealers
    
    
    50,306
    
    
    
    
    
    
    
    24,980
    
    
    
    5,000
    
    
    
    20,326Interest rate swaps on brokered deposits
    
    
    220,000
    
    
    
    
    
    
    
    45,000
    
    
    
    30,000
    
    
    
    145,000Cross currency swap (USD) (3)
    
    
    228,620
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    228,620Total return swap (4)
    
    
    26,425
    
    
    
    
    
    
    
    26,425
    
    
    
    
    
    
    
    Forward commitments to sell loans
    
    
    49,031
    
    
    
    49,031
    
    
    
    
    
    
    
    
    
    
    
    Foreign currency rate contracts: (5)Forward contracts with customers
    
    
    10,950
    
    
    
    10,950
    
    
    
    
    
    
    
    
    
    
    
    Forward contracts with dealers
    
    
    10,950
    
    
    
    10,950
    
    
    
    
    
    
    
    
    
    
    
    Foreign exchange options to purchase
    
    
    110,302
    
    
    
    53,319
    
    
    
    52,457
    
    
    
    4,526
    
    
    
    Foreign exchange options to sell
    
    
    110,302
    
    
    
    53,366
    
    
    
    52,410
    
    
    
    4,526Rate-locked loan commitments
    
    
    20,669
    
    
    
    20,669
    
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    Swaps with commercial loan customers (TD Banknorth receives fixed, pays variable).(2)
    
    Swaps with dealers (TD Banknorth pays fixed, receives variable), which offset the interest rate
swaps with commercial borrowers.(3)
    
    Swap on subordinated debt issued in Canadian dollars in September 2005.(4)
    
    See Derivatives Instruments  Designated Hedges below.(5)
    
    Forward contracts for customer accommodations. Shareholders Equity
   40




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##### Table of Contents



RISK MANAGEMENT
   CREDIT RISK MANAGEMENT
 General
   41




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##### Table of Contents



Table 11  Composition of Loans and Leases
 March 31, 2006
    
    
    December 31, 2005Percent
    
    
    
    
    
    
    
    
    
    PercentNonperforming
    
    
    
    
    
    
    
    
    
    Nonperformingand Accruing
    
    
    
    
    
    
    
    
    
    and AccruingPercent
    
    
    90 days or more
    
    
    
    
    
    
    Percent
    
    
    90 days or moreAmount
    
    
    of Loans
    
    

Overdue
    
    
    Amount
    
    
    of Loans
    
    

OverdueResidential real estate mortgages
    
    $
    2,902,999
    
    
    
    11
    %
    
    
    0.43
    %
    
    $
    2,878,323
    
    
    
    14
    %
    
    
    0.40
    %Commercial real estate mortgages
    
    
    8,708,106
    
    
    
    34
    %
    
    
    0.36
    %
    
    
    6,776,837
    
    
    
    34
    %
    
    
    0.37
    %Commercial
business loans and leases
    
    
    6,365,259
    
    
    
    25
    %
    
    
    0.49
    %
    
    
    4,278,048
    
    
    
    21
    %
    
    
    0.48
    %Consumer
loans and leases
    
    
    7,269,035
    
    
    
    28
    %
    
    
    0.14
    %
    
    
    6,186,519
    
    
    
    31
    %
    
    
    0.16
    %Credit card receivables
    
    
    375,113
    
    
    
    2
    %
    
    
    1.69
    %
    
    
    
    
    
    
    
    
    
    
    $
    25,620,512
    
    
    
    100
    %
    
    
    0.36
    %
    
    $
    20,119,727
    
    
    
    100
    %
    
    
    0.34
    %
     Table 12  Commercial Loans and Leases by State
 Commercial Real Estate Loans
    
    
    Commercial Business Loans and LeasesMarch 31,
    
    
    December 31,
    
    
    Change
    
    
    March 31,
    
    
    December 31,
    
    
    Change2006
    
    
    2005
    
    
    Amount
    
    
    Percent
    
    
    2006
    
    
    2005
    
    
    Amount
    
    
    PercentMassachusetts
    
    $
    3,486,380
    
    
    $
    3,373,844
    
    
    $
    112,536
    
    
    
    3.34
    %
    
    $
    1,833,778
    
    
    $
    1,744,082
    
    
    $
    89,696
    
    
    
    5.14
    %Connecticut
    
    
    1,239,926
    
    
    
    659,978
    
    
    
    579,948
    
    
    
    87.87
    %
    
    
    885,580
    
    
    
    527,597
    
    
    
    357,983
    
    
    
    67.85
    %Maine
    
    
    1,013,823
    
    
    
    1,015,132
    
    
    
    (1,309
    )
    
    
    (0.13
    %)
    
    
    849,387
    
    
    
    799,001
    
    
    
    50,386
    
    
    
    6.31
    %New Hampshire
    
    
    848,181
    
    
    
    889,952
    
    
    
    (41,771
    )
    
    
    (4.69
    %)
    
    
    604,973
    
    
    
    568,068
    
    
    
    36,905
    
    
    
    6.50
    %Vermont
    
    
    632,986
    
    
    
    613,557
    
    
    
    19,429
    
    
    
    3.17
    %
    
    
    481,481
    
    
    
    467,106
    
    
    
    14,375
    
    
    
    3.08
    %New York
    
    
    631,647
    
    
    
    224,374
    
    
    
    407,273
    
    
    
    181.52
    %
    
    
    438,572
    
    
    
    172,194
    
    
    
    266,378
    
    
    
    154.70
    %New Jersey
    
    
    547,444
    
    
    
    
    
    
    
    547,444
    
    
    
    N/M
    
    
    
    631,104
    
    
    
    
    
    
    
    631,104
    
    
    
    N/MPennsylvania
    
    
    261,970
    
    
    
    
    
    
    
    261,970
    
    
    
    N/M
    
    
    
    239,111
    
    
    
    
    
    
    
    239,111
    
    
    
    N/MOther
    
    
    45,749
    
    
    
    
    
    
    
    45,749
    
    
    
    N/M
    
    
    
    401,273
    (1)
    
    
    
    
    
    
    401,273
    
    
    
    N/MTotal
    
    $
    8,708,106
    
    
    $
    6,776,837
    
    
    $
    1,931,269
    
    
    
    28.50
    %
    
    $
    6,365,259
    
    
    $
    4,278,048
    
    
    $
    2,087,211
    
    
    
    48.79
    %
 
 N/M  Not Meaningful(1)
    
    Includes $271 million of loans to finance insurance
premiums funded by Flatiron.  42




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##### Table of Contents



Table 13  Composition of Consumer Loans
and Leases
 March 31,
    
    
    December 31,2006
    
    
    2005
    
    
    ChangeAmount
    
    

%
of Total
    
    
    Amount
    
    

%
of Total
    
    
    Amount
    
    
    PercentHome equity loans and lines
    
    $
    4,126,398
    
    
    
    56.77
    %
    
    $
    3,648,033
    
    
    
    58.96
    %
    
    $
    478,365
    
    
    
    13.11
    %Automobile
    
    
    2,538,108
    
    
    
    34.92
    %
    
    
    2,020,774
    
    
    
    32.66
    %
    
    
    517,334
    
    
    
    25.60
    %Education
    
    
    263,908
    
    
    
    3.63
    %
    
    
    202,044
    
    
    
    3.27
    %
    
    
    61,864
    
    
    
    30.62
    %Mobile home
    
    
    100,150
    
    
    
    1.38
    %
    
    
    88,519
    
    
    
    1.43
    %
    
    
    11,631
    
    
    
    13.14
    %Other
    
    
    240,471
    
    
    
    3.30
    %
    
    
    227,149
    
    
    
    3.68
    %
    
    
    13,322
    
    
    
    5.86
    %Total
    
    $
    7,269,035
    
    
    
    100.00
    %
    
    $
    6,186,519
    
    
    
    100.00
    %
    
    $
    1,082,516
    
    
    
    17.50
    %
  Nonperforming Assets
    43




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##### Table of Contents



Table 14  Nonperforming Assets
 2006
    
    
    2005March 31
    
    
    December 31
    
    
    September 30
    
    
    June 30
    
    
    March 31Nonaccrual loans and leases:Residential real estate loans
    
    $
    9,827
    
    
    $
    7,970
    
    
    $
    6,531
    
    
    $
    6,165
    
    
    $
    8,614Commercial real estate loans
    
    
    31,192
    
    
    
    25,219
    
    
    
    29,224
    
    
    
    30,353
    
    
    
    23,553Commercial business loans and leases
    
    
    31,460
    
    
    
    20,211
    
    
    
    21,306
    
    
    
    26,776
    
    
    
    24,520Consumer loans and leases
    
    
    6,090
    
    
    
    7,165
    
    
    
    6,899
    
    
    
    6,816
    
    
    
    6,229Total nonaccrual loans and leases
    
    
    78,569
    
    
    
    60,565
    
    
    
    63,960
    
    
    
    70,110
    
    
    
    62,916Other nonperforming assets:Other real estate owned, net of related reserves
    
    
    10,928
    
    
    
    234
    
    
    
    1,554
    
    
    
    2,101
    
    
    
    3,925Repossessions, net of related reserves
    
    
    1,173
    
    
    
    736
    
    
    
    1,375
    
    
    
    1,695
    
    
    
    2,087Total other nonperforming assets
    
    
    12,101
    
    
    
    970
    
    
    
    2,929
    
    
    
    3,796
    
    
    
    6,012Total nonperforming assets
    
    $
    90,670
    
    
    $
    61,535
    
    
    $
    66,889
    
    
    $
    73,906
    
    
    $
    68,928Accruing loans and leases 90 days or more overdue:Credit card loans
    
    $
    6,351
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Other loans
    
    
    6,583
    
    
    
    6,887
    
    
    
    6,489
    
    
    
    6,122
    
    
    
    5,041Total accruing loans and leases 90 days or more overdue
    
    $
    12,934
    
    
    $
    6,887
    
    
    $
    6,489
    
    
    $
    6,122
    
    
    $
    5,041Total nonperforming loans as a percentage of total
loans and leases(1)
    
    
    0.31
    %
    
    
    0.30
    %
    
    
    0.32
    %
    
    
    0.35
    %
    
    
    0.32
    %Total nonperforming assets as a percentage of total assets
    
    
    0.22
    %
    
    
    0.19
    %
    
    
    0.21
    %
    
    
    0.23
    %
    
    
    0.21
    %Total nonperforming assets as a percentage of total loans
and leases (1) and total other nonperforming assets
    
    
    0.35
    %
    
    
    0.31
    %
    
    
    0.33
    %
    
    
    0.37
    %
    
    
    0.35
    %
 
 (1)
    
    Total loans and leases exclude residential real estate loans held for sale. 
 Net Charge-offs
  44




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##### Table of Contents



Table 15  Allowance for Credit Losses
 Successor
    
    
    Combined2006 First
    
    
    2005 Fourth
    
    
    2005 Third
    
    
    2005 Second
    
    
    2005 FirstQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterAllowance for loan and lease losses at beginning of
period
    
    $
    223,030
    
    
    $
    228,334
    
    
    $
    228,168
    
    
    $
    228,165
    
    
    $
    243,152Additions due to acquisitions
    
    
    52,563
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,494Charge-offs:Residential real estate mortgages
    
    
    128
    
    
    
    89
    
    
    
    17
    
    
    
    93
    
    
    
    65Commercial real estate mortgages
    
    
    95
    
    
    
    315
    
    
    
    2,194
    
    
    
    271
    
    
    
    5,551Commercial business loans and leases
    
    
    1,583
    
    
    
    5,092
    
    
    
    2,828
    
    
    
    1,366
    
    
    
    2,069Consumer loans and leases
    
    
    7,081
    
    
    
    8,479
    
    
    
    6,716
    
    
    
    5,313
    
    
    
    6,738Credit card
receivables
    
    
    3,305
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total loans and leases charged off
    
    
    12,192
    
    
    
    13,975
    
    
    
    11,755
    
    
    
    7,043
    
    
    
    14,423Recoveries:Residential real estate mortgages
    
    
    17
    
    
    
    102
    
    
    
    142
    
    
    
    4
    
    
    
    8Commercial real estate mortgages
    
    
    101
    
    
    
    345
    
    
    
    477
    
    
    
    663
    
    
    
    1,519Commercial business loans and leases
    
    
    3,167
    
    
    
    738
    
    
    
    2,825
    
    
    
    1,595
    
    
    
    1,524Consumer loans and leases
    
    
    2,096
    
    
    
    1,486
    
    
    
    1,977
    
    
    
    1,187
    
    
    
    1,257Credit card
receivables
    
    
    660
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total loans and leases recovered
    
    
    6,041
    
    
    
    2,671
    
    
    
    5,421
    
    
    
    3,449
    
    
    
    4,308Net charge-offs
    
    
    6,151
    
    
    
    11,304
    
    
    
    6,334
    
    
    
    3,594
    
    
    
    10,115Provision for loan and lease losses
    
    
    6,900
    
    
    
    6,000
    
    
    
    5,500
    
    
    
    3,597
    
    
    
    2,069Specific reserves applied to reduce impaired loan
carrying values
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    
    
    
    
    (21,435
    )Allowance for loan and lease losses at end of period
    
    $
    276,342
    
    
    $
    223,030
    
    
    $
    228,334
    
    
    $
    228,168
    
    
    $
    228,165Total Allowance for Credit Losses:Allowance for loan and lease losses
    
    $
    276,342
    
    
    $
    223,030
    
    
    $
    228,334
    
    
    $
    228,168
    
    
    $
    228,165Liability for unfunded credit commitments
    
    
    8,207
    
    
    
    7,907
    
    
    
    7,607
    
    
    
    6,807
    
    
    
    6,707Total allowance for credit losses
    
    $
    284,549
    
    
    $
    230,937
    
    
    $
    235,941
    
    
    $
    234,975
    
    
    $
    234,872Ratio of net charge-offs to average loans and
leases outstanding during the period, annualized (1)
    
    
    0.10
    %
    
    
    0.22
    %
    
    
    0.13
    %
    
    
    0.07
    %
    
    
    0.21
    %Ratio of allowance for credit losses to total loans and leases
at end of period (1)
    
    
    1.11
    %
    
    
    1.15
    %
    
    
    1.18
    %
    
    
    1.17
    %
    
    
    1.20
    %Ratio of allowance for credit losses to nonperforming loans
and leases at end of period
    
    
    362
    %
    
    
    381
    %
    
    
    369
    %
    
    
    335
    %
    
    
    373
    %Ratio of net charge-offs (recoveries) as a percent of
average outstanding loans and leases, annualized (1):Residential real estate mortgages
    
    
    0.016
    %
    
    
    (0.002
    %)
    
    
    (0.015
    %)
    
    
    0.011
    %
    
    
    0.006
    %Commercial real estate mortgages
    
    
    0.000
    %
    
    
    (0.002
    %)
    
    
    0.101
    %
    
    
    (0.024
    %)
    
    
    0.254
    %Commercial business loans and leases
    
    
    (0.112
    %)
    
    
    0.413
    %
    
    
    0.000
    %
    
    
    (0.022
    %)
    
    
    0.055
    %Consumer loans and leases
    
    
    0.293
    %
    
    
    0.453
    %
    
    
    0.318
    %
    
    
    0.291
    %
    
    
    0.404
    %Credit cards
    
    
    4.409
    %
    
    
    0.000
    %
    
    
    0.000
    %
    
    
    0.000
    %
    
    
    0.000
    %Total
portfolio loans and leases at end of period (1)
    
    $
    25,620,512
    
    
    $
    20,119,727
    
    
    $
    19,971,184
    
    
    $
    20,028,662
    
    
    $
    19,649,943Total nonperforming loans and leases at end of period
    
    
    78,569
    
    
    
    60,565
    
    
    
    63,960
    
    
    
    70,110
    
    
    
    62,916Average loans and leases outstanding
during the period (1)
    
    
    23,770,023
    
    
    
    20,140,514
    
    
    
    20,021,651
    
    
    
    19,803,681
    
    
    
    19,561,761
 
 (1)
    
    Excludes residential real estate loans held for sale. 45




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##### Table of Contents



Potential Problem Loans
  Analysis and Determination of the Allowance for Loan and Lease Losses
    Asset-Liability Management
  Interest Rate Risk
  46




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##### Table of Contents



Assessment and Measurement
   Net Interest Income Sensitivity
  47




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##### Table of Contents



Table
16  Sensitivity of Net Interest Income
 200 Basis Point
    
    100 Basis Point
    
    100 Basis Point
    
    200 Basis PointRate Increase
    
    Rate Increase
    
    Rate Decrease
    
    Rate DecreaseMarch 31, 2006
    
    
    0.66
    %
    
    
    0.34
    %
    
    
    (0.44
    %)
    
    
    (1.02
    %)December 31, 2005
    
    
    (0.88
    %)
    
    
    (0.41
    %)
    
    
    0.27
    %
    
    
    0.26
    %
  2006 Asset Liability Management Actions
  48




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##### Table of Contents



Derivative Instruments
 Purpose and Benefits
   Table 17  Derivative Positions
 Asset-Liability Management Positions
 Notional Amount Maturing
    
    FairSuccessor
 March 31, 2006
    
    2006
    
    2007
    
    2008
    
    2009
    
    Thereafter
    
    Total
    
    ValueCross currency swap agreement
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    228,620
    
    
    $
    228,620
    
    
    $
    7,233Total return swap
    
    
    
    
    
    
    
    
    
    
    26,425
    
    
    
    
    
    
    
    
    
    
    
    26,425
    
    
    
    1,788Interest rate swaps
    
    
    
    
    
    
    
    
    
    
    45,000
    
    
    
    30,000
    
    
    
    145,000
    
    
    
    220,000
    
    
    
    (7,404
    )Forward commitments to sell loans
    
    
    49,031
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49,031
    
    
    
    166
 Customer-related Positions
 Notional Amount Maturing
    
    FairSuccessor
 March 31, 2006
    
    2006
    
    2007
    
    2008
    
    2009
    
    Thereafter
    
    Total
    
    ValueInterest rate contractsReceive fixed, pay variable
    
    $
    13,250
    
    
    $
    27,299
    
    
    $
    94,858
    
    
    $
    89,395
    
    
    $
    1,228,906
    
    
    $
    1,453,708
    
    
    $
    22,013Pay fixed, receive variable
    
    
    13,250
    
    
    
    27,299
    
    
    
    94,858
    
    
    
    89,395
    
    
    
    1,228,906
    
    
    
    1,453,708
    
    
    
    (22,013
    )Foreign currency rate contractsForward contracts with customers
    
    
    10,950
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,950
    
    
    
    (233
    )Forward contracts with dealers
    
    
    10,950
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,950
    
    
    
    233Foreign exchange options to purchase
    
    
    47,629
    
    
    
    26,129
    
    
    
    28,066
    
    
    
    6,627
    
    
    
    1,851
    
    
    
    110,302
    
    
    
    1,290Foreign exchange options to sell
    
    
    47,629
    
    
    
    26,129
    
    
    
    28,066
    
    
    
    6,627
    
    
    
    1,851
    
    
    
    110,302
    
    
    
    (1,290
    )Rate-locked loan commitments (1)
    
    
    20,669
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,669
    
    
    
    133
 
 (1)
    
    No value has been assigned to potential mortgage servicing rights related to rate-locked
loan commitments. Designated Hedges
    49




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##### Table of Contents



Table 18  Average Balances of Loans Held for Sale and Related Hedges
 Three Months EndedMarch 31, 2006
    
    March 31, 2005Residential mortgage loans held for sale
    
    $
    20,323
    
    
    $
    40,177Rate-locked loan commitments
    
    
    17,988
    
    
    
    43,454Forward sales contracts
    
    
    32,679
    
    
    
    69,933
 Customer-related Positions
 .
 Foreign Exchange or Market Risk
   50




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##### Table of Contents



LIQUIDITY
  Parent Company
    Banking Subsidiary
   51




---



##### Table of Contents



CAPITAL
     52




---



##### Table of Contents



Table 19  Capital Ratios
 Actual
    
    Capital Requirements
    
    ExcessAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioMarch 31, 2006TD Banknorth Inc.Total capital (to risk-weighted assets)
    
    $
    3,146,489
    
    
    
    11.07
    %
    
    $
    2,274,224
    
    
    
    8.00
    %
    
    $
    872,265
    
    
    
    3.07
    %Tier 1 capital (to risk-weighted assets)
    
    
    2,188,374
    
    
    
    7.70
    %
    
    
    1,137,112
    
    
    
    4.00
    %
    
    
    1,051,262
    
    
    
    3.70
    %Tier 1 leverage capital ratio (to
average assets)
    
    
    2,188,374
    
    
    
    6.75
    %
    
    
    1,296,336
    
    
    
    4.00
    %
    
    
    892,038
    
    
    
    2.75
    %TD Banknorth, NATotal capital (to risk-weighted assets)
    
    
    3,207,379
    
    
    
    11.34
    %
    
    
    2,261,750
    
    
    
    8.00
    %
    
    
    945,629
    
    
    
    3.34
    %Tier 1 capital (to risk-weighted assets)
    
    
    2,253,528
    
    
    
    7.97
    %
    
    
    1,130,875
    
    
    
    4.00
    %
    
    
    1,122,653
    
    
    
    3.97
    %Tier 1 leverage capital ratio (to
average assets)
    
    
    2,253,528
    
    
    
    6.97
    %
    
    
    1,292,698
    
    
    
    4.00
    %
    
    
    960,830
    
    
    
    2.97
    %December 31, 2005TD Banknorth Inc.Total capital (to risk-weighted assets)
    
    $
    2,606,274
    
    
    
    11.73
    %
    
    $
    1,777,440
    
    
    
    8.00
    %
    
    $
    828,834
    
    
    
    3.73
    %Tier 1 capital (to risk-weighted assets)
    
    
    1,917,905
    
    
    
    8.63
    %
    
    
    888,720
    
    
    
    4.00
    %
    
    
    1,029,185
    
    
    
    4.63
    %Tier 1 leverage capital ratio (to
average assets)
    
    
    1,917,905
    
    
    
    7.07
    %
    
    
    1,084,901
    
    
    
    4.00
    %
    
    
    833,004
    
    
    
    3.07
    %TD Banknorth, NATotal capital (to risk-weighted assets)
    
    
    2,563,539
    
    
    
    11.56
    %
    
    
    1,773,987
    
    
    
    8.00
    %
    
    
    789,552
    
    
    
    3.56
    %Tier 1 capital (to risk-weighted assets)
    
    
    1,878,364
    
    
    
    8.47
    %
    
    
    886,994
    
    
    
    4.00
    %
    
    
    991,370
    
    
    
    4.47
    %Tier 1 leverage capital ratio (to
average assets)
    
    
    1,878,364
    
    
    
    6.94
    %
    
    
    1,082,490
    
    
    
    4.00
    %
    
    
    795,874
    
    
    
    2.94
    %
    Table
20- Capital Securities
 JuniorIssuance
    
    
    Capital
    
    
    Common
    
    
    Subordinated
    
    
    Stated
    
    
    Maturity
    
    
    CallName
    
    Date
    
    
    Securities
    
    
    Securities
    
    
    Debentures (1)
    
    
    Rate
    
    
    Date
    
    
    DatePeoples Heritage Capital Trust
I
    
    
    1/31/1997
    
    
    $
    63,775
    
    
    $
    3,093
    
    
    $
    66,868
    
    
    
    9.06
    %
    
    
    2/1/2027
    
    
    
    2/1/2007Banknorth Capital Trust I
    
    
    5/1/1997
    
    
    
    28,000
    
    
    
    928
    
    
    
    28,928
    
    
    
    10.52
    %
    
    
    5/1/2027
    
    
    
    5/1/2007Ipswich Statutory Trust I
    
    
    2/22/2001
    
    
    
    3,500
    
    
    
    109
    
    
    
    3,609
    
    
    
    10.20
    %
    
    
    2/22/2031
    
    
    
    2/22/2011CCBT Statutory Trust I
    
    
    7/31/2001
    
    
    
    5,000
    
    
    
    155
    
    
    
    5,155
    
    
    
    8.25
    %
    
    
    7/31/2031
    
    
    
    7/31/2006Banknorth Capital Trust II
    
    
    2/22/2002
    
    
    
    200,000
    
    
    
    6,186
    
    
    
    206,186
    
    
    
    8.00
    %
    
    
    4/1/2032
    
    
    
    4/1/2007BFD Preferred Capital Trust I
    
    
    7/12/2000
    
    
    
    10,000
    
    
    
    309
    
    
    
    10,309
    
    
    
    11.30
    %
    
    
    7/19/2030
    
    
    
    7/9/2010BFD Preferred Capital Trust II
    
    
    9/19/2000
    
    
    
    22,000
    
    
    
    681
    
    
    
    22,681
    
    
    
    10.88
    %
    
    
    10/1/2030
    
    
    
    10/1/2010Hudson United Statutory Trust I
    
    
    3/17/2004
    
    
    
    20,000
    
    
    
    619
    
    
    
    20,619
    
    
    
    7.71
    %
    
    
    3/17/2034
    
    
    
    3/17/2009Hudson United Capital Trust I
    
    
    3/31/2003
    
    
    
    20,000
    
    
    
    619
    
    
    
    20,619
    
    
    
    6.85
    %
    
    
    4/15/2033
    
    
    
    4/15/2008Hudson United Capital Trust II
    
    
    3/28/2003
    
    
    
    15,000
    
    
    
    464
    
    
    
    15,464
    
    
    
    6.45
    %
    
    
    4/10/2033
    
    
    
    4/24/2008HUBCO Capital Trust I
    
    
    1/31/1997
    
    
    
    45,000
    
    
    
    1,547
    
    
    
    46,547
    
    
    
    8.98
    %
    
    
    2/1/2027
    
    
    
    2/1/2007HUBCO Capital Trust II
    
    
    6/19/1998
    
    
    
    50,000
    
    
    
    1,547
    
    
    
    51,547
    
    
    
    7.65
    %
    
    
    6/15/2028
    
    
    
    6/15/2008$
    482,275
    
    
    $
    16,257
    
    
    
    498,532Unamortized fair value adjustment
    

    
    
    
    
    
    
    
    
    
    
    
    
    
    28,979$
    527,511
 
 (1)
    
    Amounts include junior subordinated debentures acquired by affiliated trusts
from us
with the capital contributed by us in exchange for the common securities of
such trusts.
Junior subordinated debentures are equal to capital securities plus common
securities. 53




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##### Table of Contents



CRITICAL ACCOUNTING POLICIES
  IMPACT OF NEW ACCOUNTING STANDARDS
  FORWARD LOOKING STATEMENTS
  54




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4. Controls and Procedures
   
 Part II  Other Information
 
 Item 1.
    
    Legal Proceedings
  
 Item 1A.
    
    Risk Factors
  55




---



##### Table of Contents



Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
 (a)
    
    
    (b) Not applicable.
  Total Number ofShares Purchased as
    
    Maximum Number ofTotal Number
    
    Average
    
    Part of Publicly
    
    Shares that May Yet Beof Shares
    
    Price Paid
    
    Announced Plans or
    
    Purchased Under thePeriod
    
    Purchased
    
    Per Share
    
    Programs
    
    Plans or ProgramsJanuary 1-31, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,500,000February 1-28, 2006
    
    
    8,500,000
    
    
    $
    30.06
    
    
    
    8,500,000
    
    
    
    2,000,000March 1-31, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,000,000
  Total Number ofShares Purchased as
    
    Maximum Number ofTotal Number
    
    Average
    
    Part of Publicly
    
    Shares that May Yet Beof Shares
    
    Price Paid
    
    Announced Plans or
    
    Purchased Under thePeriod
    
    Purchased
    
    Per Share
    
    Programs
    
    Plans or ProgramsJanuary 1-31, 2006
    
    
    29,625,353
    
    
    $
    31.79
    
    
    
    
    February 1-28, 2006
    
    
    1,446,513
    
    
    $
    30.73
    
    
    

    
    March 1-31, 2006
    
    
    171,924
    
    
    $
    30.77
    
    
    
    
    
 
 Item 3.
    
    Defaults Upon Senior Securities  not applicable.
 
 Item 4.
    
    Submission of Matters to a Vote of Security Holders.
   56




---



##### Table of Contents



For
    
    Against
    
    Abstain
    
    Broker Non-votes143,291,989
    
    
    583,832
    
    
    
    311,004
    
    
    None
 
 Item 5.
    
    Other Information  not applicable.
 
 Item 6.
    
    Exhibits.The following exhibits are filed as part of this report.
 Exhibit 31.1
    
    Certification of Chief Executive Officer under Rules 13a-14 and 15d-14.Exhibit 31.2
    
    Certification of Chief Financial Officer under Rules 13a-14 and 15d-14.Exhibit 32.1
    
    Certification of Chief Executive Officer under 18 U.S.C. § 1350.Exhibit 32.2
    
    Certification of Chief Financial Officer under 18 U.S.C. § 1350.
 
 57




---



##### Table of Contents



SIGNATURES
  TD BANKNORTH INC.Date: May 9, 2006
    
    By:
    
    /s/ William J. RyanWilliam J. RyanChairman, President andChief Executive Officer(principal executive officer)Date: May 9, 2006
    
    By:
    
    /s/ Stephen J. BoyleStephen J. BoyleExecutive Vice President andChief Financial Officer(principal financial and accounting officer)
 58




---



##### Table of Contents



Exhibit 31.1
    
    Certification of Chief Executive Officer under Rules 13a-14 and 15d-14.Exhibit 31.2
    
    Certification of Chief Financial Officer under Rules 13a-14 and 15d-14.Exhibit 32.1
    
    Certification of Chief Executive Officer under 18 U.S.C. § 1350.Exhibit 32.2
    
    Certification of Chief Financial Officer under 18 U.S.C. § 1350.
 59