##### 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 June 30, 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)
 (Registrants telephone number, including area code)
 þ o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
 o þ
  Common stock, par value $.01 per share
    
    228,179,975(Class)
    
    (Outstanding)Class B Common stock, par value $.01 per share
    
    1(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
    
    
    22Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    52Item 4.
    
    Controls and Procedures
    
    
    53PART II.
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    53Item 1A.
    
    Risk Factors
    
    
    53Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    53Item 3.
    
    Defaults Upon Senior Securities
    
    
    54Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    54Item 5.
    
    Other Information
    
    
    55Item 6.
    
    Exhibits
    
    
    55Signatures
    
    
    56Exhibits
    
    
    57Ex-12 Calculation of Ratios of Earnings to Fixed ChargesEx-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
    
    
    SuccessorJune 30, 2006
    
    
    December 31, 2005AssetsCash and due from banks
    
    $
    1,060,587
    
    
    $
    758,751Federal funds sold and other short-term investments
    
    
    20,586
    
    
    
    10,507Securities purchased under agreements to resell
    
    
    1,998,758
    
    
    
    Securities available for sale, at market value
    
    
    2,353,506
    
    
    
    4,419,877Securities held to maturity (fair value of $56,756 and $64,487 at
June 30, 2006 and December 31, 2005, respectively)
    
    
    55,804
    
    
    
    64,126Loans held for sale
    
    
    32,493
    
    
    
    31,398Loans and leases:Residential real estate mortgages
    
    
    2,862,331
    
    
    
    2,878,323Commercial real estate mortgages
    
    
    8,752,137
    
    
    
    6,776,837Commercial business loans and leases
    
    
    6,593,276
    
    
    
    4,278,048Consumer loans and leases
    
    
    7,186,526
    
    
    
    6,186,519Credit card receivables
    
    
    428,517
    
    
    
    Total loans and leases
    
    
    25,822,787
    
    
    
    20,119,727Less: Allowance for loan and lease losses
    
    
    276,361
    
    
    
    223,030Net loans and leases
    
    
    25,546,426
    
    
    
    19,896,697Premises and equipment, net
    
    
    466,555
    
    
    
    331,912Goodwill
    
    
    6,019,817
    
    
    
    4,547,604Identifiable intangible assets
    
    
    808,373
    
    
    
    668,365Bank-owned life insurance
    
    
    774,881
    
    
    
    572,847Other assets
    
    
    1,147,786
    
    
    
    793,269Total assets
    
    $
    40,285,572
    
    
    $
    32,095,353Liabilities and Shareholders EquityDeposits:Savings accounts
    
    $
    4,261,150
    
    
    $
    2,653,233Money market and NOW accounts
    
    
    9,508,171
    
    
    
    7,819,812Certificates of deposit
    
    
    6,611,010
    
    
    
    5,132,117Brokered deposits
    
    
    238,166
    
    
    
    63,953Deposits in foreign office-interest bearing
    
    
    20,541
    
    
    
    Noninterest-bearing deposits
    
    
    5,960,781
    
    
    
    4,603,533Total deposits
    
    
    26,599,819
    
    
    
    20,272,648Short-term borrowings
    
    
    3,279,768
    
    
    
    3,685,540Long-term debt
    
    
    1,490,686
    
    
    
    1,238,430Deferred tax liability on identifiable intangible assets
    
    
    325,300
    
    
    
    261,932Other liabilities
    
    
    395,337
    
    
    
    152,930Total liabilities
    
    
    32,090,910
    
    
    
    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
    
    
    8,740,404
    
    
    
    6,833,677Retained earnings
    
    
    221,079
    
    
    
    152,494Unearned compensation
    
    
    (381
    )
    
    
    (1,131
    )Treasury stock, at cost (22,818,324 shares in 2006 and 14,761,415
shares in 2005)
    
    
    (710,595
    )
    
    
    (469,010
    )Accumulated other comprehensive loss
    
    
    (58,354
    )
    
    
    (34,041
    )Total shareholders equity
    
    
    8,194,662
    
    
    
    6,483,873Total liabilities and shareholders equity
    
    $
    40,285,572
    
    
    $
    32,095,353
  3




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##### Table of Contents



TD BANKNORTH INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME
  Successor
    
    
    Successor
    
    
    Successor
    
    
    Successor
    
    
    PredecessorThree Months Ended
    
    
    Three Months Ended
    
    
    Six Months Ended
    
    
    March 1, 2005 to
    
    
    January 1, 2005 toJune 30, 2006
    
    
    June 30, 2005
    
    
    June 30, 2006
    
    
    June 30, 2005
    
    
    February 28, 2005Interest and dividend income:Interest and fees on loans and leases
    
    $
    432,862
    
    
    $
    288,817
    
    
    $
    811,560
    
    
    $
    384,482
    
    
    $
    176,949Interest and dividends on securities
    
    
    59,961
    
    
    
    53,630
    
    
    
    137,761
    
    
    
    73,481
    
    
    
    51,183Total interest and dividend income
    
    
    492,823
    
    
    
    342,447
    
    
    
    949,321
    
    
    
    457,963
    
    
    
    228,132Interest expense:Interest on deposits
    
    
    134,790
    
    
    
    48,127
    
    
    
    241,471
    
    
    
    62,875
    
    
    
    30,694Interest on borrowed funds
    
    
    51,200
    
    
    
    41,692
    
    
    
    118,573
    
    
    
    54,506
    
    
    
    32,654Total interest expense
    
    
    185,990
    
    
    
    89,819
    
    
    
    360,044
    
    
    
    117,381
    
    
    
    63,348Net interest income
    
    
    306,833
    
    
    
    252,628
    
    
    
    589,277
    
    
    
    340,582
    
    
    
    164,784Provision for loan and lease losses
    
    
    8,719
    
    
    
    3,597
    
    
    
    15,619
    
    
    
    4,597
    
    
    
    1,069Net interest income after provision
for loan and lease losses
    
    
    298,114
    
    
    
    249,031
    
    
    
    573,658
    
    
    
    335,985
    
    
    
    163,715Noninterest income:Deposit services
    
    
    42,626
    
    
    
    31,751
    
    
    
    81,105
    
    
    
    41,576
    
    
    
    18,359Insurance agency commissions
    
    
    14,551
    
    
    
    13,604
    
    
    
    30,390
    
    
    
    19,244
    
    
    
    8,252Merchant and electronic banking income, net
    
    
    18,155
    
    
    
    14,727
    
    
    
    33,792
    
    
    
    20,090
    
    
    
    7,751Wealth management services
    
    
    11,735
    
    
    
    10,395
    
    
    
    23,083
    
    
    
    13,940
    
    
    
    6,959Bank-owned life insurance
    
    
    8,103
    
    
    
    6,107
    
    
    
    15,391
    
    
    
    8,034
    
    
    
    4,169Investment planning services
    
    
    5,359
    
    
    
    5,462
    
    
    
    10,501
    
    
    
    7,335
    
    
    
    2,815Net securities losses
    
    
    81
    
    
    
    1,439
    
    
    
    (10
    )
    
    
    (2,488
    )
    
    
    (46,548
    )Loans held for sale  Lower of cost or market adjustment
    
    
    
    
    
    
    386
    
    
    
    
    
    
    
    386
    
    
    
    (7,500
    )Change in unrealized loss on derivatives
    
    
    
    
    
    
    14,840
    
    
    
    
    
    
    
    6,664
    
    
    
    Other noninterest income
    
    
    26,458
    
    
    
    18,561
    
    
    
    50,656
    
    
    
    24,749
    
    
    
    9,104127,068
    
    
    
    117,272
    
    
    
    244,908
    
    
    
    139,530
    
    
    
    3,361Noninterest expense:Compensation and employee benefits
    
    
    127,722
    
    
    
    105,096
    
    
    
    252,933
    
    
    
    137,987
    
    
    
    67,977Occupancy
    
    
    26,748
    
    
    
    18,066
    
    
    
    51,044
    
    
    
    24,557
    
    
    
    11,411Equipment
    
    
    16,532
    
    
    
    12,982
    
    
    
    31,416
    
    
    
    17,379
    
    
    
    8,440Data processing
    
    
    15,787
    
    
    
    11,618
    
    
    
    31,021
    
    
    
    15,419
    
    
    
    7,233Advertising and marketing
    
    
    10,006
    
    
    
    8,087
    
    
    
    18,197
    
    
    
    10,408
    
    
    
    4,373Amortization of identifiable intangible assets
    
    
    39,508
    
    
    
    31,656
    
    
    
    77,174
    
    
    
    41,591
    
    
    
    1,561Merger and restructuring costs
    
    
    14,583
    
    
    
    5,368
    
    
    
    34,401
    
    
    
    9,295
    
    
    
    27,264Prepayment penalties on borrowings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    6,300Other noninterest expense
    
    
    35,182
    
    
    
    27,460
    
    
    
    66,918
    
    
    
    36,357
    
    
    
    15,887286,068
    
    
    
    220,333
    
    
    
    563,104
    
    
    
    292,996
    
    
    
    150,446Income before income tax expense
    
    
    139,114
    
    
    
    145,970
    
    
    
    255,462
    
    
    
    182,519
    
    
    
    16,630Provision for income taxes
    
    
    44,405
    
    
    
    50,375
    
    
    
    83,203
    
    
    
    63,296
    
    
    
    6,182Income from continuing operations
    
    
    94,709
    
    
    
    95,595
    
    
    
    172,259
    
    
    
    119,223
    
    
    
    10,448Discontinued operationsLoss from discontinued operations
    
    
    (2,208
    )
    
    
    
    
    
    
    (4,807
    )
    
    
    
    
    
    
    Income tax benefit
    
    
    885
    
    
    
    
    
    
    
    2,141
    
    
    
    
    
    
    
    Loss from discontinued operations, net of tax
    
    
    (1,323
    )
    
    
    
    
    
    
    (2,666
    )
    
    
    
    
    
    
    Net income
    
    $
    93,386
    
    
    $
    95,595
    
    
    $
    169,593
    
    
    $
    119,223
    
    
    $
    10,448Basic earnings per share:Income from continuing operations
    
    $
    0.42
    
    
    $
    0.55
    
    
    $
    0.79
    
    
    $
    0.68
    
    
    $
    0.06Loss from discontinued operations, net of tax
    
    
    (0.01
    )
    
    
    
    
    
    
    (0.02
    )
    
    
    
    
    
    
    Net income
    
    $
    0.41
    
    
    $
    0.55
    
    
    $
    0.77
    
    
    $
    0.68
    
    
    $
    0.06Diluted earnings per share:Income from continuing operations
    
    $
    0.41
    
    
    $
    0.55
    
    
    $
    0.78
    
    
    $
    0.68
    
    
    $
    0.06Loss from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    (0.01
    )
    
    
    
    
    
    
    Net income
    
    $
    0.41
    
    
    $
    0.55
    
    
    $
    0.77
    
    
    $
    0.68
    
    
    $
    0.06Weighted average shares outstanding:Basic
    
    
    228,130
    
    
    
    173,428
    
    
    
    218,960
    
    
    
    175,181
    
    
    
    184,964Dilutive effect of stock options
    
    
    647
    
    
    
    833
    
    
    
    701
    
    
    
    858
    
    
    
    1,783Diluted
    
    
    228,777
    
    
    
    174,261
    
    
    
    219,661
    
    
    
    176,039
    
    
    
    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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    169,593
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    169,593Change in unrealized losses on securities, net of
reclassification adjustment net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (28,374
    )
    
    
    (28,374
    )Change in unrealized gains on cash flow hedges, net of
reclassification adjustment net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,061
    
    
    
    4,061Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    145,280Common stock issued for acquisitions
    
    
    32,859
    
    
    
    329
    
    
    
    965,065
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    965,394Common stock issued to The Toronto-Dominion Bankfor acquisitions
    
    
    29,625
    
    
    
    296
    
    
    
    941,494
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    941,790Treasury stock issued for employee benefitplans, including tax benefit of $0.7 million
    
    
    443
    
    
    
    
    
    
    
    (3,656
    )
    
    
    
    
    
    
    
    
    
    
    13,885
    
    
    
    
    
    
    
    10,229Stock option compensation expense
    
    
    
    
    
    
    
    
    
    
    3,824
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,824Treasury stock purchased
    
    
    (8,500
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (255,470
    )
    
    
    
    
    
    
    (255,470
    )Decrease in unearned compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    750
    
    
    
    
    
    
    
    
    
    
    
    750Cash dividends declared ($0.44 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (101,008
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (101,008
    )Balances at June 30, 2006 (Successor)
    
    
    228,092
    
    
    $
    2,509
    
    
    $
    8,740,404
    
    
    $
    221,079
    
    
    ($
    381
    )
    
    ($
    710,595
    )
    
    ($
    58,354
    )
    
    $
    8,194,662Balances 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    119,223
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    119,223Change in unrealized losses on securities, net of
reclassification adjustment net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,974
    
    
    
    16,974Change in unrealized losses on cash flow hedges, net of
reclassification adjustment net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,096
    
    
    
    14,096Comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150,293Treasury stock issued for employee benefit
plans, including tax benefit of $0.5 million
    
    
    278
    
    
    
    
    
    
    
    (1,377
    )
    
    
    
    
    
    
    
    
    
    
    9,157
    
    
    
    
    
    
    
    7,780Treasury stock purchased
    
    
    (15,300
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (486,408
    )
    
    
    
    
    
    
    (486,408
    )Decrease in unearned compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    375
    
    
    
    
    
    
    
    
    
    
    
    375Cash dividends declared ($0.20 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34,659
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34,659
    )Balances at June 30, 2005 (Successor)
    
    
    173,406
    
    
    $
    1,884
    
    
    $
    6,835,110
    
    
    
    $84,564
    
    
    ($
    1,881
    )
    
    ($
    477,251
    )
    
    $
    31,070
    
    
    $
    6,473,496
  5




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##### Table of Contents



TD BANKNORTH INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands) (Unaudited)
 Successor
    
    
    Successor
    
    
    PredecessorSix Months Ended
    
    
    March 1, 2005 to
    
    
    January 1, 2005 toJune 30, 2006
    
    
    June 30, 2005
    
    
    February 28, 2005Cash flows from operating activities:Net income
    
    $
    169,593
    
    
    $
    119,223
    
    
    $
    10,448Loss from discontinued operations, net of tax
    
    
    (2,666
    )
    
    
    
    
    
    
    Income from continuing operations
    
    
    172,259
    
    
    
    119,223
    
    
    
    10,448Adjustments to reconcile net income to net cash provided by operating activities:Provision for loan and lease losses
    
    
    15,619
    
    
    
    4,597
    
    
    
    1,069Depreciation of banking premises and equipment
    
    
    30,030
    
    
    
    16,260
    
    
    
    7,807Net amortization of premium and discounts
    
    
    (3,104
    )
    
    
    3,533
    
    
    
    3,703Amortization of intangible assets
    
    
    77,174
    
    
    
    41,591
    
    
    
    1,561Deferred tax
(benefit) provision
    
    
    (8,500
    )
    
    
    9,500
    
    
    
    2,000Unearned compensation
    
    
    750
    
    
    
    375
    
    
    
    Stock-based compensation expense
    
    
    3,824
    
    
    
    
    
    
    
    Net losses (gains) realized from sales of securities and loans
    
    
    (17
    )
    
    
    1,814
    
    
    
    46,548Lower of cost or market adjustment on loans held for sale
    
    
    
    
    
    
    
    
    
    
    7,500Prepayment penalties on borrowings
    
    
    
    
    
    
    
    
    
    
    6,300Net losses (gains) realized from sales of loans held for sale
    
    
    
    
    
    
    7,113
    
    
    
    (616
    )Increase in cash surrender value of bank owned life insurance
    
    
    (15,391
    )
    
    
    (6,292
    )
    
    
    (4,169
    )Proceeds from sales of loans held for sale
    
    
    185,455
    
    
    
    655,489
    
    
    
    72,258Residential loans originated and purchased for sale
    
    
    (186,361
    )
    
    
    (161,999
    )
    
    
    (58,800
    )Change in fair value on derivatives
    
    
    (93
    )
    
    
    (4,788
    )
    
    
    Change in net deferred tax liability
    
    
    (4,916
    )
    
    
    (24,348
    )
    
    
    6,846Net
(increase) decrease  in other assets
    
    
    (59,446
    )
    
    
    43,202
    
    
    
    40,597Net increase (decrease) in other liabilities
    
    
    63,646
    
    
    
    51,542
    
    
    
    (42,559
    )Net cash provided by operating activities
    
    
    270,929
    
    
    
    756,812
    
    
    
    100,493Cash flows from investing activities:Proceeds from sales of securities available for sale
    
    
    2,942,400
    
    
    
    397,059
    
    
    
    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
    
    
    422,044
    
    
    
    354,540
    
    
    
    190,117Purchases of securities available for sale
    
    
    (1,169,747
    )
    
    
    (500,556
    )
    
    
    (969,979
    )Net (increase) in securities purchased under reverse repurchase agreements
    
    
    (2,000,000
    )
    
    
    
    
    
    
    Proceeds from maturities and principal repayments of securities held to maturity
    
    
    8,322
    
    
    
    7,487
    
    
    
    4,670Net (increase) in loans and leases
    
    
    (527,925
    )
    
    
    (505,743
    )
    
    
    (222,430
    )Proceeds from sales of portfolio loans
    
    
    925
    
    
    
    60,157
    
    
    
    Net (additions) decrease to premises and equipment
    
    
    (43,241
    )
    
    
    (14,010
    )
    
    
    798Proceeds from policy coverage on bank-owned life insurance
    
    
    284
    
    
    
    
    
    
    
    141Proceeds from the sale of the bond administration business
    
    
    2,000
    
    
    
    
    
    
    
    Proceeds
from the sale of OREO
    
    
    12,031
    
    
    
    
    
    
    
    Cash used in business acquisitions
    
    
    (941,874
    )
    
    
    
    
    
    
    Cash acquired from acquisitions
    
    
    238,562
    
    
    
    
    
    
    
    130,685Net cash provided by investing activities
    
    
    1,472,322
    
    
    
    173,422
    
    
    
    1,678,974Cash flows from financing activities:Net (decrease) in deposits
    
    
    (560,586
    )
    
    
    (187,188
    )
    
    
    (160,662
    )Net (decrease) increase in short-term borrowings
    
    
    (997,089
    )
    
    
    251,621
    
    
    
    2,102,739Payments on short-term borrowings as part of deleveraging program
    
    
    
    
    
    
    (374,491
    )
    
    
    (1,461,701
    )Proceeds from long-term debt
    
    
    
    
    
    
    446
    
    
    
    8,467Payments for long-term debt
    
    
    (464,395
    )
    
    
    (55,234
    )
    
    
    (474,664
    )Payments for long-term debt as part of deleveraging program
    
    
    
    
    
    
    
    
    
    
    (1,006,300
    )Excess tax benefits from stock-based compensation
    
    
    735
    
    
    
    541
    
    
    
    16,049Treasury stock issued for employee benefit plans
    
    
    9,494
    
    
    
    7,239
    
    
    
    55,319Issuance of stock to The Toronto-Dominion Bank
    
    
    941,790
    
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    (255,470
    )
    
    
    (486,408
    )
    
    
    Cash dividends paid to shareholders
    
    
    (101,008
    )
    
    
    (34,659
    )
    
    
    (37,383
    )Net cash (used in) financing activities
    
    
    (1,426,529
    )
    
    
    (878,133
    )
    
    
    (958,136
    )Cash flows from discontinued operationsOperating activities
    
    
    (4,807
    )
    
    
    
    
    
    
    Net cash (used in) discontinued operations
    
    
    (4,807
    )
    
    
    
    
    
    
    Increase (decrease) in cash and cash equivalents
    
    
    311,915
    
    
    
    52,101
    
    
    
    821,331Cash and cash equivalents at beginning of period
    
    
    769,258
    
    
    
    747,637
    
    
    
    (73,694
    )Cash and cash equivalents at end of period
    
    $
    1,081,173
    
    
    $
    799,738
    
    
    $
    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
    
    $
    10,301,998
    
    
    $
    32,462,141
    
    
    $
    1,618,940Fair value of liabilities assumed
    
    
    8,394,729
    
    
    
    25,626,026
    
    
    
    1,422,658Supplemental cash flow disclosuresCash paid for interest
    
    $
    344,949
    
    
    $
    117,559
    
    
    $
    68,238Cash paid (received) for income taxes
    
    
    92,782
    
    
    
    (5,572
    )
    
    
    (779
    )
  6




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##### Table of Contents



TD BANKNORTH INC. AND SUBSIDIARIES
 
 Notes to Consolidated Financial Statements
 June 30, 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




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##### Table of Contents



Accounting for Servicing of Financial Assets
  Accounting for Certain Hybrid Financial Instruments
  Accounting for Uncertainty in Income Taxes
  Note 3  Acquisitions
  8




---



##### Table of Contents



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
    
    
    $
    1,467.9
    
    
    $
    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
United Bancorp.  Assets:Investments
    
    $
    2,699,382Loans and leases, net
    
    
    5,155,148Premises and equipment
    
    
    121,794Goodwill
    
    
    1,467,949Other intangible assets
    
    
    222,466Cash and due from banks
    
    
    235,997Bank-owned life insurance
    
    
    156,476Other assets
    
    
    242,786Total assets acquired
    
    
    10,301,998Liabilities:Deposits
    
    
    6,897,621Borrowings
    
    
    1,311,362Other liabilities
    
    
    185,746Total liabilities assumed
    
    
    8,394,729Net assets acquired
    
    $
    1,907,269
   9




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##### Table of Contents



Successor
    
    Successor
    
    Successor
    
    Successor
    
    PredecessorThree Months Ended
    
    Three Months Ended
    
    Six Months Ended
    
    March 1, 2005 to
    
    January 1, 2005 toJune 30, 2006
    
    June 30, 2005
    
    June 30, 2006
    
    June 30, 2005
    
    February 28, 2005Net interest income
    
    $
    306,833
    
    
    $
    336,041
    
    
    $
    616,002
    
    
    $
    452,401
    
    
    $
    220,725Provision for loan and lease losses
    
    
    8,719
    
    
    
    9,347
    
    
    
    17,619
    
    
    
    11,847
    
    
    
    4,069Net interest income after provision
for loan and lease losses
    
    
    298,114
    
    
    
    326,694
    
    
    
    598,383
    
    
    
    440,554
    
    
    
    216,656Noninterest income
    
    
    127,068
    
    
    
    152,475
    
    
    
    253,994
    
    
    
    184,973
    
    
    
    24,672Noninterest expense (1)
    
    
    286,068
    
    
    
    308,250
    
    
    
    602,203
    
    
    
    407,767
    
    
    
    199,202Income before income tax expense
    
    
    139,114
    
    
    
    170,919
    
    
    
    250,174
    
    
    
    217,760
    
    
    
    42,126Provision for income taxes
    
    
    44,405
    
    
    
    43,362
    
    
    
    85,590
    
    
    
    58,384
    
    
    
    12,720Income from continuing operations
    
    
    94,709
    
    
    
    127,557
    
    
    
    164,584
    
    
    
    159,376
    
    
    
    29,406Loss from discontinued operations, net of tax
    
    
    (1,323
    )
    
    
    
    
    
    
    (2,666
    )
    
    
    
    
    
    
    Net income
    
    $
    93,386
    
    
    $
    127,557
    
    
    $
    161,918
    
    
    $
    159,376
    
    
    $
    29,406Basic earnings per shareIncome from continuing operations
    
    $
    0.42
    
    
    $
    0.56
    
    
    $
    0.72
    
    
    $
    0.70
    
    
    $
    0.12Loss from discontinued operations, net of tax
    
    ($
    0.01
    )
    
    $
    0.00
    
    
    ($
    0.01
    )
    
    $
    0.00
    
    
    $
    0.00Net income
    
    $
    0.41
    
    
    $
    0.56
    
    
    $
    0.71
    
    
    $
    0.70
    
    
    $
    0.12Diluted earnings per shareIncome from continuing operations
    
    $
    0.41
    
    
    $
    0.56
    
    
    $
    0.72
    
    
    $
    0.69
    
    
    $
    0.12Loss from discontinued operations, net of tax
    
    $
    0.00
    
    
    $
    0.00
    
    
    ($
    0.01
    )
    
    $
    0.00
    
    
    $
    0.00Net income
    
    $
    0.41
    
    
    $
    0.56
    
    
    $
    0.71
    
    
    $
    0.69
    
    
    $
    0.12Weighted average shares outstandingBasic
    
    
    228,130
    
    
    
    227,412
    
    
    
    227,957
    
    
    
    229,165
    
    
    
    238,948Diluted
    
    
    228,777
    
    
    
    228,245
    
    
    
    228,658
    
    
    
    230,023
    
    
    
    240,731
 
 (1)
    
    Includes $9.0 million of merger costs recorded by Hudson in January 2006. Note 4  Discontinued Operations
   Successor
    
    SuccessorThree Months Ended
    
    Six months endedJune 30, 2006
    
    June 30, 2006Gross revenues
from discontinued operations
    
    $
    2,986
    
    
    $
    4,881Net loss
from discontinued operations
    
    $
    1,323
    
    
    $
    2,666
  10




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##### Table of Contents



Note 5  Stock Compensation Plans
 General
   Successor
    
    
    Successor
    
    
    PredecessorThree Months Ended
    
    
    March 1, 2005 to
    
    
    January 1, 2005 toJune 30, 2005
    
    
    June 30, 2005
    
    
    February 28, 2005Net Income, as reported
    
    $
    95,595
    
    
    $
    119,223
    
    
    $
    10,448Add: Stock-based employee compensation
expense included in reported
net income, net of related tax effects
    
    
    2,925
    
    
    
    3,434
    
    
    
    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
    
    
    (5,152
    )
    
    
    (5,807
    )
    
    
    (2,159
    )Pro forma net income
    
    $
    93,368
    
    
    $
    116,850
    
    
    ($
    1,004
    )Earnings per shareBasic  As reported
    
    
    $0.55
    
    
    
    $0.68
    
    
    
    $0.06Pro forma
    
    
    $0.54
    
    
    
    $0.67
    
    
    
    ($0.01
    )Diluted  As reported
    
    
    $0.55
    
    
    
    $0.68
    
    
    
    $0.06Pro forma
    
    
    $0.54
    
    
    
    $0.66
    
    
    
    ($0.01
    )
 Stock Options
    11




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##### Table of Contents



Successor
    
    Successor
    
    Successor
    
    Successor
    
    PredecessorThree Months Ended
    
    Three Months Ended
    
    Six Months Ended
    
    March 1, 2005 to
    
    January 1 2005, toJune 30, 2006
    
    June 30, 2005
    
    June 30, 2006
    
    June 30, 2005
    
    February 28, 2005Weighted average fair value
    
    $
    5.03
    
    
    $
    4.64
    
    
    $
    5.03
    
    
    $
    5.45
    
    
    
    Expected dividend yield
    
    
    2.96
    %
    
    
    2.57
    %
    
    
    2.96
    %
    
    
    2.32
    %
    
    
    Risk-free interest rate
    
    
    5.01
    %
    
    
    3.77
    %
    
    
    5.01
    %
    
    
    4.17
    %
    
    
    Expected life
    
    6.0 years
    
    7.5 years
    
    6.0 years
    
    7.5 years
    
    
    Volatility
    
    
    15.18
    %
    
    
    13.09
    %
    
    
    15.18
    %
    
    
    13.09
    %
    
    
    
   WeightedWeighted
    
    
    Average
    
    
    AggregateNumber of
    
    
    Average
    
    
    Remaining
    
    
    IntrinsicShares
    
    
    Exercise Price
    
    
    Term
    
    

Value
(000s)Outstanding at January 1, 2006
    
    
    10,228,728
    
    
    $
    26.75Granted
    
    
    30,000
    
    
    
    29.39Granted in acquisitions
    
    
    259,270
    
    
    
    19.78Exercised
    
    
    (314,465
    )
    
    
    23.47Cancelled and forfeited
    
    
    (192,880
    )
    
    
    29.81Outstanding at June 30, 2006
    
    
    10,010,653
    
    
    $
    26.63
    
    
    7.03 years
    
    $
    31,880
    (1)Options exercisable at June 30, 2006
    
    
    6,415,937
    
    
    $
    24.92
    
    
    5.93 years
    
    $
    30,457
    (1)
 
 (1)
    
    Based on the closing stock price on June 30, 2006 of $29.45.     12




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##### Table of Contents



WeightedAverageGrant-DateNonvested Options
    
    Options
    
    
    Fair ValueNonvested at January 1, 2006
    
    
    4,705,537
    
    
    $
    5.44Granted
    
    
    
    
    
    
    Vested
    
    
    (940,119
    )
    
    
    5.57Forfeited
    
    
    (170,702
    )
    
    
    5.28Nonvested at June 30, 2006
    
    
    3,594,716
    
    
    
    5.41
 Restricted Stock and Restricted Stock Units
    WeightedRestricted Stock
    
    
    Averageand Resticted
    
    
    Grant-DateRestricted Stock and Restricted Stock Units
    
    Stock Units
    
    
    Fair ValueNonvested at January 1, 2006
    
    
    1,306,155
    
    
    $
    30.05Granted
    
    
    277,824
    
    
    
    29.93Vested
    
    
    (16,932
    )
    
    
    30.41Forfeited
    
    
    (128,893
    )
    
    
    29.97Nonvested at June 30, 2006
    
    
    1,438,154
    
    
    
    29.41Exercisable at June 30, 2006
    
    
    30,355
    
    
    
    30.48
  Employee Stock Purchase Plan
   13




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##### Table of Contents



Employee Stock Purchase Plan (1)Shares
    
    Shares
    
    AveragePurchased
    
    Available
    
    Price
    
    ExpenseJanuary 1, 2006 to June 30, 2006 (Successor)
    
    
    56,163
    
    
    
    815,884
    
    
    $
    29.45
    
    
    $
    52March 1, 2005 to June 30, 2005 (Successor)
    
    
    52,943
    
    
    
    955,308
    
    
    $
    29.80
    
    
    $
    227
    (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
  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
    
    
    $
    447,842
    
    
    $
    5,577
    
    
    
    1
    
    
    $
    998
    
    
    $
    1
    
    
    
    5
    
    
    $
    448,840
    
    
    $
    5,578Tax-exempt bonds and notes
    
    
    34
    
    
    
    20,768
    
    
    
    417
    
    
    
    82
    
    
    
    42,519
    
    
    
    1,001
    
    
    
    116
    
    
    
    63,287
    
    
    
    1,418Other bonds and notes
    
    
    57
    
    
    
    101,802
    
    
    
    1,824
    
    
    
    33
    
    
    
    42,104
    
    
    
    749
    
    
    
    90
    
    
    
    143,906
    
    
    
    2,573Mortgage-backed securities
    
    
    545
    
    
    
    1,083,856
    
    
    
    43,263
    
    
    
    407
    
    
    
    237,960
    
    
    
    9,807
    
    
    
    952
    
    
    
    1,321,816
    
    
    
    53,070Collateralized mortgage obligations
    
    
    4
    
    
    
    73,669
    
    
    
    2,268
    
    
    
    10
    
    
    
    1,825
    
    
    
    20
    
    
    
    14
    
    
    
    75,494
    
    
    
    2,288Equity securities
    
    
    1
    
    
    
    148
    
    
    
    2
    
    
    
    1
    
    
    
    119
    
    
    
    22
    
    
    
    2
    
    
    
    267
    
    
    
    24645
    
    
    $
    1,728,085
    
    
    $
    53,351
    
    
    
    534
    
    
    $
    325,525
    
    
    $
    11,600
    
    
    
    1,179
    
    
    $
    2,053,610
    
    
    $
    64,951
  14




---



##### Table of Contents



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
    
    
    1,467,949
    
    
    
    176,549
    
    
    
    45,917
    
    
    
    222,466Amortization expense
    
    
    
    
    
    
    (68,058
    )
    
    
    (9,116
    )
    
    
    (77,174
    )Adjustment of purchase accounting estimates
    
    
    4,264
    
    
    
    
    
    
    
    (5,284
    )
    
    
    (5,284
    )Balance, June 30, 2006
    
    $
    6,019,817
    
    
    $
    585,331
    
    
    $
    223,042
    
    
    $
    808,373Estimated Annual Amortization Expense:Remaining 2006
    
    
    
    
    
    $
    69,673
    
    
    $
    9,281
    
    
    $
    78,9542007
    
    
    
    
    
    
    110,029
    
    
    
    17,845
    
    
    
    127,8742008
    
    
    
    
    
    
    86,670
    
    
    
    16,806
    
    
    
    103,4762009
    
    
    
    
    
    
    70,220
    
    
    
    16,182
    
    
    
    86,4022010
    
    
    
    
    
    
    56,725
    
    
    
    15,435
    
    
    
    72,160Thereafter
    
    
    
    
    
    
    192,014
    
    
    
    145,136
    
    
    
    337,150
 
 (1)
    
    Other identifiable intangible assets include $2,357 related to the minimum pension liability that is not amortized.  June 30, 2006Gross Carrying
    
    
    Accumulated
    
    
    Net CarryingAmount
    
    
    Amortization
    
    
    AmountIdentifiable intangible assets:Core deposit intangibles
    
    $
    742,548
    
    
    $
    157,217
    
    
    $
    585,331Other identifiable intangibles:Loan relationship intangibles
    
    
    133,535
    
    
    
    8,212
    
    
    
    125,323Other identifiable intangibles
    
    
    112,989
    
    
    
    15,270
    
    
    
    97,719246,524
    
    
    
    23,482
    
    
    
    223,042Total
    
    $
    989,072
    
    
    $
    180,699
    
    
    $
    808,373
 Note 9  Deposits
  15




---



##### Table of Contents



Note 10  Short-term Borrowings
  June 30, 2006
    
    
    December 31, 2005Securities sold under agreements to repurchase  retail
    
    $
    1,437,290
    
    
    $
    1,668,139Federal funds purchased
    
    
    1,817,478
    
    
    
    1,563,000Treasury, tax and loan notes
    
    
    25,000
    
    
    
    54,401Federal Home Loan Bank advances
    
    
    
    
    
    
    400,000$
    3,279,768
    
    
    $
    3,685,540
 Note 11  Long-term Debt
  June 30, 2006
    
    
    December 31, 2005Federal Home Loan Bank advances
    
    $
    90,615
    
    
    $
    151,609Securities sold under agreements to repurchase  retail
    
    
    15,136
    
    
    
    107,952Junior subordinated debentures issued to affiliated trusts
    
    
    524,081
    
    
    
    366,237Subordinated debt due 2006
    
    
    24,708
    
    
    
    Subordinated debt due 2011
    
    
    222,750
    
    
    
    225,188Subordinated debt due 2012
    
    
    216,191
    
    
    
    Subordinated debt due 2022
    
    
    241,892
    
    
    
    232,158Senior notes 3.75%, due 2008
    
    
    149,162
    
    
    
    148,914Other long-term debt
    
    
    6,151
    
    
    
    6,372Total
    
    $
    1,490,686
    
    
    $
    1,238,430
  Note 12  Changes in Accumulated Other Comprehensive Income
  16




---



##### Table of Contents



Successor
    
    SuccessorThree Months Ended
    
    Three Months EndedJune 30, 2006
    
    June 30, 2005Pre-tax
    
    Tax
    
    Net of
    
    Pre-tax
    
    Tax
    
    Net ofAmount
    
    Effect
    
    Tax
    
    Amount
    
    Effect
    
    TaxChange in:Change in unrealized gain (loss) on
securities available for sale
    
    ($
    20,577
    )
    
    $
    7,202
    
    
    ($
    13,375
    )
    
    $
    68,932
    
    
    ($
    24,120
    )
    
    $
    44,812Change in unrealized gain (loss) on
cash flow hedges
    
    
    7,207
    
    
    
    (2,523
    )
    
    
    4,684
    
    
    
    37,997
    
    
    
    (14,594
    )
    
    
    23,403Reclassification adjustment for
losses (gains) realized in net income
    
    
    (7,614
    )
    
    
    2,665
    
    
    
    (4,949
    )
    
    
    (15,314
    )
    
    
    5,360
    
    
    
    (9,954
    )Net change in unrealized gains (losses)
    
    ($
    20,984
    )
    
    $
    7,344
    
    
    ($
    13,640
    )
    
    $
    91,615
    
    
    ($
    33,354
    )
    
    $
    58,261
 Successor
    
    Successor
    
    PredecessorSix Months Ended
    
    March 1, 2005 to
    
    January 1, 2005 toJune 30, 2006
    
    June 30, 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
    
    ($
    43,662
    )
    
    $
    15,282
    
    
    ($
    28,380
    )
    
    $
    23,626
    
    
    ($
    8,269
    )
    
    $
    15,357
    
    
    ($
    42,769
    )
    
    $
    14,975
    
    
    ($
    27,794
    )Change in unrealized gain (loss) on
cash flow hedges
    
    
    10,076
    
    
    
    (3,527
    )
    
    $
    6,549
    
    
    
    37,554
    
    
    
    (14,439
    )
    
    
    23,115
    
    
    
    (7,851
    )
    
    
    (48
    )
    
    
    (7,899
    )Reclassification adjustment for
losses (gains) realized in net income
    
    
    (3,818
    )
    
    
    1,336
    
    
    
    (2,482
    )
    
    
    (11,387
    )
    
    
    3,985
    
    
    
    (7,402
    )
    
    
    46,834
    
    
    
    (16,392
    )
    
    
    30,442Net change in unrealized gains (losses)
    
    ($
    37,404
    )
    
    $
    13,091
    
    
    ($
    24,313
    )
    
    $
    49,793
    
    
    ($
    18,723
    )
    
    $
    31,070
    
    
    ($
    3,786
    )
    
    ($
    1,465
    )
    
    ($
    5,251
    )
 Note 13  Acquired Impaired Loans
   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 June 30, 2006
    
    
    6,493
    
    
    
    7,426
    
    
    
    13,919
  Note 14   Other Noninterest Income
  17




---



##### Table of Contents



Successor
    
    
    Successor
    
    
    Successor
    
    
    Successor
    
    
    PredecessorThree Months Ended
    
    
    Three Months Ended
    
    
    Six Months Ended
    
    
    March 1, 2005 to
    
    
    January 1, 2005 toJune 30, 2006
    
    
    June 30, 2005
    
    
    June 30, 2006
    
    
    June 30, 2005
    
    
    February 28, 2005Loan fee income
    
    $
    15,524
    
    
    $
    8,891
    
    
    $
    27,917
    
    
    $
    11,263
    
    
    $
    4,549Income on restricted stock
    
    
    3,339
    
    
    
    2,202
    
    
    
    7,921
    
    
    
    3,111
    
    
    
    1,487Mortgage banking services income
    
    
    1,326
    
    
    
    2,330
    
    
    
    2,560
    
    
    
    2,734
    
    
    
    923Venture capital income (loss)
    
    
    434
    
    
    
    10
    
    
    
    942
    
    
    
    (96
    )
    
    
    (297
    )Covered call option premiums
    
    
    
    
    
    
    1,058
    
    
    
    922
    
    
    
    2,716
    
    
    
    1,412Miscellaneous income
    
    
    5,835
    
    
    
    4,070
    
    
    
    10,394
    
    
    
    5,021
    
    
    
    1,030Total
    
    $
    26,458
    
    
    $
    18,561
    
    
    $
    50,656
    
    
    $
    24,749
    
    
    $
    9,104
  Successor
    
    
    Successor
    
    
    Successor
    
    
    Successor
    
    
    PredecessorThree Months Ended
    
    
    Three Months Ended
    
    
    Six Months Ended
    
    
    March 1, 2005 to
    
    
    January 1, 2005 toJune 30, 2006
    
    
    June 30, 2005
    
    
    June 30, 2006
    
    
    June 30, 2005
    
    
    February 28, 2005Mortgage banking services incomeGains on sales and fee income
    
    $
    766
    
    
    $
    1,741
    
    
    $
    1,409
    
    
    $
    2,193
    
    
    $
    460Net effect of derivatives
    
    
    (26
    )
    
    
    82
    
    
    
    36
    
    
    
    (165
    )
    
    
    159740
    
    
    
    1,823
    
    
    
    1,445
    
    
    
    2,028
    
    
    
    619Residential mortgage servicing income
    
    
    586
    
    
    
    507
    
    
    
    1,115
    
    
    
    706
    
    
    
    304$
    1,326
    
    
    $
    2,330
    
    
    $
    2,560
    
    
    $
    2,734
    
    
    $
    923
 Note 15  Pension and Other Postretirement Plans
  Successor
    
    
    Successor
    
    
    Successor
    
    
    Successor
    
    
    PredecessorThree Months Ended
    
    
    Three Months Ended
    
    
    Six Months Ended
    
    
    March 1, 2005 to
    
    
    January 1, 2005 toComponents of net periodic benefit cost:
    
    June 30, 2006
    
    
    June 30, 2005
    
    
    June 30, 2006
    
    
    June 30, 2005
    
    
    February 28, 2005Qualified PensionService cost
    
    $
    4,716
    
    
    $
    3,552
    
    
    $
    9,191
    
    
    $
    4,736
    
    
    $
    2,369Interest cost
    
    
    4,553
    
    
    
    3,378
    
    
    
    8,823
    
    
    
    4,504
    
    
    
    2,253Expected return on plan assets
    
    
    (7,652
    )
    
    
    (5,508
    )
    
    
    (14,837
    )
    
    
    (7,344
    )
    
    
    (3,672
    )Recognized actuarial loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    809Net amortization and deferral
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (38
    )Net periodic benefit cost
    
    $
    1,617
    
    
    $
    1,422
    
    
    $
    3,177
    
    
    $
    1,896
    
    
    $
    1,721Nonqualified PensionService cost
    
    $
    236
    
    
    $
    215
    
    
    $
    472
    
    
    $
    287
    
    
    $
    106Interest cost
    
    
    728
    
    
    
    563
    
    
    
    1,397
    
    
    
    751
    
    
    
    305Amortization of prior service costs
    
    
    312
    
    
    
    298
    
    
    
    624
    
    
    
    430
    
    
    
    Recognized actuarial loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    84Net amortization and deferral
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41Net periodic benefit cost
    
    $
    1,276
    
    
    $
    1,076
    
    
    $
    2,493
    
    
    $
    1,468
    
    
    $
    536Other Postretirement BenefitsService cost
    
    $
    50
    
    
    $
    57
    
    
    $
    100
    
    
    $
    76
    
    
    $
    37Interest cost
    
    
    339
    
    
    
    321
    
    
    
    678
    
    
    
    428
    
    
    
    214Recognized actuarial loss
    
    
    (64
    )
    
    
    
    
    
    
    (128
    )
    
    
    
    
    
    
    36Net amortization and deferral
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    89Net periodic benefit cost
    
    $
    325
    
    
    $
    378
    
    
    $
    650
    
    
    $
    504
    
    
    $
    376
 18




---



##### Table of Contents



Note 16  Merger and Restructuring Costs
  Successor
    
    
    Successor
    
    
    Successor
    
    
    Successor
    
    
    PredecessorThree Months Ended
    
    
    Three Months Ended
    
    
    Six Months Ended
    
    
    March 1, 2005 to
    
    
    January 1, 2005 toJune 30, 2006
    
    
    June 30, 2005
    
    
    June 30, 2006
    
    
    June 30, 2005
    
    
    February 28, 2005Restructuring CostsPersonnel costs
    
    $
    88
    
    
    $
    
    
    
    $
    10,711
    
    
    $
    
    
    
    $
    Branch closings
    
    
    374
    
    
    
    
    
    
    
    374
    
    
    
    
    
    
    
    462
    
    
    
    
    
    
    
    11,085
    
    
    
    
    
    
    
    Interchange Financial Services Corporation
Merger ChargesPersonnel costs
    
    
    5
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    Other costs
    
    
    72
    
    
    
    
    
    
    
    72
    
    
    
    
    
    
    
    77
    
    
    
    
    
    
    
    77Hudson United Bancorp Merger ChargesPersonnel costs
    
    
    3,868
    
    
    
    
    
    
    
    3,936
    
    
    
    
    
    
    
    Systems conversion and integration/customer
communications
    
    
    6,354
    
    
    
    
    
    
    
    11,795
    
    
    
    
    
    
    
    Other costs
    
    
    3,242
    
    
    
    
    
    
    
    5,028
    
    
    
    
    
    
    
    13,464
    
    
    
    
    
    
    
    20,759
    
    
    
    
    
    
    
    The Toronto-Dominion Bank Merger ChargesTransaction costs
    
    
    (374
    )
    
    
    
    
    
    
    (339
    )
    
    
    1,503
    
    
    
    18,148Personnel costs
    
    
    663
    
    
    
    1,764
    
    
    
    2,088
    
    
    
    2,654
    
    
    
    2,285Name change
    
    
    256
    
    
    
    2,177
    
    
    
    549
    
    
    
    2,201
    
    
    
    2,061Other costs
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    59
    
    
    
    2,941545
    
    
    
    3,959
    
    
    
    2,298
    
    
    
    6,417
    
    
    
    25,435BostonFed Bancorp, Inc. Merger ChargesPersonnel costs
    
    
    7
    
    
    
    284
    
    
    
    19
    
    
    
    735
    
    
    
    673Systems conversion and integration/customer
communications
    
    
    
    
    
    
    273
    
    
    
    
    
    
    
    631
    
    
    
    987Other costs
    
    
    4
    
    
    
    584
    
    
    
    16
    
    
    
    958
    
    
    
    21111
    
    
    
    1,141
    
    
    
    35
    
    
    
    2,324
    
    
    
    1,871Other Merger ChargesAmerican Financial Holdings, Inc. Merger Charges
    
    
    
    
    
    
    27
    
    
    
    7
    
    
    
    189
    
    
    
    117First & Ocean Bancorp Merger Charges
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    19
    
    
    
    1Foxborough Savings Bank Merger Charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    11CCBT Financial Companies, Inc. Merger Charges
    
    
    24
    
    
    
    198
    
    
    
    140
    
    
    
    312
    
    
    
    (171
    )Other Costs
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    25
    
    
    
    24
    
    
    
    268
    
    
    
    147
    
    
    
    554
    
    
    
    (42
    )Total Merger and Restructuring Costs
    
    $
    14,583
    
    
    $
    5,368
    
    
    $
    34,401
    
    
    $
    9,295
    
    
    $
    27,264
   19




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##### Table of Contents



Purchase
    
    
    
    
    
    
    
    
    
    
    Non-cashAccounting
    
    
    Merger and
    
    
    
    
    
    
    Write DownsBalance
    
    
    Adjustments
    
    
    Restructuring
    
    
    Cash
    
    
    and Other
    
    
    Balance12/31/05
    
    
    at Acquisition
    
    
    Costs
    
    
    Payments
    
    
    Adjustments
    
    
    6/30/06Restructuring costs
    
    $
    
    
    
    $
    
    
    
    $
    11,085
    
    
    
    ($11,085
    )
    
    $
    
    
    
    $
    Interchange Merger
    
    
    
    
    
    
    
    
    
    
    77
    
    
    
    (77
    )
    
    
    
    
    
    
    Hudson United Bancorp Merger
    
    
    
    
    
    
    46,324
    
    
    
    20,759
    
    
    
    (53,058
    )
    
    
    
    
    
    
    14,025The Toronto-Dominion Bank Merger
    
    
    459
    
    
    
    
    
    
    
    2,298
    
    
    
    (2,381
    )
    
    
    (376
    )
    
    
    BostonFed Bancorp, Inc. Merger
    
    
    1,935
    
    
    
    
    
    
    
    35
    
    
    
    (212
    )
    
    
    (70
    )
    
    
    1,688CCBT Financial Companies, Inc. Merger
    
    
    
    
    
    
    
    
    
    
    140
    
    
    
    (140
    )
    
    
    
    
    
    
    American Financial Holdings, Inc. Merger
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    (7
    )
    
    
    
    
    
    
    Total
    
    $
    2,394
    
    
    $
    46,324
    
    
    $
    34,401
    
    
    
    ($66,960
    )
    
    ($
    446
    )
    
    $
    15,713
 Note 17  Earnings Per Share
  Successor
    
    Successor
    
    Successor
    
    Successor
    
    PredecessorThree Months Ended
    
    Three Months Ended
    
    Six Months Ended
    
    March 1, 2005 to
    
    January 1, 2005 to(in actual shares)
    
    June 30, 2006
    
    June 30, 2005
    
    June 30, 2006
    
    June 30, 2005
    
    February 28,2005Antidilutive effect of
options outstanding
    
    
    2,046,151
    
    
    
    2,139,362
    
    
    
    2,016,151
    
    
    
    1,624,205
    
    
    
    
 Note 18  Related Party Transactions
   June 30, 2006
    
    December 31, 2005Cash and due from banks
    
    $
    6,052
    
    
    $
    1,694Other assets:Positive fair value marks on derivatives
    
    
    31,763
    
    
    
    8,090Accounts receivable
    
    
    
    
    
    
    1,396Deferred tax asset
    
    
    2,722
    
    
    
    2,868Deferred debt issuance costs
    
    
    1,062
    
    
    
    1,110Interest-bearing deposits from The Toronto-Dominion Bank
    
    
    32,364
    
    
    
    15,013Other liabilities:Negative fair value marks on derivatives
    
    
    2,956
    
    
    
    2,856Accounts payable
    
    
    100
    
    
    
    Shareholders EquityAccumulated other comprehensive income
    
    
    (5,056
    )
    
    
    (8,865
    )Broker commissions paid to TD Securities
for common stock repurchases
    
    
    (476
    )
    
    
    (306
    )Off-balance sheet transactions (notional amounts):Interest rate swaps and caps
    
    
    881,258
    
    
    
    606,256Foreign exchange contracts
    
    
    125,859
    
    
    
    39,557
 20




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##### Table of Contents



Note 19  Subsequent Events
    21




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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 $0.41 per share for the three months ended June 30, 2006
as compared to $0.55 per share for the comparable period in 2005. This decrease was
primarily attributable to non-recurring gains on certain derivatives in June 2005 ($0.06
per diluted share), increased merger and restructuring charges ($0.04 per diluted share), a
five basis point decline in net interest margin, and increased provisions for loan and
lease losses.
    
    For the six month periods ended June 30th, diluted earnings per share
amounted to $0.77 per share in 2006 as compared to $0.72 per share in 2005. This increase
was primarily due to losses recorded on a balance sheet deleveraging program in 2005 ($0.23
per diluted share), non-recurring gains on certain derivatives in 2005 ($0.02 per diluted
share), increased amortization of identifiable assets related to the TD transaction and the
acquisition of Hudson ($0.07 per diluted share), a nine basis point decline in net interest
margin, and increased provisions for loan and lease losses.
    
    We completed the acquisition of Hudson on January 31, 2006 and successfully completed
the systems conversion in May 2006.
    
    Although the net interest margin increased to 4.07% in the second quarter of 2006 from
3.83% in the first quarter of 2006, we continue to see intense competition for high quality
loans and deposits. This 24 basis point increase in margin was due largely to the benefits
of balance sheet deleveraging and restructuring programs completed in the first quarter of
2006 under which we sold $2.5 billion of our mortgage-backed securities and used the
proceeds to purchase shorter-duration investments, and sold an additional $2.5 billion of
securities acquired in the Hudson merger 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,
but will reduce our interest rate sensitivity.
    
    Our total risk-based capital ratio was 11.15% at June 30, 2006 compared to 11.73% at
December 31, 2005. Our tangible equity to tangible assets ratio was 5.06% at June 30,
2006 compared to
 22




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##### Table of Contents



5.69% at December 31, 2005. These ratios declined due to share
repurchases made after the completion of the Hudson acquisition.
    
    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
     23




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##### Table of Contents



Table 1  Selected Income Data
 Successor
    
    
    Combined
    
    
    Successor
    
    
    PredecessorSix Months Ended
    
    
    Six Months Ended
    
    
    March 1, 2005 to
    
    
    January 1, 2005 toJune 30, 2006
    
    
    June 30, 2005
    
    
    June 30, 2005
    
    
    February 28, 2005Interest and dividend income:Interest and fees on loans and leases
    
    $
    811,560
    
    
    $
    561,431
    
    
    $
    384,482
    
    
    $
    176,949Interest and dividends on securities
    
    
    137,761
    
    
    
    124,664
    
    
    
    73,481
    
    
    
    51,183Total interest and dividend income
    
    
    949,321
    
    
    
    686,095
    
    
    
    457,963
    
    
    
    228,132Interest expense:Interest on deposits
    
    
    241,471
    
    
    
    93,569
    
    
    
    62,875
    
    
    
    30,694Interest on borrowed funds
    
    
    118,573
    
    
    
    87,160
    
    
    
    54,506
    
    
    
    32,654Total interest expense
    
    
    360,044
    
    
    
    180,729
    
    
    
    117,381
    
    
    
    63,348Net interest income
    
    
    589,277
    
    
    
    505,366
    
    
    
    340,582
    
    
    
    164,784Provision for loan and lease losses
    
    
    15,619
    
    
    
    5,666
    
    
    
    4,597
    
    
    
    1,069Net interest income after provision
for loan and lease losses
    
    
    573,658
    
    
    
    499,700
    
    
    
    335,985
    
    
    
    163,715Noninterest income:Deposit services
    
    
    81,105
    
    
    
    59,935
    
    
    
    41,576
    
    
    
    18,359Insurance agency commissions
    
    
    30,390
    
    
    
    27,496
    
    
    
    19,244
    
    
    
    8,252Merchant and electronic banking income, net
    
    
    33,792
    
    
    
    27,841
    
    
    
    20,090
    
    
    
    7,751Wealth management services
    
    
    23,083
    
    
    
    20,899
    
    
    
    13,940
    
    
    
    6,959Bank-owned life insurance
    
    
    15,391
    
    
    
    12,203
    
    
    
    8,034
    
    
    
    4,169Investment planning services
    
    
    10,501
    
    
    
    10,150
    
    
    
    7,335
    
    
    
    2,815Net securities losses
    
    
    (10
    )
    
    
    (49,036
    )
    
    
    (2,488
    )
    
    
    (46,548
    )Loans held for sale  Lower of cost or market adjustment
    
    
    
    
    
    
    (7,114
    )
    
    
    386
    
    
    
    (7,500
    )Change in unrealized loss on derivatives
    
    
    
    
    
    
    6,664
    
    
    
    6,664
    
    
    
    Other noninterest income
    
    
    50,656
    
    
    
    33,853
    
    
    
    24,749
    
    
    
    9,104244,908
    
    
    
    142,891
    
    
    
    139,530
    
    
    
    3,361Noninterest expense:Compensation and employee benefits
    
    
    252,933
    
    
    
    205,964
    
    
    
    137,987
    
    
    
    67,977Occupancy
    
    
    51,044
    
    
    
    35,968
    
    
    
    24,557
    
    
    
    11,411Equipment
    
    
    31,416
    
    
    
    25,819
    
    
    
    17,379
    
    
    
    8,440Data processing
    
    
    31,021
    
    
    
    22,652
    
    
    
    15,419
    
    
    
    7,233Advertising and marketing
    
    
    18,197
    
    
    
    14,781
    
    
    
    10,408
    
    
    
    4,373Amortization of identifiable intangible assets
    
    
    77,174
    
    
    
    43,152
    
    
    
    41,591
    
    
    
    1,561Merger and restructuring costs
    
    
    34,401
    
    
    
    36,559
    
    
    
    9,295
    
    
    
    27,264Prepayment penalties on borrowings
    
    
    
    
    
    
    6,303
    
    
    
    3
    
    
    
    6,300Other noninterest expense
    
    
    66,918
    
    
    
    52,244
    
    
    
    36,357
    
    
    
    15,887563,104
    
    
    
    443,442
    
    
    
    292,996
    
    
    
    150,446Income before income tax expense
    
    
    255,462
    
    
    
    199,149
    
    
    
    182,519
    
    
    
    16,630Provision for income taxes
    
    
    83,203
    
    
    
    69,478
    
    
    
    63,296
    
    
    
    6,182Income from continuing operations
    
    
    172,259
    
    
    
    129,671
    
    
    
    119,223
    
    
    
    10,448Discontinued operationsLoss from discontinued operations
    
    
    (4,807
    )
    
    
    
    
    
    
    
    
    
    
    Income tax benefit
    
    
    2,141
    
    
    
    
    
    
    
    
    
    
    
    Loss from discontinued operations, net of tax
    
    
    (2,666
    )
    
    
    
    
    
    
    
    
    
    
    Net income
    
    $
    169,593
    
    
    $
    129,671
    
    
    $
    119,223
    
    
    $
    10,448Basic earnings per shareIncome from continuing operations
    
    $
    0.79
    
    
    $
    0.73Loss from discontinued operations, net of tax
    
    ($
    0.02
    )
    
    
    Net Income
    
    $
    0.77
    
    
    $
    0.73Diluted earnings per shareIncome from continuing operations
    
    $
    0.78
    
    
    $
    0.72Loss from discontinued operations, net of tax
    
    ($
    0.01
    )
    
    
    Net Income
    
    $
    0.77
    
    
    $
    0.72
 Acquisitions
  24




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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
  Table 3  Selected Quarterly Data
  2006
    
    
    2005Second
    
    
    First
    
    
    Fourth
    
    
    Third
    
    
    SecondCondensed Income StatementInterest income
    
    
    
    
    
    $
    492,823
    
    
    $
    456,499
    
    
    $
    363,917
    
    
    $
    350,679
    
    
    $
    342,447Interest expense
    
    
    
    
    
    
    185,990
    
    
    
    174,055
    
    
    
    120,477
    
    
    
    101,682
    
    
    
    89,819Net interest income
    
    
    (A
    )
    
    
    306,833
    
    
    
    282,444
    
    
    
    243,440
    
    
    
    248,997
    
    
    
    252,628Provision for loan and lease losses
    
    
    
    
    
    
    8,719
    
    
    
    6,900
    
    
    
    6,000
    
    
    
    5,500
    
    
    
    3,597Net interest income after provision
for loan and lease losses
    
    
    
    
    
    
    298,114
    
    
    
    275,544
    
    
    
    237,440
    
    
    
    243,497
    
    
    
    249,031Noninterest income (1)
    
    
    (B
    )
    
    
    127,068
    
    
    
    117,839
    
    
    
    60,097
    
    
    
    103,607
    
    
    
    117,272Noninterest expense, excluding merger and
restructuring costs
    
    
    (C
    )
    
    
    271,485
    
    
    
    257,218
    
    
    
    210,700
    
    
    
    210,566
    
    
    
    214,965Merger and restructuring costs
    
    
    (D
    )
    
    
    14,583
    
    
    
    19,818
    
    
    
    4,957
    
    
    
    1,163
    
    
    
    5,368Income before income taxes
    
    
    
    
    
    
    139,114
    
    
    
    116,347
    
    
    
    81,880
    
    
    
    135,375
    
    
    
    145,970Income tax expense
    
    
    
    
    
    
    44,405
    
    
    
    38,799
    
    
    
    26,315
    
    
    
    46,634
    
    
    
    50,375Loss from discontinued operations, net of tax
    
    
    
    
    
    
    (1,323
    )
    
    
    (1,342
    )
    
    
    
    
    
    
    
    
    
    
    Net income
    
    
    
    
    
    $
    93,386
    
    
    $
    76,206
    
    
    $
    55,565
    
    
    $
    88,741
    
    
    $
    95,595Weighted average shares outstanding:Basic
    
    
    
    
    
    
    228,130
    
    
    
    209,690
    
    
    
    173,745
    
    
    
    173,661
    
    
    
    173,428Diluted
    
    
    
    
    
    
    228,777
    
    
    
    210,444
    
    
    
    174,427
    
    
    
    174,398
    
    
    
    174,261Basic earnings per shareIncome from continuing operations
    
    
    
    
    
    $
    0.42
    
    
    $
    0.37
    
    
    $
    0.32
    
    
    $
    0.51
    
    
    $
    0.55Loss from discontinued operations, net
    
    
    
    
    
    ($
    0.01
    )
    
    ($
    0.01
    )
    
    $
    0.00
    
    
    $
    0.00
    
    
    $
    0.00Net income
    
    
    
    
    
    $
    0.41
    
    
    $
    0.36
    
    
    $
    0.32
    
    
    $
    0.51
    
    
    $
    0.55Diluted earnings per shareIncome from continuing operations
    
    
    
    
    
    $
    0.41
    
    
    $
    0.37
    
    
    $
    0.32
    
    
    $
    0.51
    
    
    $
    0.55Loss from discontinued operations, net
    
    
    
    
    
    $
    0.00
    
    
    ($
    0.01
    )
    
    $
    0.00
    
    
    $
    0.00
    
    
    $
    0.00Net income
    
    
    
    
    
    $
    0.41
    
    
    $
    0.36
    
    
    $
    0.32
    
    
    $
    0.51
    
    
    $
    0.55Financial RatiosReturn on average assets (2)
    
    
    
    
    
    
    0.93
    %
    
    
    0.79
    %
    
    
    0.69
    %
    
    
    1.11
    %
    
    
    1.20
    %Return on average equity (2)
    
    
    
    
    
    
    4.58
    %
    
    
    4.07
    %
    
    
    3.42
    %
    
    
    5.44
    %
    
    
    5.98
    %Net interest margin (fully-taxable equivalent) (2)
    
    
    
    
    
    
    4.07
    %
    
    
    3.83
    %
    
    
    3.96
    %
    
    
    4.09
    %
    
    
    4.12
    %Noninterest income as a percent of total income (3)
    
    
    
    
    
    
    29.29
    %
    
    
    29.44
    %
    
    
    19.80
    %
    
    
    29.38
    %
    
    
    31.70
    %Efficiency ratio (4)
    
    
    
    
    
    
    65.93
    %
    
    
    69.21
    %
    
    
    71.05
    %
    
    
    60.05
    %
    
    
    59.57
    %Per Share DataBook value per share
    
    
    
    
    
    $
    35.93
    
    
    $
    35.80
    
    
    $
    37.34
    
    
    $
    37.23
    
    
    $
    37.33Dividends per share
    
    
    
    
    
    $
    0.22
    
    
    $
    0.22
    
    
    $
    0.22
    
    
    $
    0.22
    
    
    $
    0.20
 
 (1)
    
    Noninterest income included net securities losses of $45 million in the fourth quarter of 2005
as part of the balance sheet restructuring/deleveraging program.(2)
    
    Annualized.(3)
    
    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).(4)
    
    Represents noninterest expense as a percentage of net interest income and noninterest income.
Efficiency ratio is calculated as (C+D) divided by (A+B). 25




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##### Table of Contents



Net Interest Income and Margin
  1 4
  
    
    Loans representing a higher percentage of average earning assets (loans comprised 84% of
average earning assets during the second quarter of 2006 compared to 81% during the second
quarter of 2005); and
    
    a reduction in borrowings as a percent of total interest-bearing liabilities (borrowings
comprised 18% of average interest-bearing liabilities during the second quarter of 2006
compared to 25% during the first quarter of 2005).
   26




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##### Table of Contents



Table 4  Average Balances, Yields and Rates
 Successor
    
    
    Successor2006 Second Quarter
    
    
    2005 Second QuarterYield/
    
    
    
    
    
    
    
    
    
    
    Yield/Average Balance
    
    
    Interest
    
    
    Rate (1)
    
    
    Average Balance
    
    
    Interest
    
    
    Rate (1)Loans and leases (2):Residential real estate mortgages
    
    $
    2,901,974
    
    
    $
    40,247
    
    
    
    5.55
    %
    
    $
    3,665,306
    
    
    $
    49,737
    
    
    
    5.43
    %Commercial real estate mortgages
    
    
    8,791,585
    
    
    
    151,573
    
    
    
    6.92
    %
    
    
    6,658,257
    
    
    
    97,389
    
    
    
    5.87
    %Commercial business loans and leases
    
    
    6,456,262
    
    
    
    114,963
    
    
    
    7.18
    %
    
    
    4,162,669
    
    
    
    59,336
    
    
    
    5.72
    %Consumer loans and leases
    
    
    7,170,723
    
    
    
    115,074
    
    
    
    6.44
    %
    
    
    5,686,240
    
    
    
    83,620
    
    
    
    5.90
    %Credit card receivables
    
    
    403,101
    
    
    
    12,562
    
    
    
    12.50
    %
    
    
    
    
    
    
    
    
    
    
    Total loans and leases
    
    
    25,723,645
    
    
    
    434,419
    
    
    
    6.78
    %
    
    
    20,172,472
    
    
    
    290,082
    
    
    
    5.77
    %Investment securities (3)
    
    
    2,339,284
    
    
    
    30,606
    
    
    
    5.23
    %
    
    
    4,578,749
    
    
    
    54,060
    
    
    
    4.72
    %Securities purchased under agreements to resell
    
    
    2,426,434
    
    
    
    30,249
    
    
    
    4.93
    %
    
    
    
    
    
    
    
    
    
    
    Federal funds sold and other short-term investments
    
    
    11,349
    
    
    
    98
    
    
    
    3.48
    %
    
    
    12,574
    
    
    
    77
    
    
    
    2.44
    %Total earning assets
    
    
    30,500,712
    
    
    
    495,372
    
    
    
    6.51
    %
    
    
    24,763,795
    
    
    
    344,219
    
    
    
    5.57
    %Bank-owned life insurance
    
    
    769,784
    
    
    
    
    
    
    
    
    
    
    
    557,665Goodwill
    
    
    6,016,959
    
    
    
    
    
    
    
    
    
    
    
    4,536,952Indentifiable intangible assets
    
    
    833,508
    
    
    
    
    
    
    
    
    
    
    
    746,331Other noninterest-earning assets
    
    
    2,136,123
    
    
    
    
    
    
    
    
    
    
    
    1,403,735Total assets
    
    $
    40,257,086
    
    
    
    
    
    
    
    
    
    
    $
    32,008,478Interest-bearing deposits:Regular savings
    
    $
    4,336,225
    
    
    
    14,042
    
    
    
    1.30
    %
    
    $
    2,696,236
    
    
    
    1,973
    
    
    
    0.29
    %NOW and money market accounts
    
    
    9,837,884
    
    
    
    62,086
    
    
    
    2.53
    %
    
    
    8,031,408
    
    
    
    24,425
    
    
    
    1.22
    %Certificates of deposit
    
    
    6,649,366
    
    
    
    55,480
    
    
    
    3.35
    %
    
    
    4,786,696
    
    
    
    20,998
    
    
    
    1.76
    %Brokered deposits
    
    
    256,872
    
    
    
    3,174
    
    
    
    4.96
    %
    
    
    76,441
    
    
    
    731
    
    
    
    3.84
    %Deposits in foreign office
    
    
    783
    
    
    
    8
    
    
    
    3.85
    %
    
    
    
    
    
    
    
    
    
    
    Total interest-bearing deposits
    
    
    21,081,130
    
    
    
    134,790
    
    
    
    2.56
    %
    
    
    15,590,781
    
    
    
    48,127
    
    
    
    1.24
    %Borrowed funds
    
    
    4,622,370
    
    
    
    51,200
    
    
    
    4.44
    %
    
    
    5,140,876
    
    
    
    41,692
    
    
    
    3.25
    %Total interest-bearing liabilities
    
    
    25,703,500
    
    
    
    185,990
    
    
    
    2.90
    %
    
    
    20,731,657
    
    
    
    89,819
    
    
    
    1.74
    %Non-interest bearing deposits
    
    
    5,682,032
    
    
    
    
    
    
    
    
    
    
    
    4,351,905Deferred tax liability related to
identifiable intangible assets
    
    
    333,871
    
    
    
    
    
    
    
    
    
    
    
    264,676Other liabilities
    
    
    353,817
    
    
    
    
    
    
    
    
    
    
    
    244,650Shareholders equity
    
    
    8,183,866
    
    
    
    
    
    
    
    
    
    
    
    6,415,590Total liabilities and shareholders equity
    
    $
    40,257,086
    
    
    
    
    
    
    
    
    
    
    $
    32,008,478Net earning assets
    
    $
    4,797,212
    
    
    
    
    
    
    
    
    
    
    $
    4,032,138Net interest income (fully-taxable equivalent)
    
    
    
    
    
    
    309,382
    
    
    
    
    
    
    
    
    
    
    
    254,400Less: fully-taxable equivalent adjustments
    
    
    
    
    
    
    (2,549
    )
    
    
    
    
    
    
    
    
    
    
    (1,772
    )Net interest income
    
    
    
    
    
    $
    306,833
    
    
    
    
    
    
    
    
    
    
    $
    252,628Net interest rate spread (fully-taxable equivalent)
    
    
    
    
    
    
    
    
    
    
    3.61
    %
    
    
    
    
    
    
    
    
    
    
    3.83
    %Net interest margin (fully-taxable equivalent)
    
    
    
    
    
    
    
    
    
    
    4.07
    %
    
    
    
    
    
    
    
    
    
    
    4.12
    %
 
 (1)
    
    Annualized.(2)
    
    Loans and leases include loans held for sale.(3)
    
    Includes securities available for sale and held to maturity. 27




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##### Table of Contents



Table 4  Average Balances, Yields and Rates
 Successor
    
    
    CombinedSix Months Ended
    
    
    Six Months EndedJune 30, 2006
    
    
    June 30, 2005Yield/
    
    
    
    
    
    
    
    
    
    
    Yield/Average Balance
    
    
    Interest
    
    
    Rate (1)
    
    
    Average Balance
    
    
    Interest
    
    
    Rate (1)Loans and leases (2):Residential real estate mortgages
    
    $
    2,909,401
    
    
    $
    80,517
    
    
    
    5.53
    %
    
    $
    3,735,498
    
    
    $
    98,533
    
    
    
    5.28
    %Commercial real estate mortgages
    
    
    8,396,305
    
    
    
    283,776
    
    
    
    6.82
    %
    
    
    6,553,657
    
    
    
    192,167
    
    
    
    5.91
    %Commercial business loans and leases
    
    
    6,110,198
    
    
    
    209,322
    
    
    
    6.94
    %
    
    
    4,091,063
    
    
    
    115,335
    
    
    
    5.68
    %Consumer loans and leases
    
    
    7,040,377
    
    
    
    220,542
    
    
    
    6.32
    %
    
    
    5,594,277
    
    
    
    157,858
    
    
    
    5.69
    %Credit card receivables
    
    
    323,636
    
    
    
    20,406
    
    
    
    12.71
    %
    
    
    
    
    
    
    
    
    
    
    Total loans and leases
    
    
    24,779,917
    
    
    
    814,563
    
    
    
    6.63
    %
    
    
    19,974,495
    
    
    
    563,893
    
    
    
    5.68
    %Investment securities (3)
    
    
    3,977,890
    
    
    
    101,913
    
    
    
    5.12
    %
    
    
    5,338,825
    
    
    
    125,556
    
    
    
    4.70
    %Securities purchased under agreements to resell
    
    
    1,511,080
    
    
    
    37,444
    
    
    
    4.93
    %
    
    
    
    
    
    
    
    
    
    
    Federal funds sold and other short-term investments
    
    
    13,255
    
    
    
    238
    
    
    
    3.63
    %
    
    
    12,003
    
    
    
    160
    
    
    
    2.69
    %Total earning assets
    
    
    30,282,142
    
    
    
    954,158
    
    
    
    6.35
    %
    
    
    25,325,323
    
    
    
    689,609
    
    
    
    5.48
    %Bank-owned life insurance
    
    
    733,925
    
    
    
    
    
    
    
    
    
    
    
    551,842Goodwill
    
    
    5,764,814
    
    
    
    
    
    
    
    
    
    
    
    3,532,889Indentifiable intangible assets
    
    
    817,615
    
    
    
    
    
    
    
    
    
    
    
    524,947Other noninterest-earning assets
    
    
    2,040,514
    
    
    
    
    
    
    
    
    
    
    
    1,424,746Total assets
    
    $
    39,639,010
    
    
    
    
    
    
    
    
    
    
    $
    31,359,747Interest-bearing deposits:Regular savings
    
    $
    4,023,863
    
    
    
    23,308
    
    
    
    1.17
    %
    
    $
    2,669,867
    
    
    
    3,854
    
    
    
    0.29
    %NOW and money market accounts
    
    
    9,507,085
    
    
    
    110,698
    
    
    
    2.35
    %
    
    
    8,059,616
    
    
    
    45,387
    
    
    
    1.14
    %Certificates of deposit
    
    
    6,438,869
    
    
    
    101,936
    
    
    
    3.19
    %
    
    
    4,742,817
    
    
    
    42,963
    
    
    
    1.83
    %Brokered deposits
    
    
    234,405
    
    
    
    5,521
    
    
    
    4.75
    %
    
    
    71,179
    
    
    
    1,365
    
    
    
    3.87
    %Deposits in foreign office
    
    
    394
    
    
    
    8
    
    
    
    3.85
    %
    
    
    
    
    
    
    
    
    
    
    Total interest-bearing deposits
    
    
    20,204,616
    
    
    
    241,471
    
    
    
    2.41
    %
    
    
    15,543,479
    
    
    
    93,569
    
    
    
    1.21
    %Borrowed funds
    
    
    5,448,586
    
    
    
    118,573
    
    
    
    4.38
    %
    
    
    5,644,617
    
    
    
    87,160
    
    
    
    3.11
    %Total interest-bearing liabilities
    
    
    25,653,202
    
    
    
    360,044
    
    
    
    2.83
    %
    
    
    21,188,096
    
    
    
    180,729
    
    
    
    1.72
    %Non-interest bearing deposits
    
    
    5,425,567
    
    
    
    
    
    
    
    
    
    
    
    4,287,179Deferred tax liability related to
identifiable intangible assets
    
    
    324,735
    
    
    
    
    
    
    
    
    
    
    
    134,551Other liabilities
    
    
    342,037
    
    
    
    
    
    
    
    
    
    
    
    297,194Shareholders equity
    
    
    7,893,469
    
    
    
    
    
    
    
    
    
    
    
    5,452,727Total liabilities and shareholders equity
    
    $
    39,639,010
    
    
    
    
    
    
    
    
    
    
    $
    31,359,747Net earning assets
    
    $
    4,628,940
    
    
    
    
    
    
    
    
    
    
    $
    4,137,227Net interest income (fully-taxable equivalent)
    
    
    
    
    
    
    594,114
    
    
    
    
    
    
    
    
    
    
    
    508,880Less: fully-taxable equivalent adjustments
    
    
    
    
    
    
    (4,837
    )
    
    
    
    
    
    
    
    
    
    
    (5,314
    )Net interest income
    
    
    
    
    
    $
    589,277
    
    
    
    
    
    
    
    
    
    
    $
    503,566Net interest rate spread (fully-taxable equivalent)
    
    
    
    
    
    
    
    
    
    
    3.52
    %
    
    
    
    
    
    
    
    
    
    
    3.76
    %Net interest margin (fully-taxable equivalent)
    
    
    
    
    
    
    
    
    
    
    3.95
    %
    
    
    
    
    
    
    
    
    
    
    4.04
    %
 
 (1)
    
    Annualized.(2)
    
    Loans and leases include loans held for sale.(3)
    
    Includes securities available for sale and held to maturity. 28




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##### Table of Contents



Table 5   Rate /Volume Analysis
 Three Months Ended
    
    
    Six Months EndedJune 30, 2006 (Successor) vs. Three Months Ended
    
    
    June 30, 2006 (Successor) vs. Six Months EndedJune 30, 2005 (Successor)
    
    
    June 30, 2005 (Combined)Increase (decrease) due to
    
    
    Increase (decrease) due toTotal
    
    
    
    
    
    
    
    
    
    
    TotalVolume (1)
    
    
    Rate
    
    
    Change
    
    
    Volume (1)
    
    
    Rate
    
    
    ChangeInterest income:Loans and leases
    
    $
    87,823
    
    
    $
    56,514
    
    
    $
    144,337
    
    
    $
    147,869
    
    
    $
    102,801
    
    
    $
    250,670Investment securities
    
    
    (30,105
    )
    
    
    6,651
    
    
    
    (23,454
    )
    
    
    (36,404
    )
    
    
    12,761
    
    
    
    (23,643
    )Securities purchased under agreements to resell
    
    
    30,249
    
    
    
    
    
    
    
    30,249
    
    
    
    37,444
    
    
    
    
    
    
    
    37,444Federal funds sold and
other short-term investements
    
    
    (2
    )
    
    
    23
    
    
    
    21
    
    
    
    9
    
    
    
    69
    
    
    
    78Total interest income
    
    
    87,965
    
    
    
    63,188
    
    
    
    151,153
    
    
    
    148,918
    
    
    
    115,631
    
    
    
    264,549Interest expense:Interest-bearing deposits:Regular savings
    
    
    1,795
    
    
    
    10,274
    
    
    
    12,069
    
    
    
    2,785
    
    
    
    16,669
    
    
    
    19,454NOW and money market accounts
    
    
    6,523
    
    
    
    31,138
    
    
    
    37,661
    
    
    
    9,452
    
    
    
    55,859
    
    
    
    65,311Certificates of deposit
    
    
    10,381
    
    
    
    24,101
    
    
    
    34,482
    
    
    
    19,158
    
    
    
    39,815
    
    
    
    58,973Brokered deposits
    
    
    2,175
    
    
    
    268
    
    
    
    2,443
    
    
    
    3,781
    
    
    
    375
    
    
    
    4,156Deposits in foreign office
    
    
    8
    
    
    
    
    
    
    
    8
    
    
    
    8
    
    
    
    
    
    
    
    8Total interest-bearing deposits
    
    
    20,882
    
    
    
    65,781
    
    
    
    86,663
    
    
    
    35,184
    
    
    
    112,718
    
    
    
    147,902Borrowed funds
    
    
    (3,614
    )
    
    
    13,122
    
    
    
    9,508
    
    
    
    (2,920
    )
    
    
    34,333
    
    
    
    31,413Total interest expense
    
    
    17,268
    
    
    
    78,903
    
    
    
    96,171
    
    
    
    32,264
    
    
    
    147,051
    
    
    
    179,315Net interest income (fully taxable equivalent)
    
    $
    70,697
    
    
    
    ($15,715
    )
    
    $
    54,982
    
    
    $
    116,654
    
    
    
    ($31,420
    )
    
    $
    85,234
 
 (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.  29




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##### Table of Contents



Table 6  Analysis of Net Interest Income
 Successor
    
    
    Successor
    
    
    
    
    
    
    Successor
    
    
    CombinedThree Months Ended
    
    
    Three Months Ended
    
    
    
    
    
    
    Six Months Ended
    
    
    Six Months EndedJune 30, 2006
    
    
    June 30, 2005
    
    
    Change
    
    
    June 30, 2006
    
    
    June 30, 2005
    
    
    ChangeComponents of net interest incomeIncome on earning assets (fully-taxable equivalent)
    
    $
    495,372
    
    
    $
    344,219
    
    
    $
    151,153
    
    
    $
    954,158
    
    
    $
    689,609
    
    
    $
    264,549Expense on interest-bearing liabilities
    
    
    185,990
    
    
    
    89,819
    
    
    
    96,171
    
    
    
    360,044
    
    
    
    180,729
    
    
    
    179,315Net interest income (fully-taxable equivalent)
    
    
    309,382
    
    
    
    254,400
    
    
    
    54,982
    
    
    
    594,114
    
    
    
    508,880
    
    
    
    85,234Less: fully-taxable equivalent adjustments
    
    
    (2,549
    )
    
    
    (1,772
    )
    
    
    (777
    )
    
    
    (4,837
    )
    
    
    (3,514
    )
    
    
    (1,323
    )Net interest income, as reported
    
    $
    306,833
    
    
    $
    252,628
    
    
    $
    54,205
    
    
    $
    589,277
    
    
    $
    505,366
    
    
    $
    83,911Average balancesLoans and leases
    
    $
    25,723,645
    
    
    $
    20,172,472
    
    
    $
    5,551,173
    
    
    $
    24,779,917
    
    
    $
    19,974,495
    
    
    $
    4,805,422Investment securities
    
    
    2,339,284
    
    
    
    4,578,749
    
    
    
    (2,239,465
    )
    
    
    3,977,890
    
    
    
    5,338,825
    
    
    
    (1,360,935
    )Securities purchased under agreements to resell
    
    
    2,426,434
    
    
    
    
    
    
    
    2,426,434
    
    
    
    1,511,080
    
    
    
    
    
    
    
    1,511,080Federal funds sold and other short-term investments
    
    
    11,349
    
    
    
    12,574
    
    
    
    (1,225
    )
    
    
    13,255
    
    
    
    12,003
    
    
    
    1,252Total earning assets
    
    
    30,500,712
    
    
    
    24,763,795
    
    
    
    5,736,917
    
    
    
    30,282,142
    
    
    
    25,325,323
    
    
    
    4,956,819Total interest-bearing liabilities
    
    
    25,703,500
    
    
    
    20,731,657
    
    
    
    4,971,843
    
    
    
    25,653,202
    
    
    
    21,188,096
    
    
    
    4,465,106Net earning assets
    
    $
    4,797,212
    
    
    $
    4,032,138
    
    
    $
    765,074
    
    
    $
    4,628,940
    
    
    $
    4,137,227
    
    
    $
    491,713Average yields and rates paidEarning assets yield (fully-taxable equivalent)
    
    
    6.51
    %
    
    
    5.57
    %
    
    
    0.94
    %
    
    
    6.35
    %
    
    
    5.48
    %
    
    
    0.87
    %Rate paid on interest-bearing liabilities
    
    
    2.90
    %
    
    
    1.74
    %
    
    
    1.16
    %
    
    
    2.83
    %
    
    
    1.72
    %
    
    
    1.11
    %Net interest rate spread (fully-taxable equivalent)
    
    
    3.61
    %
    
    
    3.83
    %
    
    
    (0.22
    %)
    
    
    3.52
    %
    
    
    3.76
    %
    
    
    (0.24
    %)Net interest margin (fully-taxable equivalent)
    
    
    4.07
    %
    
    
    4.12
    %
    
    
    (0.05
    %)
    
    
    3.95
    %
    
    
    4.04
    %
    
    
    (0.09
    %)
 Provision and Allowance for Loan and Lease Losses
   Noninterest Income
   30




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##### Table of Contents



Table 7  Noninterest Income
 Successor
    
    
    Successor
    
    
    
    
    
    
    
    
    
    
    Successor
    
    
    CombinedThree Months Ended
    
    
    Three Months Ended
    
    
    Change
    
    
    Six Months Ended
    
    
    Six Months Ended
    
    
    ChangeJune 30, 2006
    
    
    June 30, 2005
    
    
    Amount
    
    
    Percent
    
    
    June 30, 2006
    
    
    June 30, 2005
    
    
    Amount
    
    
    PercentNoninterest income:Deposit services
    
    $
    42,626
    
    
    $
    31,751
    
    
    $
    10,875
    
    
    
    34
    %
    
    $
    81,105
    
    
    $
    59,935
    
    
    $
    21,170
    
    
    
    35
    %Insurance agency commissions
    
    
    14,551
    
    
    
    13,604
    
    
    
    947
    
    
    
    7
    %
    
    
    30,390
    
    
    
    27,496
    
    
    
    2,894
    
    
    
    11
    %Merchant and electronic banking income, net
    
    
    18,155
    
    
    
    14,727
    
    
    
    3,428
    
    
    
    23
    %
    
    
    33,792
    
    
    
    27,841
    
    
    
    5,951
    
    
    
    21
    %Wealth management services
    
    
    11,735
    
    
    
    10,395
    
    
    
    1,340
    
    
    
    13
    %
    
    
    23,083
    
    
    
    20,899
    
    
    
    2,184
    
    
    
    10
    %Bank-owned life insurance
    
    
    8,103
    
    
    
    6,107
    
    
    
    1,996
    
    
    
    33
    %
    
    
    15,391
    
    
    
    12,203
    
    
    
    3,188
    
    
    
    26
    %Investment planning services
    
    
    5,359
    
    
    
    5,462
    
    
    
    (103
    )
    
    
    (2
    %)
    
    
    10,501
    
    
    
    10,150
    
    
    
    351
    
    
    
    3
    %Net securities gains (losses)
    
    
    81
    
    
    
    1,439
    
    
    
    (1,358
    )
    
    
    (94
    %)
    
    
    (10
    )
    
    
    (49,036
    )
    
    
    49,026
    
    
    
    (100
    %)Loans held for sale  lower of cost or
market adjustment
    
    
    
    
    
    
    386
    
    
    
    (386
    )
    
    
    (100
    %)
    
    
    
    
    
    
    (7,114
    )
    
    
    7,114
    
    
    
    (100
    %)Change in unrealized loss on derivatives
    
    
    
    
    
    
    14,840
    
    
    
    (14,840
    )
    
    
    (100
    %)
    
    
    
    
    
    
    6,664
    
    
    
    (6,664
    )
    
    
    (100
    %)Other noninterest income:Loan fee income
    
    
    15,524
    
    
    
    8,891
    
    
    
    6,633
    
    
    
    75
    %
    
    
    27,917
    
    
    
    15,812
    
    
    
    12,105
    
    
    
    77
    %Income on restricted stock
    
    
    3,339
    
    
    
    2,202
    
    
    
    1,137
    
    
    
    52
    %
    
    
    7,921
    
    
    
    4,598
    
    
    
    3,323
    
    
    
    72
    %Mortgage banking services income
    
    
    1,326
    
    
    
    2,330
    
    
    
    (1,004
    )
    
    
    (43
    %)
    
    
    2,560
    
    
    
    3,657
    
    
    
    (1,097
    )
    
    
    (30
    %)Venture capital income (loss)
    
    
    434
    
    
    
    10
    
    
    
    424
    
    
    
    N/M
    
    
    
    942
    
    
    
    (393
    )
    
    
    1,335
    
    
    
    (340
    %)Covered call option premiums
    
    
    
    
    
    
    1,058
    
    
    
    (1,058
    )
    
    
    (100
    %)
    
    
    922
    
    
    
    4,128
    
    
    
    (3,206
    )
    
    
    (78
    %)Miscellaneous income
    
    
    5,835
    
    
    
    4,070
    
    
    
    1,765
    
    
    
    43
    %
    
    
    10,394
    
    
    
    6,051
    
    
    
    4,343
    
    
    
    72
    %Total other noninterest income
    
    
    26,458
    
    
    
    18,561
    
    
    
    7,897
    
    
    
    43
    %
    
    
    50,656
    
    
    
    33,853
    
    
    
    16,803
    
    
    
    50
    %Total noninterest income
    
    $
    127,068
    
    
    $
    117,272
    
    
    $
    9,796
    
    
    
    8
    %
    
    $
    244,908
    
    
    $
    142,891
    
    
    $
    102,017
    
    
    
    71
    %
 
 N/M
    
    - not meaningful     31




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##### Table of Contents



Noninterest Expense
   32




---



##### Table of Contents



Table 8  Noninterest Expense
 Successor
    
    
    Successor
    
    
    
    
    
    
    
    
    
    
    Successor
    
    
    CombinedThree Months Ended
    
    
    Three Months Ended
    
    
    Change
    
    
    Six Months Ended
    
    
    Six Months Ended
    
    
    ChangeJune 30, 2006
    
    
    June 30, 2005
    
    
    Amount
    
    
    Percent
    
    
    June 30, 2006
    
    
    June 30, 2005
    
    
    Amount
    
    
    PercentNoninterest expense:Compensation and employee benefits
    
    $
    127,722
    
    
    $
    105,096
    
    
    $
    22,626
    
    
    
    22
    %
    
    $
    252,933
    
    
    $
    205,964
    
    
    $
    46,969
    
    
    
    23
    %Occupancy
    
    
    26,748
    
    
    
    18,066
    
    
    
    8,682
    
    
    
    48
    %
    
    
    51,044
    
    
    
    35,968
    
    
    
    15,076
    
    
    
    42
    %Equipment
    
    
    16,532
    
    
    
    12,982
    
    
    
    3,550
    
    
    
    27
    %
    
    
    31,416
    
    
    
    25,819
    
    
    
    5,597
    
    
    
    22
    %Data processing
    
    
    15,787
    
    
    
    11,618
    
    
    
    4,169
    
    
    
    36
    %
    
    
    31,021
    
    
    
    22,652
    
    
    
    8,369
    
    
    
    37
    %Advertising and marketing
    
    
    10,006
    
    
    
    8,087
    
    
    
    1,919
    
    
    
    24
    %
    
    
    18,197
    
    
    
    14,781
    
    
    
    3,416
    
    
    
    23
    %Amortization
of identifiable intangible assets
    
    
    39,508
    
    
    
    31,656
    
    
    
    7,852
    
    
    
    25
    %
    
    
    77,174
    
    
    
    43,152
    
    
    
    34,022
    
    
    
    79
    %Merger and restructuring costs
    
    
    14,583
    
    
    
    5,368
    
    
    
    9,215
    
    
    
    172
    %
    
    
    34,401
    
    
    
    36,559
    
    
    
    (2,158
    )
    
    
    (6
    %)Prepayment penalties on borrowings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    N/M
    
    
    
    
    
    
    
    6,303
    
    
    
    (6,303
    )
    
    
    (100
    %)Other noninterest expense:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Professional fees
    
    
    6,282
    
    
    
    5,702
    
    
    
    580
    
    
    
    10
    %
    
    
    11,791
    
    
    
    10,886
    
    
    
    905
    
    
    
    8
    %Telephone
    
    
    4,809
    
    
    
    3,287
    
    
    
    1,522
    
    
    
    46
    %
    
    
    8,741
    
    
    
    6,984
    
    
    
    1,757
    
    
    
    25
    %Office supplies
    
    
    4,086
    
    
    
    3,042
    
    
    
    1,044
    
    
    
    34
    %
    
    
    7,147
    
    
    
    5,620
    
    
    
    1,527
    
    
    
    27
    %Postage and freight
    
    
    4,092
    
    
    
    2,880
    
    
    
    1,212
    
    
    
    42
    %
    
    
    7,763
    
    
    
    5,754
    
    
    
    2,009
    
    
    
    35
    %Courier
    
    
    2,893
    
    
    
    1,675
    
    
    
    1,218
    
    
    
    73
    %
    
    
    5,297
    
    
    
    3,202
    
    
    
    2,095
    
    
    
    65
    %Miscellaneous loan costs
    
    
    1,508
    
    
    
    1,359
    
    
    
    149
    
    
    
    11
    %
    
    
    2,713
    
    
    
    2,644
    
    
    
    69
    
    
    
    3
    %Deposits and other assessments
    
    
    1,326
    
    
    
    1,070
    
    
    
    256
    
    
    
    24
    %
    
    
    2,567
    
    
    
    2,146
    
    
    
    421
    
    
    
    20
    %Miscellaneous
    
    
    10,186
    
    
    
    8,445
    
    
    
    1,741
    
    
    
    21
    %
    
    
    20,899
    
    
    
    15,008
    
    
    
    5,891
    
    
    
    39
    %Total other noninterest expense
    
    
    35,182
    
    
    
    27,460
    
    
    
    7,722
    
    
    
    28
    %
    
    
    66,918
    
    
    
    52,244
    
    
    
    14,674
    
    
    
    28
    %Total noninterest expense
    
    $
    286,068
    
    
    $
    220,333
    
    
    $
    65,735
    
    
    
    30
    %
    
    $
    563,104
    
    
    $
    443,442
    
    
    $
    119,662
    
    
    
    27
    %
 
 N/M
    
    - not meaningful      33




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##### Table of Contents



Discontinued Operations
  Taxes
   Comprehensive Income
  34




---



##### Table of Contents



FINANCIAL CONDITION
   Securities Purchased under Agreements to Resell
  Securities
   35




---



##### Table of Contents



Loans and Leases
       Deposits
  36




---



##### Table of Contents



Other Funding Sources
     37




---



##### Table of Contents



Table 9   Subordinated Debt
 Issuance
    
    Balance at
    
    Interest
    
    MaturityDate
    
    6/30/2006
    
    Rate
    
    DateSeptember 20, 2005
    
    $
    241,892
    (1)
    
    
    5.05
    %
    
    9/20/2022May 6, 2002
    
    
    216,191
    
    
    
    7.00
    %
    
    5/6/2012June 22, 2001
    
    
    222,750
    
    
    
    7.63
    %
    
    6/15/2011September 1, 1996
    
    
    24,708
    
    
    
    8.20
    %
    
    9/1/2006$
    705,541
 
 (1)
    
    Represents Can$270 million of TD Banknorth notes which are unconditionally guaranteed by The Toronto-Dominion Bank.  Off-Balance Sheet Arrangements
    38




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##### Table of Contents



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
    
    $
    1,484,536
    
    
    $
    122,096
    
    
    $
    236,806
    
    
    $
    51,308
    
    
    $
    1,074,326Capital lease obligations
    
    
    6,150
    
    
    
    161
    
    
    
    1,179
    
    
    
    1,508
    
    
    
    3,302Total long-term debt
    
    
    1,490,686
    
    
    
    122,257
    
    
    
    237,985
    
    
    
    52,816
    
    
    
    1,077,628Operating lease obligations
    
    
    202,939
    
    
    
    40,085
    
    
    
    65,565
    
    
    
    42,387
    
    
    
    54,902Pension plan contribution  estimated (2)
    
    
    30,311
    
    
    
    30,311
    
    
    
    
    
    
    
    
    
    
    
    Other benefit plan payments  estimated
    
    
    61,289
    
    
    
    4,581
    
    
    
    11,130
    
    
    
    19,099
    
    
    
    26,479Other vendor obligations (3)
    
    
    76,298
    
    
    
    12,567
    
    
    
    6,405
    
    
    
    6,696
    
    
    
    50,630Total contractual obligations
    
    $
    1,861,523
    
    
    $
    209,801
    
    
    $
    321,085
    
    
    $
    120,998
    
    
    $
    1,209,639
 
 (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. 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
    
    $
    7,841,119
    
    
    $
    3,084,583
    
    
    $
    753,338
    
    
    $
    343,647
    
    
    $
    3,659,551Standby letters of credit
    
    
    595,217
    
    
    
    172,192
    
    
    
    119,290
    
    
    
    84,733
    
    
    
    219,002Commercial letters of credit
    
    
    10,559
    
    
    
    5,096
    
    
    
    377
    
    
    
    57
    
    
    
    5,029Commitments to originate loans
    
    
    2,670,649
    
    
    
    1,531,913
    
    
    
    616,449
    
    
    
    183,473
    
    
    
    338,814Other commitments
    
    
    238,441
    
    
    
    11,130
    
    
    
    11,136
    
    
    
    5,571
    
    
    
    210,604Total commitments
    
    $
    11,355,985
    
    
    $
    4,804,914
    
    
    $
    1,500,590
    
    
    $
    617,481
    
    
    $
    4,433,000
 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)
    
    $
    1,538,986
    
    
    $
    8,159
    
    
    $
    157,101
    
    
    $
    254,975
    
    
    $
    1,118,751Interest rate swaps with dealers (2)
    
    
    1,538,986
    
    
    
    8,159
    
    
    
    157,101
    
    
    
    254,975
    
    
    
    1,118,751Interest rate caps with commercial borrowers
    
    
    49,415
    
    
    
    
    
    
    
    24,830
    
    
    
    4,526
    
    
    
    20,059Interest rate caps with dealers
    
    
    49,415
    
    
    
    
    
    
    
    24,830
    
    
    
    4,526
    
    
    
    20,059Cross currency swap (USD) (3)
    
    
    228,620
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    228,620Total return swap
    
    
    26,425
    
    
    
    
    
    
    
    26,425Interest rate swaps
    
    
    1,120,000
    
    
    
    700,000
    
    
    
    75,000
    
    
    
    
    
    
    
    345,000Forward commitments to sell loans
    
    
    38,389
    
    
    
    38,389Foreign currency rate contracts: (4)Forward contracts with customers
    
    
    123,262
    
    
    
    70,154
    
    
    
    50,664
    
    
    
    2,444Forward contracts with dealers
    
    
    123,262
    
    
    
    70,154
    
    
    
    50,664
    
    
    
    2,444Foreign Exchange OptionsOptions with customers
    
    
    1,800
    
    
    
    1,800Options with dealers
    
    
    1,800
    
    
    
    1,800Rate-locked loan commitments
    
    
    66,573
    
    
    
    66,573
 
 (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. See Derivatives Insturments below.(4)
    
    Forward contracts for customer accommodations. 39




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##### Table of Contents



Shareholders Equity
    RISK MANAGEMENT
   CREDIT RISK MANAGEMENT
 General
  40




---



##### Table of Contents



Table 11  Composition of Loans and Leases
 June 30, 2006
    
    
    December 31, 2005Percent nonperforming
    
    
    
    
    
    
    
    
    
    
    Percent nonperformingPercent
    
    
    and accruing 90 days or more
    
    
    
    
    
    
    Percent
    
    
    and accruing 90 days or moreAmount
    
    
    of Loans
    
    
    overdue
    
    
    Amount
    
    
    of Loans
    
    
    overdueResidential real estate mortgages
    
    $
    2,862,331
    
    
    
    11
    %
    
    
    0.48
    %
    
    $
    2,878,323
    
    
    
    14
    %
    
    
    0.40
    %Commercial real estate mortgages
    
    
    8,752,137
    
    
    
    34
    %
    
    
    0.40
    %
    
    
    6,776,837
    
    
    
    34
    %
    
    
    0.37
    %Commercial business loans and leases
    
    
    6,593,276
    
    
    
    25
    %
    
    
    0.54
    %
    
    
    4,278,048
    
    
    
    21
    %
    
    
    0.48
    %Consumer loans and leases
    
    
    7,186,526
    
    
    
    28
    %
    
    
    0.13
    %
    
    
    6,186,519
    
    
    
    31
    %
    
    
    0.16
    %Credit card receivables
    
    
    428,517
    
    
    
    2
    %
    
    
    1.38
    %
    
    
    
    
    
    
    
    
    
    
    $
    25,822,787
    
    
    
    100
    %
    
    
    0.39
    %
    
    $
    20,119,727
    
    
    
    100
    %
    
    
    0.34
    %
      Table 12  Composition of Consumer Loans and Leases
 June 30,
    
    
    December 31,2006
    
    
    2005
    
    
    Change% of
    
    
    
    
    
    
    % ofAmount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    Amount
    
    
    PercentHome equity loans and lines
    
    $
    4,237,881
    
    
    
    58.97
    %
    
    $
    3,648,033
    
    
    
    58.96
    %
    
    $
    589,848
    
    
    
    16.17
    %Automobile
    
    
    2,558,206
    
    
    
    35.60
    %
    
    
    2,020,774
    
    
    
    32.66
    %
    
    
    537,432
    
    
    
    26.60
    %Education
    
    
    71,301
    
    
    
    0.99
    %
    
    
    202,044
    
    
    
    3.27
    %
    
    
    (130,743
    )
    
    
    (64.71
    %)Mobile home
    
    
    92,583
    
    
    
    1.29
    %
    
    
    88,519
    
    
    
    1.43
    %
    
    
    4,064
    
    
    
    4.59
    %Other
    
    
    226,555
    
    
    
    3.15
    %
    
    
    227,149
    
    
    
    3.68
    %
    
    
    (594
    )
    
    
    (0.26
    %)Total
    
    $
    7,186,526
    
    
    
    100.00
    %
    
    $
    6,186,519
    
    
    
    100.00
    %
    
    $
    1,000,007
    
    
    
    16.16
    %
 41




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##### Table of Contents



Nonperforming Assets
     42




---



##### Table of Contents



Table 13  Nonperforming Assets
 2006
    
    
    2005June 30
    
    
    March 31
    
    
    December 31
    
    
    September 30
    
    
    June 30Nonaccrual loans and leases:Residential real estate loans
    
    $
    10,714
    
    
    $
    9,827
    
    
    
    $  7,970
    
    
    
    $  6,531
    
    
    $
    6,165Commercial real estate loans
    
    
    35,439
    
    
    
    31,192
    
    
    
    25,219
    
    
    
    29,224
    
    
    
    30,353Commercial business loans and leases
    
    
    35,768
    
    
    
    31,460
    
    
    
    20,211
    
    
    
    21,306
    
    
    
    26,776Consumer loans and leases
    
    
    7,123
    
    
    
    6,090
    
    
    
    7,165
    
    
    
    6,899
    
    
    
    6,816Total nonaccrual loans and leases
    
    
    89,044
    
    
    
    78,569
    
    
    
    60,565
    
    
    
    63,960
    
    
    
    70,110Other nonperforming assets:Other real estate owned, net of related reserves
    
    
    1,076
    
    
    
    10,928
    
    
    
    234
    
    
    
    1,554
    
    
    
    2,101Repossessions, net of related reserves
    
    
    1,083
    
    
    
    1,173
    
    
    
    736
    
    
    
    1,375
    
    
    
    1,695Total other nonperforming assets
    
    
    2,159
    
    
    
    12,101
    
    
    
    970
    
    
    
    2,929
    
    
    
    3,796Total nonperforming assets
    
    $
    91,203
    
    
    $
    90,670
    
    
    $
    61,535
    
    
    $
    66,889
    
    
    $
    73,906Accruing loans and leases 90 days or more overdue:Credit card receivables
    
    $
    5,900
    
    
    $
    6,351
    
    
    
    $      
    
    
    
    $      
    
    
    $
    Other loans
    
    
    5,646
    
    
    
    6,583
    
    
    
    6,887
    
    
    
    6,489
    
    
    
    6,122Total accruing loans and leases 90 days or more overdue
    
    $
    11,546
    
    
    $
    12,934
    
    
    
    $6,887
    
    
    
    $6,489
    
    
    $
    6,122Total nonperforming loans as a percentage of total
loans and leases(1)
    
    
    0.34
    %
    
    
    0.31
    %
    
    
    0.30
    %
    
    
    0.32
    %
    
    
    0.35
    %Total nonperforming assets as a percentage of total assets
    
    
    0.23
    %
    
    
    0.22
    %
    
    
    0.19
    %
    
    
    0.21
    %
    
    
    0.23
    %Total nonperforming assets as a percentage of total loans
and leases and total other nonperforming assets (1)
    
    
    0.35
    %
    
    
    0.35
    %
    
    
    0.31
    %
    
    
    0.33
    %
    
    
    0.37
    %
 
 (1)
    
    Total loans and leases exclude residential real estate loans held for sale.  Net Charge-offs
  43




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##### Table of Contents



Table 14  Allowance for Credit Losses
 2006 Second
    
    
    2006 First
    
    
    2005 Fourth
    
    
    2005 Third
    
    
    2005 SecondQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterAllowance for loan and lease losses at beginning of period
    
    $
    276,342
    
    
    $
    223,030
    
    
    $
    228,334
    
    
    $
    228,168
    
    
    $
    228,165Additions due to acquisitions
    
    
    
    
    
    
    52,563
    
    
    
    
    
    
    
    
    
    
    
    Charge-offs:Residential real estate mortgages
    
    
    42
    
    
    
    128
    
    
    
    89
    
    
    
    17
    
    
    
    93Commercial real estate mortgages
    
    
    447
    
    
    
    95
    
    
    
    315
    
    
    
    2,194
    
    
    
    271Commercial business loans and leases
    
    
    3,328
    
    
    
    1,583
    
    
    
    5,092
    
    
    
    2,828
    
    
    
    1,366Consumer loans and leases
    
    
    5,647
    
    
    
    7,081
    
    
    
    8,479
    
    
    
    6,716
    
    
    
    5,313Credit card receivables
    
    
    4,386
    
    
    
    3,305
    
    
    
    
    
    
    
    
    
    
    
    Total loans and leases charged off
    
    
    13,850
    
    
    
    12,192
    
    
    
    13,975
    
    
    
    11,755
    
    
    
    7,043Recoveries:Residential real estate mortgages
    
    
    105
    
    
    
    17
    
    
    
    102
    
    
    
    142
    
    
    
    4Commercial real estate mortgages
    
    
    564
    
    
    
    101
    
    
    
    345
    
    
    
    477
    
    
    
    663Commercial business loans and leases
    
    
    1,227
    
    
    
    3,167
    
    
    
    738
    
    
    
    2,825
    
    
    
    1,595Consumer loans and leases
    
    
    2,243
    
    
    
    2,096
    
    
    
    1,486
    
    
    
    1,977
    
    
    
    1,187Credit card receivables
    
    
    1,011
    
    
    
    660
    
    
    
    
    
    
    
    
    
    
    
    Total loans and leases recovered
    
    
    5,150
    
    
    
    6,041
    
    
    
    2,671
    
    
    
    5,421
    
    
    
    3,449Net charge-offs
    
    
    8,700
    
    
    
    6,151
    
    
    
    11,304
    
    
    
    6,334
    
    
    
    3,594Provision for loan and lease losses
    
    
    8,719
    
    
    
    6,900
    
    
    
    6,000
    
    
    
    5,500
    
    
    
    3,597Specific reserves applied to reduce impaired loan carrying values
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    Allowance for loan and lease losses at end of period
    
    $
    276,361
    
    
    $
    276,342
    
    
    $
    223,030
    
    
    $
    228,334
    
    
    $
    228,168Total Allowance for Credit Losses:Allowance for loan and lease losses
    
    $
    276,361
    
    
    $
    276,342
    
    
    $
    223,030
    
    
    $
    228,334
    
    
    $
    228,168Liability for unfunded credit commitments
    
    
    8,507
    
    
    
    8,207
    
    
    
    7,907
    
    
    
    7,607
    
    
    
    6,807Total allowance for credit losses
    
    $
    284,868
    
    
    $
    284,549
    
    
    $
    230,937
    
    
    $
    235,941
    
    
    $
    234,975Ratio of net charge-offs to average loans and
leases outstanding during the period, annualized (1)
    
    
    0.14
    %
    
    
    0.10
    %
    
    
    0.22
    %
    
    
    0.13
    %
    
    
    0.07
    %Ratio of allowance for credit losses to total loans and leases
at end of period (1)
    
    
    1.10
    %
    
    
    1.11
    %
    
    
    1.15
    %
    
    
    1.18
    %
    
    
    1.17
    %Ratio of allowance for credit losses to nonperforming loans
and leases at end of period
    
    
    320
    %
    
    
    362
    %
    
    
    381
    %
    
    
    369
    %
    
    
    335
    %Ratio of net charge-offs (recoveries) as a percent of
average outstanding loans and leases, annualized (1):Residential real estate mortgages
    
    
    (0.009
    %)
    
    
    0.016
    %
    
    
    (0.002
    %)
    
    
    (0.015
    %)
    
    
    0.011
    %Commercial real estate mortgages
    
    
    (0.005
    %)
    
    
    0.000
    %
    
    
    (0.002
    %)
    
    
    0.101
    %
    
    
    (0.024
    %)Commercial business loans and leases
    
    
    0.131
    %
    
    
    (0.112
    %)
    
    
    0.413
    %
    
    
    0.000
    %
    
    
    (0.022
    %)Consumer loans and leases
    
    
    0.190
    %
    
    
    0.293
    %
    
    
    0.453
    %
    
    
    0.318
    %
    
    
    0.291
    %Credit card receivables
    
    
    3.358
    %
    
    
    4.409
    %
    
    
    0.000
    %
    
    
    0.000
    %
    
    
    0.000
    %Total portfolio loans and leases at end of period (1)
    
    $
    25,822,787
    
    
    $
    25,620,512
    
    
    $
    20,119,727
    
    
    $
    19,971,184
    
    
    $
    20,028,662Total nonperforming loans and leases at end of period
    
    
    89,044
    
    
    
    78,569
    
    
    
    60,565
    
    
    
    63,960
    
    
    
    70,110Average loans and leases outstanding
during theperiod (1)
    
    
    25,702,904
    
    
    
    23,770,023
    
    
    
    20,140,514
    
    
    
    20,021,651
    
    
    
    19,803,681
 
 (1)
    
    Excludes residential real estate loans held for sale. 44




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##### Table of Contents



Potential Problem Loans
  Analysis and Determination of the Allowance for Loan and Lease Losses
    ASSET-LIABILITY MANAGEMENT
  Managing Interest Rate Risk
   45




---



##### Table of Contents




    
    Evaluating and managing the impact of rising or falling interest rates on net interest income and economic value.
    
    Measuring the contribution of each banking product on a risk-adjusted, fully hedged
basis, including the impact of financial options, such as mortgage commitments, that are
granted to customers.
    
    Developing and implementing strategies to reduce the volatility of net income from all
personal and commercial banking products.
  Assessment and Measurement of Economic Value at Risk (EVaR)
   Table 15  Economic Value at Risk
 June 30, 2006
    
    
    December 31, 2005 (1)$ Change
    
    
    % Change
    
    
    $ Change
    
    
    % Change100 basis point rate increase
    
    $
    10,095
    
    
    
    0.47
    %
    
    $
    20,150
    
    
    
    1.21
    %100 basis point rate decrease
    
    
    (18,824
    )
    
    
    (0.88
    %)
    
    
    (50,700
    )
    
    
    (3.05
    %)Policy limit
    
    
    (64,000
    )
    
    
    (3.00
    %)
    
    
    (50,000
    )
    
    
    (3.00
    %)
 
 (1)
    
    Provided for comparison only. New method adopted in 2006. Assessment and Measurement of Earnings at Risk (EaR)
   46




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Derivative Instruments
 Purpose and Benefits
    Table 16  Derivative Positions
 Asset-Liability Management Positions
 Notional Amount Maturing
    
    
    
    
    
    FairSuccessor - June 30, 2006
    
    2006
    
    2007
    
    2008
    
    2009
    
    Thereafter
    
    Total
    
    ValueCross currency swap agreement
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    228,620
    
    
    $
    228,620
    
    
    $
    15,507Total return swap
    
    
    
    
    
    
    
    
    
    
    26,425
    
    
    
    
    
    
    
    
    
    
    
    26,425
    
    
    
    (542
    )Interest rate swaps
    
    
    
    
    
    
    700,000
    
    
    
    45,000
    
    
    
    30,000
    
    
    
    345,000
    
    
    
    1,120,000
    
    
    
    (9,395
    )Forward commitments to sell loans
    
    
    38,389
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38,389
    
    
    
    212
 Customer-related Positions
 Notional Amount Maturing
    
    
    
    
    
    FairSuccessor - June 30, 2006
    
    2006
    
    2007
    
    2008
    
    2009
    
    Thereafter
    
    Total
    
    ValueInterest rate contractsReceive fixed, pay variable
    
    $
    2,000
    
    
    $
    17,380
    
    
    $
    99,401
    
    
    $
    101,862
    
    
    $
    1,367,758
    
    
    $
    1,588,401
    
    
    $
    40,817Pay fixed, receive variable
    
    
    2,000
    
    
    
    17,380
    
    
    
    99,401
    
    
    
    101,862
    
    
    
    1,367,758
    
    
    
    1,588,401
    
    
    
    (40,817
    )Foreign currency rate contractsForward contracts with customers
    
    
    48,100
    
    
    
    36,152
    
    
    
    30,221
    
    
    
    6,938
    
    
    
    1,851
    
    
    
    123,262
    
    
    
    (142
    )Forward contracts with dealers
    
    
    48,100
    
    
    
    36,152
    
    
    
    30,221
    
    
    
    6,938
    
    
    
    1,851
    
    
    
    123,262
    
    
    
    142Foreign Exchange OptionsOptions with customers
    
    
    1,800
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,800
    
    
    
    8Options with dealers
    
    
    1,800
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,800
    
    
    
    (8
    )Rate-locked loan commitments (1)
    
    
    66,573
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66,573
    
    
    
    48
 
 (1)
    
    No value has been assigned to potential mortagage servicing rights related to rate-locked loan commitments.    47




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##### Table of Contents



Table 17  Average Balances of Loans Held for Sale and Related Hedges
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,Successor
    
    Successor
    
    Successor
    
    Combined2006
    
    2005
    
    2006
    
    2005Residential mortgage loans held for sale
    
    $
    20,328
    
    
    $
    48,559
    
    
    $
    20,326
    
    
    $
    44,368Rate-locked loan commitments
    
    
    19,581
    
    
    
    56,584
    
    
    
    18,784
    
    
    
    50,019Forward sales contracts
    
    
    29,652
    
    
    
    86,670
    
    
    
    31,165
    
    
    
    78,301
 Customer-related Positions
 .
 Foreign Exchange or Market Risk
   LIQUIDITY
  48




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##### Table of Contents



Parent Company
    Banking Subsidiary
      49




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##### Table of Contents



CAPITAL
     Table 18  Capital Ratios
 Actual
    
    Capital Requirements
    
    ExcessAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioJune 30, 2006TD Banknorth Inc.Total capital (to risk-weighted assets)
    
    $
    3,179,889
    
    
    
    11.15
    %
    
    $
    2,280,866
    
    
    
    8.00
    %
    
    $
    899,023
    
    
    
    3.15
    %Tier 1 capital (to risk-weighted assets)
    
    
    2,257,219
    
    
    
    7.92
    %
    
    
    1,140,433
    
    
    
    4.00
    %
    
    
    1,116,786
    
    
    
    3.92
    %Tier 1 leverage capital ratio (to average assets)
    
    
    2,257,219
    
    
    
    6.70
    %
    
    
    1,346,717
    
    
    
    4.00
    %
    
    
    910,502
    
    
    
    2.70
    %TD Banknorth, NATotal capital (to risk-weighted assets)
    
    
    3,237,992
    
    
    
    11.37
    %
    
    
    2,278,641
    
    
    
    8.00
    %
    
    
    959,351
    
    
    
    3.37
    %Tier 1 capital (to risk-weighted assets)
    
    
    2,320,886
    
    
    
    8.15
    %
    
    
    1,139,320
    
    
    
    4.00
    %
    
    
    1,181,566
    
    
    
    4.15
    %Tier 1 leverage capital ratio (to average assets)
    
    
    2,320,886
    
    
    
    6.91
    %
    
    
    1,343,792
    
    
    
    4.00
    %
    
    
    977,094
    
    
    
    2.91
    %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
    %
 50




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##### Table of Contents



Table 19  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
    
    
    
    8.73
    %
    
    
    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
    
    
    
    8.19
    %
    
    
    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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,549$524,081
 
 (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.    51




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##### Table of Contents



CRITICAL ACCOUNTING POLICIES
  IMPACT OF NEW ACCOUNTING STANDARDS
  FORWARD LOOKING STATEMENTS
  
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
  52




---



##### Table of Contents



Item 4. Controls and Procedures
   
 Part II  Other Information
 
   
   
    53




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##### Table of Contents



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 ProgramsApril 130, 2006
    
    
    
    
    
    $
    0.00
    
    
    
    
    
    
    
    May 131, 2006
    
    
    
    
    
    $
    0.00
    
    
    
    
    
    
    
    June 130, 2006
    
    
    
    
    
    $
    0.00
    
    
    
    
    
    
    
    
  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 ProgramsApril 130, 2006
    
    
    
    
    
    $
    0.00
    
    
    
    
    
    
    
    May 131, 2006
    
    
    923,585
    
    
    $
    28.97
    
    
    
    
    
    
    
    June 130, 2006
    
    
    
    
    
    $
    0.00
    
    
    
    
    
    
    
    
 
  
     1.
    
    Election of Class A directors each for a one-year term and in each
case until their successors are elected and qualified
 For
    
    AgainstRobert G. Clarke
    
    
    210,798,362
    
    
    
    752,535P. Kevin Condron
    
    
    206,000,541
    
    
    
    5,550,355John O. Drew
    
    
    208,039,994
    
    
    
    3,510,902Brian M. Flynn
    
    
    210,827,502
    
    
    
    723,394Joanna T. Lau
    
    
    210,798,090
    
    
    
    752,806Dana S. Levenson
    
    
    210,816,370
    
    
    
    734,526Steven T. Martin
    
    
    206,011,771
    
    
    
    5,539,125John M. Naughton
    
    
    205,999,536
    
    
    
    5,551,360Irving Rogers, III
    
    
    206,026,860
    
    
    
    5,524,036William J. Ryan
    
    
    210,229,157
    
    
    
    1,321,739David A. Rosow
    
    
    210,846,996
    
    
    
    703,900Curtis M. Scribner
    
    
    210,661,557
    
    
    
    889,339Peter G. Vigue
    
    
    210,814,364
    
    
    
    736,532Gerry S. Weidema
    
    
    210,834,706
    
    
    
    716,190
 54




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##### Table of Contents



2.
    
    Proposal to ratify the appointment of Ernst & Young LLP as
independent registered public accounting firm for 2006.
 For
    
    Against
    
    Abstain
    
    Broker Non-votes210,874,203
    
    
    340,960
    
    
    
    335,733
    
    
    None
  
 
  
   
 55




---



##### Table of Contents



SIGNATURES
  TD BANKNORTH INC.Date: August 4, 2006
    By:
    /s/ William J. RyanWilliam J. RyanChairman, President and
Chief Executive Officer
(principal executive officer)Date: August 4, 2006
    By:
    /s/ Stephen J. BoyleStephen J. BoyleExecutive Vice President and
Chief Financial Officer
(principal financial and accounting officer) 56




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##### Table of Contents



57