##### 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 September 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 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)Two Portland Square, Portland, Maine
    
    04112(Address of principal executive offices)
    
    (Zip Code)
 
 þ o
  þ o o
 o þ
  Common stock, par value $.01 per share
    
    228,330,683(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
    
    55Item 4. Controls and Procedures
    
    55PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    55Item 1A. Risk Factors
    
    55Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 56Item 3. Defaults Upon Senior Securities
    
    56Item 4. Submission of Matters to a Vote of Security Holders
    
    56Item 5. Other Information
    
    56Item 6. Exhibits
    
    56Signatures
    
    57Exhibits
    
    58Ex-12 Calculations 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
    
    
    SuccessorSeptember 30, 2006
    
    
    December 31, 2005AssetsCash and due from banks
    
    $
    889,278
    
    
    $
    758,751Federal funds sold and other short-term investments
    
    
    2,589
    
    
    
    10,507Securities purchased under agreements to resell
    
    
    1,949,878
    
    
    
    Securities available for sale, at market value
    
    
    2,505,398
    
    
    
    4,419,877Securities held to maturity (fair value of $54,489 and $64,487 at
September 30 2006 and December 31, 2005, respectively)
    
    
    51,769
    
    
    
    64,126Loans held for sale
    
    
    20,992
    
    
    
    31,398Loans and leases:Residential real estate mortgages
    
    
    2,788,235
    
    
    
    2,878,323Commercial real estate mortgages
    
    
    8,735,919
    
    
    
    6,776,837Commercial business loans and leases
    
    
    6,614,394
    
    
    
    4,278,048Consumer loans and leases
    
    
    7,141,738
    
    
    
    6,186,519Credit card receivables
    
    
    449,664
    
    
    
    Total loans and leases
    
    
    25,729,950
    
    
    
    20,119,727Less: Allowance for loan and lease losses
    
    
    278,568
    
    
    
    223,030Net loans and leases
    
    
    25,451,382
    
    
    
    19,896,697Premises and equipment, net
    
    
    472,289
    
    
    
    331,912Goodwill
    
    
    6,017,406
    
    
    
    4,547,604Identifiable intangible assets
    
    
    768,893
    
    
    
    668,365Bank-owned life insurance
    
    
    783,197
    
    
    
    572,847Other assets
    
    
    1,004,154
    
    
    
    793,269Total assets
    
    $
    39,917,225
    
    
    $
    32,095,353Liabilities and Shareholders EquityDeposits:Savings accounts
    
    $
    3,884,179
    
    
    $
    2,653,233Money market and NOW accounts
    
    
    10,159,880
    
    
    
    7,819,812Certificates of deposit
    
    
    7,251,077
    
    
    
    5,132,117Brokered deposits
    
    
    230,672
    
    
    
    63,953Deposits in foreign office  interest bearing
    
    
    120,012
    
    
    
    Noninterest-bearing deposits
    
    
    5,844,950
    
    
    
    4,603,533Total deposits
    
    
    27,490,770
    
    
    
    20,272,648Short-term borrowings
    
    
    2,223,792
    
    
    
    3,685,540Long-term debt
    
    
    1,444,025
    
    
    
    1,238,430Deferred tax liability on identifiable intangible assets
    
    
    309,828
    
    
    
    261,932Other liabilities
    
    
    182,099
    
    
    
    152,930Total liabilities
    
    
    31,650,514
    
    
    
    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
    
    
    8,741,325
    
    
    
    6,833,677Retained earnings
    
    
    256,982
    
    
    
    152,494Unearned compensation
    
    
    
    
    
    
    (1,131
    )Treasury stock, at cost (22,634,306 shares in 2006 and 14,761,415
shares in 2005)
    
    
    (704,865
    )
    
    
    (469,010
    )Accumulated other comprehensive loss
    
    
    (29,240
    )
    
    
    (34,041
    )Total shareholders equity
    
    
    8,266,711
    
    
    
    6,483,873Total liabilities and shareholders equity
    
    $
    39,917,225
    
    
    $
    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
    
    
    Nine Months Ended
    
    
    March 1, 2005 to
    
    
    January 1, 2005 toSeptember 30, 2006
    
    
    September 30, 2005
    
    
    September 30, 2006
    
    
    September 30, 2005
    
    
    February 28, 2005Interest and dividend income:Interest and fees on loans and
leases
    
    $
    447,180
    
    
    $
    299,148
    
    
    $
    1,258,740
    
    
    $
    683,631
    
    
    $
    176,949Interest and dividends on
securities
    
    
    56,918
    
    
    
    51,531
    
    
    
    194,679
    
    
    
    125,012
    
    
    
    51,183Total interest and
dividend income
    
    
    504,098
    
    
    
    350,679
    
    
    
    1,453,419
    
    
    
    808,643
    
    
    
    228,132Interest expense:Interest on deposits
    
    
    153,582
    
    
    
    61,453
    
    
    
    395,053
    
    
    
    124,328
    
    
    
    30,694Interest on borrowed funds
    
    
    49,452
    
    
    
    40,229
    
    
    
    168,025
    
    
    
    94,736
    
    
    
    32,654Total interest expense
    
    
    203,034
    
    
    
    101,682
    
    
    
    563,078
    
    
    
    219,064
    
    
    
    63,348Net interest income
    
    
    301,064
    
    
    
    248,997
    
    
    
    890,341
    
    
    
    589,579
    
    
    
    164,784Provision for loan and lease losses
    
    
    13,755
    
    
    
    5,500
    
    
    
    29,374
    
    
    
    10,097
    
    
    
    1,069Net interest income after
provision
for
loan
and
lease
losses
    
    
    287,309
    
    
    
    243,497
    
    
    
    860,967
    
    
    
    579,482
    
    
    
    163,715Noninterest income:Deposit services
    
    
    42,213
    
    
    
    34,558
    
    
    
    123,318
    
    
    
    76,134
    
    
    
    18,359Insurance agency commissions
    
    
    12,755
    
    
    
    12,216
    
    
    
    43,145
    
    
    
    31,460
    
    
    
    8,252Merchant and electronic banking
income, net
    
    
    17,532
    
    
    
    15,824
    
    
    
    51,323
    
    
    
    35,914
    
    
    
    7,751Wealth management services
    
    
    11,009
    
    
    
    10,662
    
    
    
    34,092
    
    
    
    24,602
    
    
    
    6,959Bank-owned life insurance
    
    
    8,273
    
    
    
    5,994
    
    
    
    23,664
    
    
    
    14,029
    
    
    
    4,169Investment planning services
    
    
    4,838
    
    
    
    4,708
    
    
    
    15,339
    
    
    
    12,044
    
    
    
    2,815Net securities losses
    
    
    7
    
    
    
    1,014
    
    
    
    (3
    )
    
    
    (1,474
    )
    
    
    (46,548
    )Loans held for sale  Lower of
cost or market adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    386
    
    
    
    (7,500
    )Change in unrealized loss on
derivatives
    
    
    
    
    
    
    (711
    )
    
    
    
    
    
    
    5,954
    
    
    
    Other noninterest income
    
    
    31,679
    
    
    
    19,342
    
    
    
    82,335
    
    
    
    44,091
    
    
    
    9,104128,306
    
    
    
    103,607
    
    
    
    373,213
    
    
    
    243,140
    
    
    
    3,361Noninterest expense:Compensation and employee
benefits
    
    
    130,643
    
    
    
    102,059
    
    
    
    383,575
    
    
    
    240,046
    
    
    
    67,977Occupancy
    
    
    26,003
    
    
    
    17,114
    
    
    
    77,047
    
    
    
    41,670
    
    
    
    11,411Equipment
    
    
    16,648
    
    
    
    12,831
    
    
    
    48,064
    
    
    
    30,210
    
    
    
    8,440Data processing
    
    
    15,172
    
    
    
    11,675
    
    
    
    46,193
    
    
    
    27,094
    
    
    
    7,233Advertising and marketing
    
    
    12,718
    
    
    
    7,503
    
    
    
    30,915
    
    
    
    17,911
    
    
    
    4,373Amortization of identifiable
intangible assets
    
    
    39,480
    
    
    
    31,041
    
    
    
    116,653
    
    
    
    72,632
    
    
    
    1,561Merger and restructuring costs
    
    
    14,089
    
    
    
    1,163
    
    
    
    48,490
    
    
    
    10,458
    
    
    
    27,264Prepayment penalties on
borrowings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    6,300Other noninterest expense
    
    
    39,282
    
    
    
    28,343
    
    
    
    106,201
    
    
    
    64,701
    
    
    
    15,887294,035
    
    
    
    211,729
    
    
    
    857,138
    
    
    
    504,725
    
    
    
    150,446Income before income tax expense
    
    
    121,580
    
    
    
    135,375
    
    
    
    377,042
    
    
    
    317,897
    
    
    
    16,630Provision for income taxes
    
    
    37,989
    
    
    
    46,634
    
    
    
    121,193
    
    
    
    109,931
    
    
    
    6,182Income from continuing operations
    
    
    83,591
    
    
    
    88,741
    
    
    
    255,849
    
    
    
    207,966
    
    
    
    10,448Discontinued operationsIncome (loss) from discontinued
operations
    
    
    284
    
    
    
    
    
    
    
    (4,523
    )
    
    
    
    
    
    
    Income tax benefit
    
    
    2,227
    
    
    
    
    
    
    
    4,368
    
    
    
    
    
    
    
    Income (loss) from discontinued
operations, net of tax
    
    
    2,511
    
    
    
    
    
    
    
    (155
    )
    
    
    
    
    
    
    Net income
    
    $
    86,102
    
    
    $
    88,741
    
    
    $
    255,694
    
    
    $
    207,966
    
    
    $
    10,448Basic earnings per share:Income from continuing operations
    
    $
    0.37
    
    
    $
    0.51
    
    
    $
    1.15
    
    
    $
    1.19
    
    
    $
    0.06Income from discontinued
operations, net of tax
    
    $
    0.01
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    $
    0.38
    
    
    $
    0.51
    
    
    $
    1.15
    
    
    $
    1.19
    
    
    $
    0.06Diluted earnings per share:Income from continuing operations
    
    $
    0.37
    
    
    $
    0.51
    
    
    $
    1.15
    
    
    $
    1.19
    
    
    $
    0.06Income from discontinued
operations, net of tax
    
    $
    0.01
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    $
    0.38
    
    
    $
    0.51
    
    
    $
    1.15
    
    
    $
    1.19
    
    
    $
    0.06Dividends declared per share
    
    $
    0.22
    
    
    $
    0.22
    
    
    $
    0.66
    
    
    $
    0.42
    
    
    $
    0.20Weighted average shares outstanding:Basic
    
    
    228,278
    
    
    
    173,661
    
    
    
    222,100
    
    
    
    174,528
    
    
    
    184,964Dilutive effect of stock
options
    
    
    823
    
    
    
    737
    
    
    
    882
    
    
    
    804
    
    
    
    1,783Diluted
    
    
    229,101
    
    
    
    174,398
    
    
    
    222,982
    
    
    
    175,332
    
    
    
    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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    255,694
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    255,694Change in unrealized losses on securities, net of
reclassification adjustment net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,807
    )
    
    
    (4,807
    )Change in unrealized gains on cash flow hedges, net of
reclassification adjustment net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,608
    
    
    
    9,608Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    260,495Common stock issued for acquisitions
    
    
    32,859
    
    
    
    329
    
    
    
    965,065
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    965,394Common stock issued to The Toronto-Dominion Bank
for acquisitions
    
    
    29,625
    
    
    
    296
    
    
    
    941,494
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    941,790Treasury stock issued for employee benefit
plans, including tax benefit of $1.0 million
    
    
    627
    
    
    
    
    
    
    
    (4,657
    )
    
    
    
    
    
    
    
    
    
    
    19,615
    
    
    
    
    
    
    
    14,958Stock option compensation expense
    
    
    
    
    
    
    
    
    
    
    5,746
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,746Treasury stock purchased
    
    
    (8,500
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (255,470
    )
    
    
    
    
    
    
    (255,470
    )Decrease in unearned compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,131
    
    
    
    
    
    
    
    
    
    
    
    1,131Cash dividends declared ($0.66 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (151,206
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (151,206
    )Balances at September 30, 2006 (Successor)
    
    
    228,276
    
    
    $
    2,509
    
    
    $
    8,741,325
    
    
    $
    256,982
    
    
    $
    
    
    
    
    ($704,865
    )
    
    
    ($29,240
    )
    
    $
    8,266,711Balances 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    207,966
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    207,966Change in unrealized losses on securities, net of
reclassification adjustment net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,680
    )
    
    
    (25,680
    )Change in unrealized losses on cash flow hedges, net of
reclassification adjustment net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,567
    )
    
    
    (9,567
    )Comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    172,719Treasury stock issued for employee benefit
plans, including tax benefit of $0.9 million
    
    
    487
    
    
    
    
    
    
    
    (2,531
    )
    
    
    
    
    
    
    
    
    
    
    15,816
    
    
    
    
    
    
    
    13,285Treasury stock purchased
    
    
    (15,300
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (486,408
    )
    
    
    
    
    
    
    (486,408
    )Decrease in unearned compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    750
    
    
    
    
    
    
    
    
    
    
    
    750Cash dividends declared ($0.42 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (72,838
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (72,838
    )Balances at September 30, 2005 (Successor)
    
    
    173,615
    
    
    $
    1,884
    
    
    $
    6,833,956
    
    
    $
    135,128
    
    
    
    ($1,506
    )
    
    
    ($470,592
    )
    
    
    ($35,247
    )
    
    $
    6,463,623
  5




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##### Table of Contents



TD BANKNORTH INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands) (Unaudited)
 Successor
    
    
    Successor
    
    
    PredecessorNine Months Ended
    
    
    March 1, 2005 to
    
    
    January 1, 2005 toSeptember 30, 2006
    
    
    September 30, 2005
    
    
    February 28, 2005Cash flows from operating activities:Net income
    
    $
    255,694
    
    
    $
    207,966
    
    
    $
    10,448Loss from discontinued operations, net of tax
    
    
    (155
    )
    
    
    
    
    
    
    Income from continuing operations
    
    
    255,849
    
    
    
    207,966
    
    
    
    10,448Adjustments to reconcile net income to net cash
provided by operating activities:Provision for loan and lease losses
    
    
    29,374
    
    
    
    10,097
    
    
    
    1,069Depreciation of banking premises and equipment
    
    
    45,842
    
    
    
    28,284
    
    
    
    7,807Net amortization of premium and discounts
    
    
    (1,708
    )
    
    
    6,835
    
    
    
    3,703Amortization of intangible assets
    
    
    116,653
    
    
    
    72,632
    
    
    
    1,561Deferred tax (benefit) provision
    
    
    (19,300
    )
    
    
    (10,500
    )
    
    
    2,000Unearned compensation
    
    
    1,131
    
    
    
    750
    
    
    
    Stock-based compensation expense
    
    
    5,746
    
    
    
    
    
    
    
    Net losses (gains) realized from sales of securities and loans
    
    
    (17
    )
    
    
    44
    
    
    
    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
    
    
    (23,664
    )
    
    
    (12,186
    )
    
    
    (4,169
    )Proceeds from sales of loans held for sale
    
    
    304,445
    
    
    
    805,649
    
    
    
    72,258Residential loans originated and purchased for sale
    
    
    (293,974
    )
    
    
    (304,297
    )
    
    
    (58,800
    )Change in fair value on derivatives
    
    
    (267
    )
    
    
    (4,788
    )
    
    
    Change in net deferred tax liability
    
    
    (2,617
    )
    
    
    (14,137
    )
    
    
    6,846Net (increase) decrease in other assets
    
    
    (75,723
    )
    
    
    36,721
    
    
    
    40,597Net increase (decrease) in other liabilities
    
    
    4,082
    
    
    
    31,641
    
    
    
    (42,559
    )Net cash provided by operating activities
    
    
    345,852
    
    
    
    861,824
    
    
    
    100,493Cash flows from investing activities:Proceeds from sales of securities available for sale
    
    
    2,942,400
    
    
    
    662,100
    
    
    
    83,271Proceeds from sales of securities as part of deleveraging program
    
    
    2,528,541
    
    
    
    377,907
    
    
    
    2,461,701Proceeds from maturities and principal repayments of securities available for sale
    
    
    583,598
    
    
    
    602,520
    
    
    
    190,117Purchases of securities available for sale
    
    
    (1,447,935
    )
    
    
    (1,301,788
    )
    
    
    (969,979
    )Net (increase) in securities purchased under reverse repurchase agreements
    
    
    (1,950,000
    )
    
    
    
    
    
    
    Proceeds from maturities and principal repayments of securities held to maturity
    
    
    12,357
    
    
    
    13,322
    
    
    
    4,670Net (increase) in loans and leases
    
    
    (455,813
    )
    
    
    (570,931
    )
    
    
    (222,430
    )Proceeds from sales of portfolio loans
    
    
    925
    
    
    
    167,297
    
    
    
    Net (additions) decrease to premises and equipment
    
    
    (64,787
    )
    
    
    (31,167
    )
    
    
    798Proceeds from policy coverage on bank-owned life insurance
    
    
    241
    
    
    
    
    
    
    
    141Proceeds from the sale of the bond administration business
    
    
    2,000
    
    
    
    
    
    
    
    Proceeds from the sale of OREO
    
    
    12,162
    
    
    
    
    
    
    
    Cash used in business acquisitions
    
    
    (941,874
    )
    
    
    
    
    
    
    Cash acquired from acquisitions
    
    
    238,562
    
    
    
    
    
    
    
    130,685Net cash provided by investing activities
    
    
    1,460,377
    
    
    
    (80,740
    )
    
    
    1,678,974Cash flows from financing activities:Net increase (decrease) in deposits
    
    
    334,538
    
    
    
    477,639
    
    
    
    (160,662
    )Net (decrease) increase in short-term borrowings
    
    
    (1,960,249
    )
    
    
    (360,889
    )
    
    
    2,102,739Payments on short-term borrowings as part of deleveraging program
    
    
    
    
    
    
    (374,491
    )
    
    
    (1,461,701
    )Proceeds from long-term debt
    
    
    
    
    
    
    230,637
    
    
    
    8,467Payments for long-term debt
    
    
    (603,458
    )
    
    
    (206,097
    )
    
    
    (474,664
    )Payments for long-term debt as part of deleveraging program
    
    
    
    
    
    
    
    
    
    
    (1,006,300
    )Excess tax benefits from stock-based compensation
    
    
    1,025
    
    
    
    875
    
    
    
    16,049Treasury stock issued for employee benefit plans
    
    
    13,933
    
    
    
    12,410
    
    
    
    55,319Issuance of stock to The Toronto-Dominion Bank
    
    
    941,790
    
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    (255,470
    )
    
    
    (486,408
    )
    
    
    Cash dividends paid to shareholders
    
    
    (151,206
    )
    
    
    (72,838
    )
    
    
    (37,383
    )Net cash (used in) financing activities
    
    
    (1,679,097
    )
    
    
    (779,162
    )
    
    
    (958,136
    )Cash flows from discontinued operationsOperating activities
    
    
    (4,523
    )
    
    
    
    
    
    
    Net cash (used in) discontinued operations
    
    
    (4,523
    )
    
    
    
    
    
    
    Increase (decrease) in cash and cash equivalents
    
    
    122,609
    
    
    
    1,922
    
    
    
    821,331Cash and cash equivalents at beginning of period
    
    
    769,258
    
    
    
    747,637
    
    
    
    (73,694
    )Cash and cash equivalents at end of period
    
    $
    891,867
    
    
    $
    749,559
    
    
    $
    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
    
    $
    531,824
    
    
    $
    213,372
    
    
    $
    68,238Cash paid (received) for income taxes
    
    
    132,415
    
    
    
    62,767
    
    
    
    (779
    )
  6




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##### Table of Contents



TD BANKNORTH INC. AND SUBSIDIARIES
 
 Notes to Consolidated Financial Statements
 September 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



Defined Pension and Other Postretirement Plans
  Fair Value Measurement
  Accounting for Servicing of Financial Assets
  Accounting for Certain Hybrid Financial Instruments
  8




---



##### Table of Contents



Accounting for Uncertainty in Income Taxes
  Note 3
 Acquisitions
  Transaction-Related ItemsBalance at
    
    
    
    
    
    Identifiable
    
    
    
    
    
    
    
    
    
    TotalAcquisition
    
    Acquisition Date
    
    
    
    
    
    Intangible
    
    Cash
    
    Shares
    
    Purchase(Dollars and shares in millions)
    
    Date
    
    Assets
    
    Equity
    
    Goodwill
    
    Assets
    
    Paid
    
    Issued
    
    PriceHudson United Bancorp
    
    
    1/31/2006
    
    
    $
    8,771.0
    
    
    $
    518.3
    
    
    $
    1,463.6
    
    
    $
    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
    
    
    1,463,555Other intangible assets
    
    
    222,466Cash and due from banks
    
    
    235,997Bank-owned life insurance
    
    
    156,476Other assets
    
    
    247,180Total 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
    
    
    Nine Months Ended
    
    
    March 1, 2005 to
    
    
    January 1, 2005 toSeptember 30, 2006
    
    
    September 30, 2005
    
    
    September 30, 2006
    
    
    September 30, 2005
    
    
    February 28, 2005Net interest income
    
    $
    301,064
    
    
    $
    327,637
    
    
    $
    917,066
    
    
    $
    780,148
    
    
    $
    220,725Provision for loan and lease losses
    
    
    13,755
    
    
    
    16,650
    
    
    
    31,374
    
    
    
    28,497
    
    
    
    4,069Net interest income after provision
for loan and lease losses
    
    
    287,309
    
    
    
    310,987
    
    
    
    885,692
    
    
    
    751,651
    
    
    
    216,656Noninterest income
    
    
    128,306
    
    
    
    138,161
    
    
    
    382,299
    
    
    
    323,137
    
    
    
    24,672Noninterest expense (1)
    
    
    294,035
    
    
    
    301,104
    
    
    
    896,237
    
    
    
    708,875
    
    
    
    199,202Income before income tax expense
    
    
    121,580
    
    
    
    148,044
    
    
    
    371,754
    
    
    
    365,913
    
    
    
    42,126Provision for income taxes
    
    
    37,989
    
    
    
    47,659
    
    
    
    123,580
    
    
    
    106,081
    
    
    
    12,720Income from continuing operations
    
    
    83,591
    
    
    
    100,385
    
    
    
    248,174
    
    
    
    259,832
    
    
    
    29,406Income (loss) from discontinued operations, net
of tax
    
    
    2,511
    
    
    
    
    
    
    
    (155
    )
    
    
    
    
    
    
    Net income
    
    $
    86,102
    
    
    $
    100,385
    
    
    $
    248,019
    
    
    $
    259,832
    
    
    $
    29,406Basic earnings per shareIncome from
continuing operations
    
    $
    0.37
    
    
    $
    0.44
    
    
    $
    1.09
    
    
    $
    1.14
    
    
    $
    0.12Income from discontinued operations, net of tax
    
    $
    0.01
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    $
    0.38
    
    
    $
    0.44
    
    
    $
    1.09
    
    
    $
    1.14
    
    
    $
    0.12Diluted earnings per shareIncome from
continuing operations
    
    $
    0.37
    
    
    $
    0.44
    
    
    $
    1.08
    
    
    $
    1.13
    
    
    $
    0.12Income from discontinued operations, net of tax
    
    $
    0.01
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    $
    0.38
    
    
    $
    0.44
    
    
    $
    1.08
    
    
    $
    1.13
    
    
    $
    0.12Weighted average shares outstandingBasic
    
    
    228,278
    
    
    
    227,645
    
    
    
    228,098
    
    
    
    228,512
    
    
    
    238,948Diluted
    
    
    229,101
    
    
    
    228,382
    
    
    
    228,980
    
    
    
    229,316
    
    
    
    240,731
 
 (1)
    
    Includes $9.0 million of merger costs recorded by Hudson
in January 2006. Note 4
 Discontinued Operations
   Successor
    
    SuccessorThree Months Ended
    
    Nine Months EndedSeptember 30, 2006
    
    September 30, 2006Gross revenues
from discontinued operations
    
    $
    3,292
    
    
    $
    8,173Net income (loss)
from discontinued operations
    
    $
    2,511
    
    
    ($
    155
    )
 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 toSeptember 30, 2005
    
    
    September 30, 2005
    
    
    February 28, 2005Net income, as reported
    
    $
    88,741
    
    
    $
    207,966
    
    
    $
    10,448Add: Stock-based employee compensation
expense included in reported
net income, net of related tax effects
    
    
    2,614
    
    
    
    5,886
    
    
    
    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
    
    
    (3,429
    )
    
    
    (7,733
    )
    
    
    (2,159
    )Pro forma net income
    
    $
    87,926
    
    
    $
    206,119
    
    
    
    ($1,004
    )Earnings per shareBasic  As reported
    
    $
    0.51
    
    
    $
    1.19
    
    
    $
    0.06Pro forma
    
    $
    0.51
    
    
    $
    1.18
    
    
    ($
    0.01
    )Diluted  As reported
    
    $
    0.51
    
    
    $
    1.19
    
    
    $
    0.06Pro forma
    
    $
    0.50
    
    
    $
    1.18
    
    
    ($
    0.01
    )
 Stock Options
    11




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##### Table of Contents



Successor
    
    SuccessorNine Months Ended
    
    March 1, 2005 toSeptember 30, 2006
    
    September 30, 2005Weighted average fair value
    
    $
    5.03
    
    
    $
    5.45Expected dividend yield
    
    
    2.96%
    
    
    
    2.32%Risk-free interest rate
    
    
    5.01%
    
    
    
    4.17%Expected life
    
    
    6.0 years
    
    
    
    7.5 yearsVolatility
    
    
    15.18%
    
    
    
    13.09%Options granted
    
    
    30,000
    
    
    
    2,175,349
   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
    
    
    
    29.39Exchanged in acquisitions
    
    
    259,270
    
    
    
    19.78Exercised
    
    
    (430,922
    )
    
    
    23.23Cancelled and forfeited
    
    
    (262,535
    )
    
    
    29.21Outstanding at September 30, 2006
    
    
    9,824,541
    
    
    $
    26.65
    
    
    6.79 years
    
    $
    26,653
    (1)Options exercisable at September 30, 2006
    
    
    6,281,992
    
    
    $
    24.95
    
    
    5.70 years
    
    $
    26,486
    (1)
 
 (1)
    
    Based on the closing stock price on September 30, 2006 of $28.88.    12




---



##### Table of Contents



WeightedAverageGrant-DateNonvested Options
    
    Options
    
    Fair ValueNonvested at January 1, 2006
    
    
    4,705,537
    
    
    $
    5.44Granted
    
    
    
    
    
    
    Vested
    
    
    (951,947
    )
    
    
    5.57Forfeited
    
    
    (211,041
    )
    
    
    5.29Nonvested at September 30, 2006
    
    
    3,542,549
    
    
    
    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
    
    
    283,533
    
    
    
    29.93Vested
    
    
    (17,476
    )
    
    
    30.43Forfeited
    
    
    (183,699
    )
    
    
    29.92Nonvested at September 30, 2006
    
    
    1,388,513
    
    
    
    30.04Exercisable at September 30, 2006
    
    
    33,320
    
    
    
    30.22
  Employee Stock Purchase Plan
   13




---



##### Table of Contents



Employee Stock Purchase Plan (1)Shares Purchased
    
    Shares Available
    
    Average Price
    
    ExpenseJanuary 1, 2006 to September 30, 2006 (Successor)
    
    
    83,540
    
    
    
    788,507
    
    
    $
    27.80
    
    
    $
    122March 1, 2005 to September 30, 2005 (Successor)
    
    
    95,533
    
    
    
    912,718
    
    
    $
    25.30
    
    
    $
    434
    
    
    
    (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
    
    
    3
    
    
    $
    451,866
    
    
    $
    1,052
    
    
    
    1
    
    
    $
    964
    
    
    $
    17
    
    
    
    4
    
    
    $
    452,830
    
    
    $
    1,069Tax-exempt bonds and notes
    
    
    9
    
    
    
    3,959
    
    
    
    25
    
    
    
    87
    
    
    
    46,929
    
    
    
    376
    
    
    
    96
    
    
    
    50,888
    
    
    
    401Other bonds and notes
    
    
    29
    
    
    
    38,400
    
    
    
    346
    
    
    
    54
    
    
    
    77,194
    
    
    
    685
    
    
    
    83
    
    
    
    115,594
    
    
    
    1,031Mortgage-backed securities
    
    
    281
    
    
    
    318,974
    
    
    
    3,455
    
    
    
    594
    
    
    
    973,334
    
    
    
    22,966
    
    
    
    875
    
    
    
    1,292,308
    
    
    
    26,421Collateralized mortgage
obligations
    
    
    1
    
    
    
    411
    
    
    
    5
    
    
    
    12
    
    
    
    52,888
    
    
    
    991
    
    
    
    13
    
    
    
    53,299
    
    
    
    996Equity securities
    
    
    2
    
    
    
    86
    
    
    
    6
    
    
    
    1
    
    
    
    123
    
    
    
    17
    
    
    
    3
    
    
    
    209
    
    
    
    23325
    
    
    $
    813,696
    
    
    $
    4,889
    
    
    
    749
    
    
    $
    1,151,432
    
    
    $
    25,052
    
    
    
    1,074
    
    
    $
    1,965,128
    
    
    $
    29,941
   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
    
    
    1,465,355
    
    
    
    176,549
    
    
    
    45,917
    
    
    
    222,466Amortization expense
    
    
    
    
    
    
    (102,893
    )
    
    
    (13,760
    )
    
    
    (116,653
    )Adjustment of purchase accounting estimates
    
    
    4,447
    
    
    
    
    
    
    
    (5,285
    )
    
    
    (5,285
    )Balance, September 30, 2006
    
    $
    6,017,406
    
    
    $
    550,496
    
    
    $
    218,397
    
    
    $
    768,893Estimated Annual Amortization Expense:Remaining 2006
    
    
    
    
    
    $
    34,832
    
    
    $
    4,642
    
    
    $
    39,4742007
    
    
    
    
    
    
    110,030
    
    
    
    17,849
    
    
    
    127,8792008
    
    
    
    
    
    
    86,670
    
    
    
    16,810
    
    
    
    103,4802009
    
    
    
    
    
    
    70,220
    
    
    
    16,186
    
    
    
    86,4062010
    
    
    
    
    
    
    56,725
    
    
    
    15,439
    
    
    
    72,164Thereafter
    
    
    
    
    
    
    192,019
    
    
    
    145,114
    
    
    
    337,133
 
 (1)
    
    Other identifiable intangible assets at September 30, 2006 and December 31, 2005 include $2,357 related to the
minimum pension liability that is not amortized.  September 30, 2006Gross Carrying
    
    
    Accumulated
    
    
    Net CarryingAmount
    
    
    Amortization
    
    
    AmountIdentifiable intangible assets:Core deposit intangibles
    
    $
    742,549
    
    
    $
    192,053
    
    
    $
    550,496Other identifiable intangibles:Loan relationship intangibles
    
    
    133,535
    
    
    
    10,146
    
    
    
    123,389Other identifiable
intangibles
    
    
    112,988
    
    
    
    17,980
    
    
    
    95,008246,523
    
    
    
    28,126
    
    
    
    218,397Total
    
    $
    989,072
    
    
    $
    220,179
    
    
    $
    768,893
 Note 9
 Deposits
  Note
10  Short-term Borrowings
  15




---



##### Table of Contents



September 30, 2006
    
    
    December 31, 2005Securities sold under agreements to repurchase  retail
    
    $
    1,441,431
    
    
    $
    1,668,139Federal funds purchased
    
    
    757,000
    
    
    
    1,563,000Treasury, tax and loan notes
    
    
    18,161
    
    
    
    54,401Federal Home Loan Bank advances
    
    
    7,200
    
    
    
    400,000$
    2,223,792
    
    
    $
    3,685,540
  Note
11  Long-term Debt
  September 30, 2006
    
    
    December 31, 2005Federal Home Loan Bank advances
    
    $
    71,367
    
    
    $
    151,609Securities sold under agreements to repurchase  retail
    
    
    12,571
    
    
    
    107,952Junior subordinated debentures issued to affiliated trusts
    
    
    520,736
    
    
    
    366,237Subordinated debt due 2011
    
    
    221,531
    
    
    
    225,188Subordinated debt due 2012
    
    
    220,965
    
    
    
    Subordinated debt due 2022
    
    
    241,568
    
    
    
    232,158Senior notes 3.75%, due 2008
    
    
    149,287
    
    
    
    148,914Other long-term debt
    
    
    6,000
    
    
    
    6,372Total
    
    $
    1,444,025
    
    
    $
    1,238,430
  Note
12  Changes in Accumulated Other Comprehensive Income
  16




---



##### Table of Contents



Successor
    
    SuccessorThree Months Ended
    
    Three Months EndedSeptember 30, 2006
    
    September 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
    
    $
    36,224
    
    
    
    ($12,653
    )
    
    $
    23,571
    
    
    
    ($64,609
    )
    
    $
    22,613
    
    
    
    ($41,996
    )Change in unrealized gain (loss) on
cash flow hedges
    
    
    6,152
    
    
    
    (2,153
    )
    
    
    3,999
    
    
    
    (3,801
    )
    
    
    2,626
    
    
    
    (1,175
    )Reclassification adjustment for
losses (gains) realized in net income
    
    
    2,375
    
    
    
    (831
    )
    
    
    1,544
    
    
    
    (35,609
    )
    
    
    12,463
    
    
    
    (23,146
    )Net change in unrealized gains (losses)
    
    $
    44,751
    
    
    
    ($15,637
    )
    
    $
    29,114
    
    
    
    ($104,019
    )
    
    $
    37,702
    
    
    
    ($66,317
    )
 Successor
    
    Successor
    
    PredecessorNine Months Ended
    
    March 1, 2005 to
    
    January 1, 2005 toSeptember 30, 2006
    
    September 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 (loss) gain on
securities available for sale
    
    ($
    7,438
    )
    
    $
    2,629
    
    
    ($
    4,809
    )
    
    
    ($40,983
    )
    
    $
    14,344
    
    
    ($
    26,639
    )
    
    
    ($42,769
    )
    
    $
    14,975
    
    
    
    ($27,794
    )Change in unrealized gain (loss) on
cash flow hedges
    
    
    16,228
    
    
    
    (5,680
    )
    
    
    10,548
    
    
    
    49,378
    
    
    ($
    17,282
    )
    
    
    32,096
    
    
    
    (7,851
    )
    
    
    (48
    )
    
    
    (7,899
    )Reclassification adjustment for
(gains) losses realized in net income
    
    
    (1,443
    )
    
    
    505
    
    
    
    (938
    )
    
    
    (62,621
    )
    
    
    21,917
    
    
    
    (40,704
    )
    
    
    46,834
    
    
    
    (16,392
    )
    
    
    30,442Net change in unrealized gains (losses)
    
    $
    7,347
    
    
    ($
    2,546
    )
    
    $
    4,801
    
    
    
    ($54,226
    )
    
    $
    18,979
    
    
    ($
    35,247
    )
    
    
    ($ 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 September 30, 2006
    
    
    5,662
    
    
    
    7,208
    
    
    
    12,870
  17




---



##### Table of Contents



Note 14   Other Noninterest Income
  Successor
    
    
    Successor
    
    
    Successor
    
    
    Successor
    
    
    PredecessorThree Months Ended
    
    
    Three Months Ended
    
    
    Nine Months Ended
    
    
    March 1, 2005 to
    
    
    January 1, 2005 toSeptember 30, 2006
    
    
    September 30, 2005
    
    
    September 30, 2006
    
    
    September 30, 2005
    
    
    February 28, 2005Loan fee income
    
    $
    14,168
    
    
    $
    8,031
    
    
    $
    42,084
    
    
    $
    19,294
    
    
    $
    4,549Income on restricted stock
    
    
    6,473
    
    
    
    2,104
    
    
    
    14,395
    
    
    
    5,215
    
    
    
    1,487Mortgage banking services
income
    
    
    1,435
    
    
    
    2,910
    
    
    
    3,995
    
    
    
    5,644
    
    
    
    923Venture capital gains
(write-downs)
    
    
    127
    
    
    
    (840
    )
    
    
    1,069
    
    
    
    (936
    )
    
    
    (297
    )Covered call premiums
    
    
    
    
    
    
    1,951
    
    
    
    922
    
    
    
    4,668
    
    
    
    1,412Miscellaneous income
    
    
    9,476
    
    
    
    5,186
    
    
    
    19,870
    
    
    
    10,206
    
    
    
    1,030Total
    
    $
    31,679
    
    
    $
    19,342
    
    
    $
    82,335
    
    
    $
    44,091
    
    
    $
    9,104
 Note
15  Pension and Other Postretirement Plans
  Components of net periodic benefit cost:
 Successor
    
    
    Successor
    
    
    Successor
    
    
    Successor
    
    
    PredecessorThree Months Ended
    
    
    Three Months Ended
    
    
    Nine Months Ended
    
    
    March 1, 2005 to
    
    
    January 1, 2005 toSeptember 30, 2006
    
    
    September 30, 2005
    
    
    September 30, 2006
    
    
    September 30, 2005
    
    
    February 28, 2005Qualified PensionService cost
    
    $
    4,219
    
    
    $
    3,643
    
    
    $
    13,410
    
    
    $
    8,379
    
    
    $
    2,369Interest cost
    
    
    4,658
    
    
    
    3,500
    
    
    
    13,482
    
    
    
    8,004
    
    
    
    2,253Expected (gain) on plan assets
    
    
    (7,688
    )
    
    
    (5,527
    )
    
    
    (22,525
    )
    
    
    (12,871
    )
    
    
    (3,672
    )Recognized actuarial loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    809Net amortization and deferral
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (38
    )Net periodic benefit cost
    
    $
    1,189
    
    
    $
    1,616
    
    
    $
    4,367
    
    
    $
    3,512
    
    
    $
    1,721Nonqualified PensionService cost
    
    $
    74
    
    
    $
    227
    
    
    $
    546
    
    
    $
    514
    
    
    $
    106Interest cost
    
    
    608
    
    
    
    539
    
    
    
    2,005
    
    
    
    1,290
    
    
    
    305Amortization of prior service costs
    
    
    167
    
    
    
    282
    
    
    
    791
    
    
    
    712
    
    
    
    Recognized actuarial loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    84Net amortization and deferral
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41Net periodic benefit cost
    
    $
    849
    
    
    $
    1,048
    
    
    $
    3,342
    
    
    $
    2,516
    
    
    $
    536Other Postretirement BenefitsService cost
    
    $
    50
    
    
    $
    57
    
    
    $
    150
    
    
    $
    133
    
    
    $
    37Interest cost
    
    
    339
    
    
    
    321
    
    
    
    1,017
    
    
    
    749
    
    
    
    214Recognized actuarial (gain) loss
    
    
    (64
    )
    
    
    
    
    
    
    (192
    )
    
    
    
    
    
    
    36Net amortization and deferral
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    89Net periodic benefit cost
    
    $
    325
    
    
    $
    378
    
    
    $
    975
    
    
    $
    882
    
    
    $
    376
  18




---



##### Table of Contents



Note
16  Merger and Restructuring Costs
  Successor
    
    
    Successor
    
    
    Successor
    
    
    Successor
    
    
    PredecessorThree Months Ended
    
    
    Three Months Ended
    
    
    Nine Months Ended
    
    
    March 1, 2005 to
    
    
    January 1, 2005 toSeptember 30, 2006
    
    
    September 30, 2005
    
    
    September 30, 2006
    
    
    September 30, 2005
    
    
    February 28, 2005Restructuring CostsPersonnel costs
    
    $
    637
    
    
    $
    
    
    
    $
    11,348
    
    
    $
    
    
    
    $
    Branch closings
    
    
    
    
    
    
    
    
    
    
    374
    
    
    
    
    
    
    
    637
    
    
    
    
    
    
    
    11,722
    
    
    
    
    
    
    
    Interchange Financial Services Corporation
Merger ChargesPersonnel costs
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    Systems conversion and integration/customer
communications
    
    
    1,877
    
    
    
    
    
    
    
    1,877
    
    
    
    
    
    
    
    Other costs
    
    
    128
    
    
    
    
    
    
    
    200
    
    
    
    
    
    
    
    2,005
    
    
    
    
    
    
    
    2,082Hudson United Bancorp Merger ChargesPersonnel costs
    
    
    3,404
    
    
    
    2
    
    
    
    7,340
    
    
    
    2
    
    
    
    Systems conversion and integration/customer
communications
    
    
    4,135
    
    
    
    580
    
    
    
    15,930
    
    
    
    580
    
    
    
    Other costs
    
    
    1,858
    
    
    
    112
    
    
    
    6,886
    
    
    
    112
    
    
    
    9,397
    
    
    
    694
    
    
    
    30,156
    
    
    
    694
    
    
    
    The Toronto-Dominion Bank Merger ChargesTransaction costs
    
    
    
    
    
    
    (1,500
    )
    
    
    (339
    )
    
    
    3
    
    
    
    18,148Personnel costs
    
    
    1,373
    
    
    
    398
    
    
    
    3,462
    
    
    
    3,052
    
    
    
    2,285Systems conversion and integration/customer
communications
    
    
    43
    
    
    
    
    
    
    
    43
    
    
    
    
    
    
    
    Name change
    
    
    95
    
    
    
    1,013
    
    
    
    644
    
    
    
    3,214
    
    
    
    2,061Other costs
    
    
    479
    
    
    
    35
    
    
    
    479
    
    
    
    94
    
    
    
    2,9411,990
    
    
    
    (54
    )
    
    
    4,289
    
    
    
    6,363
    
    
    
    25,435BostonFed Bancorp, Inc. Merger ChargesPersonnel costs
    
    
    7
    
    
    
    39
    
    
    
    26
    
    
    
    774
    
    
    
    673Systems conversion and integration/customer
communications
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    642
    
    
    
    987Other costs
    
    
    5
    
    
    
    70
    
    
    
    21
    
    
    
    1,028
    
    
    
    21112
    
    
    
    120
    
    
    
    47
    
    
    
    2,444
    
    
    
    1,871Other Merger ChargesAmerican Financial Holdings, Inc. Merger Charges
    
    
    
    
    
    
    306
    
    
    
    7
    
    
    
    495
    
    
    
    117First & Ocean Bancorp Merger Charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19
    
    
    
    1Foxborough Savings Bank Merger Charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    11CCBT Financial Companies, Inc. Merger Charges
    
    
    48
    
    
    
    96
    
    
    
    187
    
    
    
    408
    
    
    
    (171
    )Other Costs
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    26
    
    
    
    48
    
    
    
    403
    
    
    
    194
    
    
    
    957
    
    
    
    (42
    )Total Merger and Restructuring Costs
    
    $
    14,089
    
    
    $
    1,163
    
    
    $
    48,490
    
    
    $
    10,458
    
    
    $
    27,264
  Non-cashPurchase Accounting
    
    
    Merger and
    
    
    
    
    
    
    Write DownsBalance
    
    
    Adjustments
    
    
    Restructuring
    
    
    Cash
    
    
    and Other
    
    
    Balance12/31/05
    
    
    at Acquisition
    
    
    Costs
    
    
    Payments
    
    
    Adjustments
    
    
    9/30/06Restructuring costs
    
    $
    
    
    
    $
    
    
    
    $
    11,722
    
    
    
    ($11,722
    )
    
    $
    
    
    
    $
    Interchange Merger
    
    
    
    
    
    
    
    
    
    
    2,082
    
    
    
    (2,082
    )
    
    
    
    
    
    
    Hudson United Bancorp Merger
    
    
    
    
    
    
    46,324
    
    
    
    30,157
    
    
    
    (65,125
    )
    
    
    (6,762
    )
    
    
    4,594The Toronto-Dominion Bank Merger
    
    
    459
    
    
    
    
    
    
    
    4,288
    
    
    
    (4,371
    )
    
    
    (376
    )
    
    
    BostonFed Bancorp, Inc. Merger
    
    
    1,935
    
    
    
    
    
    
    
    47
    
    
    
    (285
    )
    
    
    (70
    )
    
    
    1,627CCBT Financial Companies, Inc. Merger
    
    
    
    
    
    
    
    
    
    
    187
    
    
    
    (187
    )
    
    
    
    
    
    
    American Financial Holdings, Inc.
Merger
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    (7
    )
    
    
    
    
    
    
    Total
    
    $
    2,394
    
    
    $
    46,324
    
    
    $
    48,490
    
    
    
    ($83,779
    )
    
    ($
    7,208
    )
    
    $
    6,221
  19




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##### Table of Contents



Note
17  Earnings Per Share
  Successor
    
    Successor
    
    Successor
    
    Successor
    
    PredecessorThree Months Ended
    
    Three Months Ended
    
    Nine Months Ended
    
    March 1, 2005 to
    
    January 1, 2005 toSeptember 30, 2006
    
    September 30, 2005
    
    September 30, 2006
    
    September 30, 2006
    
    February 28,20054,142,645
    
    
    2,132,369
    
    
    
    2,002,565
    
    
    
    1,831,114
    
    
    
    
 Note
18  Related Party Transactions
   September 30, 2006
    
    December 31, 2005Cash and due from banks
    
    $
    1,210
    
    
    $
    1,694Other assets:Positive fair value marks on derivatives
    
    
    25,510
    
    
    
    8,090Accounts receivable
    
    
    
    
    
    
    1,396Deferred tax asset
    
    
    720
    
    
    
    2,868Deferred debt issuance costs
    
    
    1,038
    
    
    
    1,110Interest-bearing deposits from The
Toronto-Dominion Bank
    
    
    15,425
    
    
    
    15,013Other liabilities:Negative fair value marks on derivatives
    
    
    11,498
    
    
    
    2,856Accounts payable
    
    
    69
    
    
    
    Shareholders EquityAccumulated other comprehensive income
    
    
    (1,338
    )
    
    
    (8,865
    )Broker commissions paid to TD Securities
for common stock repurchases
    
    
    (170
    )
    
    
    (306
    )Off-balance sheet transactions (notional amounts):Interest rate swaps and caps
    
    
    951,939
    
    
    
    606,256Foreign exchange contracts
    
    
    108,660
    
    
    
    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 $0.38 per share for the three months ended September
30, 2006 as compared to $0.51 per share for the comparable period in 2005. This decrease
was primarily attributable to increased merger and restructuring charges ($0.04 per
diluted share), an eight basis point decline in net interest margin, increased provisions
for loan and lease losses, and the spread income on securities in the quarter ended
September 30, 2005 which were sold in 2006 as part of a balance sheet deleveraging
program. The results for the quarter reflect the full impact of the acquisition of
Hudson United Bancorp (Hudson) on January 31, 2006.
    
    For the nine-month periods ended September 30th, diluted earnings per share
amounted to $1.15 per share in 2006 as compared to $1.23 per share in 2005. This decrease
was primarily attributable to a nine basis point decline in net interest margin, increased
amortization of identifiable intangible assets ($0.05 per diluted share) 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.
    
    The net interest margin (net interest income divided by average interest-earnings
assets) decreased to 4.01% in the third quarter of 2006 from 4.09% in the third quarter of
2005. We continued to see intense competition for high quality loans and deposits.
    
    Our total risk-based capital ratio was 11.41% at September 30, 2006 compared to 11.73%
at December 31, 2005. Our tangible equity to tangible assets ratio was 5.40% at
September 30, 2006 compared to 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.
 22




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##### Table of Contents



Outlook
  
    
    Increase our focus on organic loan and deposit growth;
    
    Focus on process improvements to enhance customer service and reduce costs;
    
    Perform a comprehensive review of our fees and fee routines for services;
    
    Review the performance characteristics of our branch network in our entire market area; and
    
    Review our pricing on loans and deposits in certain market areas.
  Acquisition by The Toronto-Dominion Bank
     23




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##### Table of Contents



Table 1  Selected Income Data
 Successor
    
    
    Combined
    
    
    Successor
    
    
    PredecessorNine Months Ended
    
    
    Nine Months Ended
    
    
    March 1, 2005 to
    
    
    January 1, 2005 toSeptember 30, 2006
    
    
    September 30, 2005
    
    
    September 30, 2005
    
    
    February 28, 2005Interest and dividend income:Interest and fees on loans and leases
    
    $
    1,258,740
    
    
    $
    860,580
    
    
    $
    683,631
    
    
    $
    176,949Interest and dividends on securities
    
    
    194,679
    
    
    $
    176,195
    
    
    
    125,012
    
    
    
    51,183Total interest and dividend income
    
    
    1,453,419
    
    
    
    1,036,775
    
    
    
    808,643
    
    
    
    228,132Interest expense:Interest on deposits
    
    
    395,053
    
    
    
    155,022
    
    
    
    124,328
    
    
    
    30,694Interest on borrowed funds
    
    
    168,025
    
    
    
    127,390
    
    
    
    94,736
    
    
    
    32,654Total interest expense
    
    
    563,078
    
    
    
    282,412
    
    
    
    219,064
    
    
    
    63,348Net interest income
    
    
    890,341
    
    
    
    754,363
    
    
    
    589,579
    
    
    
    164,784Provision for loan and lease losses
    
    
    29,374
    
    
    
    11,166
    
    
    
    10,097
    
    
    
    1,069Net interest income after provision
for loan and lease losses
    
    
    860,967
    
    
    
    743,197
    
    
    
    579,482
    
    
    
    163,715Noninterest income:Deposit services
    
    
    123,318
    
    
    
    94,493
    
    
    
    76,134
    
    
    
    18,359Insurance agency commissions
    
    
    43,145
    
    
    
    39,712
    
    
    
    31,460
    
    
    
    8,252Merchant and electronic banking income, net
    
    
    51,323
    
    
    
    43,665
    
    
    
    35,914
    
    
    
    7,751Wealth management services
    
    
    34,092
    
    
    
    31,561
    
    
    
    24,602
    
    
    
    6,959Bank-owned life insurance
    
    
    23,664
    
    
    
    18,198
    
    
    
    14,029
    
    
    
    4,169Investment planning services
    
    
    15,339
    
    
    
    14,859
    
    
    
    12,044
    
    
    
    2,815Net securities losses
    
    
    (3
    )
    
    
    (48,022
    )
    
    
    (1,474
    )
    
    
    (46,548
    )Loans held for sale  Lower of cost or market
adjustment
    
    
    
    
    
    
    (7,114
    )
    
    
    386
    
    
    
    (7,500
    )Change in unrealized loss on derivatives
    
    
    
    
    
    
    5,954
    
    
    
    5,954
    
    
    
    Other noninterest income
    
    
    82,335
    
    
    
    53,195
    
    
    
    44,091
    
    
    
    9,104373,213
    
    
    
    246,501
    
    
    
    243,140
    
    
    
    3,361Noninterest expense:Compensation and employee benefits
    
    
    383,575
    
    
    
    308,023
    
    
    
    240,046
    
    
    
    67,977Occupancy
    
    
    77,047
    
    
    
    53,081
    
    
    
    41,670
    
    
    
    11,411Equipment
    
    
    48,064
    
    
    
    38,650
    
    
    
    30,210
    
    
    
    8,440Data processing
    
    
    46,193
    
    
    
    34,327
    
    
    
    27,094
    
    
    
    7,233Advertising and marketing
    
    
    30,915
    
    
    
    22,284
    
    
    
    17,911
    
    
    
    4,373Amortization of identifiable intangible assets
    
    
    116,653
    
    
    
    74,193
    
    
    
    72,632
    
    
    
    1,561Merger and restructuring costs
    
    
    48,490
    
    
    
    37,722
    
    
    
    10,458
    
    
    
    27,264Prepayment penalties on borrowings
    
    
    
    
    
    
    6,303
    
    
    
    3
    
    
    
    6,300Other noninterest expense
    
    
    106,201
    
    
    
    80,588
    
    
    
    64,701
    
    
    
    15,887857,138
    
    
    
    655,171
    
    
    
    504,725
    
    
    
    150,446Income before income tax expense
    
    
    377,042
    
    
    
    334,527
    
    
    
    317,897
    
    
    
    16,630Provision for income taxes
    
    
    121,193
    
    
    
    116,113
    
    
    
    109,931
    
    
    
    6,182Income from continuing operations
    
    
    255,849
    
    
    
    218,414
    
    
    
    207,966
    
    
    
    10,448Discontinued operationsIncome (loss) from discontinued operations
    
    
    (4,523
    )
    
    
    
    
    
    
    
    
    
    
    Income tax benefit
    
    
    4,368
    
    
    
    
    
    
    
    
    
    
    
    Loss from discontinued operations, net of tax
    
    
    (155
    )
    
    
    
    
    
    
    
    
    
    
    Net income
    
    $
    255,694
    
    
    $
    218,414
    
    
    $
    207,966
    
    
    $
    10,448Basic earnings per shareIncome from continuing operations
    
    $
    1.15
    
    
    $
    1.24Income from discontinued operations, net of tax
    
    
    
    
    
    
    Net Income
    
    $
    1.15
    
    
    $
    1.24Diluted earnings per shareIncome from continuing operations
    
    $
    1.15
    
    
    $
    1.23Income from discontinued operations, net of tax
    
    
    
    
    
    
    Net Income
    
    $
    1.15
    
    
    $
    1.23Weighted average shares outstanding:Basic
    
    
    222,100
    
    
    
    176,822Dilutive effect of stock options
    
    
    882
    
    
    
    1,036Diluted
    
    
    222,982
    
    
    
    177,858
 24




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##### Table of Contents



Acquisitions
   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
  25




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##### Table of Contents



Table 3  Selected Quarterly Data
 2006
    
    
    2005Third
    
    
    Second
    
    
    First
    
    
    Fourth
    
    
    ThirdCondensed Income StatementInterest income
    
    
    
    
    
    $
    504,098
    
    
    $
    492,823
    
    
    $
    456,499
    
    
    $
    363,917
    
    
    $
    350,679Interest expense
    
    
    
    
    
    
    203,034
    
    
    
    185,990
    
    
    
    174,055
    
    
    
    120,477
    
    
    
    101,682Net interest income
    
    
    (A
    )
    
    
    301,064
    
    
    
    306,833
    
    
    
    282,444
    
    
    
    243,440
    
    
    
    248,997Provision for loan and lease losses
    
    
    
    
    
    
    13,755
    
    
    
    8,719
    
    
    
    6,900
    
    
    
    6,000
    
    
    
    5,500Net interest income after provision
for loan and lease losses
    
    
    
    
    
    
    287,309
    
    
    
    298,114
    
    
    
    275,544
    
    
    
    237,440
    
    
    
    243,497Noninterest income (1)
    
    
    (B
    )
    
    
    128,306
    
    
    
    127,068
    
    
    
    117,839
    
    
    
    60,097
    
    
    
    103,607Noninterest expense, excluding merger and
restructuring costs
    
    
    (C
    )
    
    
    279,946
    
    
    
    271,485
    
    
    
    257,218
    
    
    
    210,700
    
    
    
    210,566Merger and restructuring costs
    
    
    (D
    )
    
    
    14,089
    
    
    
    14,583
    
    
    
    19,818
    
    
    
    4,957
    
    
    
    1,163Income before income taxes
    
    
    
    
    
    
    121,580
    
    
    
    139,114
    
    
    
    116,347
    
    
    
    81,880
    
    
    
    135,375Income tax expense
    
    
    
    
    
    
    37,989
    
    
    
    44,405
    
    
    
    38,799
    
    
    
    26,315
    
    
    
    46,634Income (loss) from discontinued operations, net of tax
    
    
    
    
    
    
    2,511
    
    
    
    (1,323
    )
    
    
    (1,342
    )
    
    
    
    
    
    
    Net income
    
    
    
    
    
    $
    86,102
    
    
    $
    93,386
    
    
    $
    76,206
    
    
    $
    55,565
    
    
    $
    88,741Weighted average shares outstanding:Basic
    
    
    
    
    
    
    228,278
    
    
    
    228,130
    
    
    
    209,690
    
    
    
    173,745
    
    
    
    173,661Diluted
    
    
    
    
    
    
    229,101
    
    
    
    228,777
    
    
    
    210,444
    
    
    
    174,427
    
    
    
    174,398Basic earnings per shareIncome from continuing operations
    
    
    
    
    
    $
    0.37
    
    
    $
    0.42
    
    
    $
    0.37
    
    
    $
    0.32
    
    
    $
    0.51Loss from discontinued operations, net
    
    
    
    
    
    $
    0.01
    
    
    ($
    0.01
    )
    
    ($
    0.01
    )
    
    
    
    
    
    
    Net income
    
    
    
    
    
    $
    0.38
    
    
    $
    0.41
    
    
    $
    0.36
    
    
    $
    0.32
    
    
    $
    0.51Diluted earnings per shareIncome from continuing operations
    
    
    
    
    
    $
    0.37
    
    
    $
    0.41
    
    
    $
    0.37
    
    
    $
    0.32
    
    
    $
    0.51Loss from discontinued operations, net
    
    
    
    
    
    $
    0.01
    
    
    
    
    
    
    ($
    0.01
    )
    
    
    
    
    
    
    Net income
    
    
    
    
    
    $
    0.38
    
    
    $
    0.41
    
    
    $
    0.36
    
    
    $
    0.32
    
    
    $
    0.51Financial RatiosReturn on average assets (2)
    
    
    
    
    
    
    0.86
    %
    
    
    0.93
    %
    
    
    0.79
    %
    
    
    0.69
    %
    
    
    1.11
    %Return on average equity (2)
    
    
    
    
    
    
    4.15
    %
    
    
    4.58
    %
    
    
    4.07
    %
    
    
    3.42
    %
    
    
    5.44
    %Net interest margin (fully-taxable equivalent) (2)
    
    
    
    
    
    
    4.01
    %
    
    
    4.07
    %
    
    
    3.83
    %
    
    
    3.96
    %
    
    
    4.09
    %Noninterest income as a percent of total income (3)
    
    
    
    
    
    
    29.88
    %
    
    
    29.29
    %
    
    
    29.44
    %
    
    
    19.80
    %
    
    
    29.38
    %Efficiency ratio (4)
    
    
    
    
    
    
    68.48
    %
    
    
    65.93
    %
    
    
    69.21
    %
    
    
    71.05
    %
    
    
    60.05
    %Per Share DataBook value per share
    
    
    
    
    
    $
    36.21
    
    
    $
    35.93
    
    
    $
    35.80
    
    
    $
    37.34
    
    
    $
    37.23Dividends per share
    
    
    
    
    
    $
    0.22
    
    
    $
    0.22
    
    
    $
    0.22
    
    
    $
    0.22
    
    
    $
    0.22
 
 (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). Net Interest Income and Margin
   26




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##### Table of Contents



1 4
  
    
    Loans representing a higher percentage of average earning assets (loans comprised 85% of
average earning assets during the third quarter of 2006 compared to 82% during the third
quarter of 2005); and
    
    a reduction in borrowings as a percent of total interest-bearing liabilities (borrowings
comprised 16% of average interest-bearing liabilities during the third quarter of 2006
compared to 22% during the third quarter of 2005).
   27




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##### Table of Contents



Table 4  Average Balances, Yields and Rates
 Successor
    
    
    Successor2006 Third Quarter (4)
    
    
    2005 Third QuarterYield/
    
    
    
    
    
    
    
    
    
    
    Yield/Average Balance
    
    
    Interest
    
    

    Rate (1)
    
    
    Average Balance
    
    
    Interest
    
    

    Rate (1)Loans and leases (2):Residential real estate mortgages
    
    $
    2,832,669
    
    
    $
    40,100
    
    
    
    5.66
    %
    
    $
    3,246,891
    
    
    $
    44,806
    
    
    
    5.52
    %Commercial real estate mortgages
    
    
    8,849,915
    
    
    
    156,776
    
    
    
    7.03
    %
    
    
    6,719,569
    
    
    
    103,508
    
    
    
    6.11
    %Commercial business loans and leases
    
    
    6,505,446
    
    
    
    121,209
    
    
    
    7.40
    %
    
    
    4,180,982
    
    
    
    63,419
    
    
    
    6.02
    %Consumer loans and leases
    
    
    7,176,928
    
    
    
    118,848
    
    
    
    6.57
    %
    
    
    5,918,342
    
    
    
    88,669
    
    
    
    5.94
    %Credit card receivables
    
    
    432,848
    
    
    
    12,810
    
    
    
    11.74
    %
    
    
    
    
    
    
    
    
    
    
    Total loans and leases
    
    
    25,797,806
    
    
    
    449,743
    
    
    
    6.92
    %
    
    
    20,065,784
    
    
    
    300,402
    
    
    
    5.95
    %Investment securities (3)
    
    
    2,448,455
    
    
    
    32,794
    
    
    
    5.36
    %
    
    
    4,341,490
    
    
    
    52,086
    
    
    
    4.80
    %Securities purchased under agreements to resell
    
    
    1,962,348
    
    
    
    25,358
    
    
    
    5.06
    %
    
    
    
    
    
    
    
    
    
    
    Federal funds sold and other short-term investments
    
    
    13,952
    
    
    
    84
    
    
    
    2.38
    %
    
    
    15,611
    
    
    
    65
    
    
    
    1.66
    %Total earning assets
    
    
    30,222,561
    
    
    
    507,979
    
    
    
    6.67
    %
    
    
    24,422,885
    
    
    
    352,553
    
    
    
    5.74
    %Bank-owned life insurance
    
    
    777,735
    
    
    
    
    
    
    
    
    
    
    
    563,040Goodwill
    
    
    6,019,737
    
    
    
    
    
    
    
    
    
    
    
    4,549,680Identifiable intangible assets
    
    
    791,631
    
    
    
    
    
    
    
    
    
    
    
    715,078Other noninterest-earning assets
    
    
    2,241,649
    
    
    
    
    
    
    
    
    
    
    
    1,484,289Total assets
    
    $
    40,053,313
    
    
    
    
    
    
    
    
    
    
    $
    31,734,972Interest-bearing deposits:Regular savings
    
    $
    4,059,605
    
    
    
    13,327
    
    
    
    1.30
    %
    
    $
    2,605,428
    
    
    
    2,138
    
    
    
    0.33
    %NOW and money market accounts
    
    
    9,888,539
    
    
    
    70,518
    
    
    
    2.83
    %
    
    
    8,187,345
    
    
    
    31,708
    
    
    
    1.54
    %Certificates of deposit
    
    
    6,952,112
    
    
    
    65,841
    
    
    
    3.76
    %
    
    
    4,841,020
    
    
    
    27,005
    
    
    
    2.21
    %Brokered deposits
    
    
    232,612
    
    
    
    3,149
    
    
    
    5.37
    %
    
    
    62,505
    
    
    
    602
    
    
    
    3.82
    %Deposits in foreign office
    
    
    72,600
    
    
    
    747
    
    
    
    4.18
    %
    
    
    
    
    
    
    
    
    
    
    Total interest-bearing deposits
    
    
    21,205,468
    
    
    
    153,582
    
    
    
    2.87
    %
    
    
    15,696,298
    
    
    
    61,453
    
    
    
    1.55
    %Borrowed funds
    
    
    4,132,212
    
    
    
    49,452
    
    
    
    4.76
    %
    
    
    4,411,042
    
    
    
    40,229
    
    
    
    3.62
    %Total interest-bearing liabilities
    
    
    25,337,680
    
    
    
    203,034
    
    
    
    3.18
    %
    
    
    20,107,340
    
    
    
    101,682
    
    
    
    2.01
    %Non-interest bearing deposits
    
    
    5,757,444
    
    
    
    
    
    
    
    
    
    
    
    4,546,766Deferred tax liability related to
identifiable intangible assets
    
    
    320,029
    
    
    
    
    
    
    
    
    
    
    
    265,588Other liabilities
    
    
    411,631
    
    
    
    
    
    
    
    
    
    
    
    338,178Shareholders equity
    
    
    8,226,529
    
    
    
    
    
    
    
    
    
    
    
    6,477,100Total liabilities and shareholders equity
    
    $
    40,053,313
    
    
    
    
    
    
    
    
    
    
    $
    31,734,972Net earning assets
    
    $
    4,884,881
    
    
    
    
    
    
    
    
    
    
    $
    4,315,545Net interest income (fully-taxable equivalent)
    
    
    
    
    
    
    304,945
    
    
    
    
    
    
    
    
    
    
    
    250,871Less: fully-taxable equivalent adjustments
    
    
    
    
    
    
    (3,881
    )
    
    
    
    
    
    
    
    
    
    
    (1,874
    )Net interest income
    
    
    
    
    
    $
    301,064
    
    
    
    
    
    
    
    
    
    
    $
    248,997Net interest rate spread (fully-taxable equivalent)
    
    
    
    
    
    
    
    
    
    
    3.49
    %
    
    
    
    
    
    
    
    
    
    
    3.73
    %Net interest margin (fully-taxable equivalent)
    
    
    
    
    
    
    
    
    
    
    4.01
    %
    
    
    
    
    
    
    
    
    
    
    4.09
    %
 
 (1)
    
    Annualized.(2)
    
    Loans and leases include loans held for sale.(3)
    
    Includes securities available for sale and held to maturity.(4)
    
    Includes the effects of the acquisition of Hudson on January 31, 2006. 28




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##### Table of Contents



Table 4  Average Balances, Yields and Rates
 Successor
    
    
    CombinedNine Months Ended
    
    
    Nine Months EndedSeptember 30, 2006 (4)
    
    
    September 30, 2005Yield/
    
    
    
    
    
    
    
    
    
    
    Yield/Average Balance
    
    
    Interest
    
    
    Rate (1)
    
    
    Average Balance
    
    
    Interest
    
    
    Rate (1)Loans and leases (2):Residential real estate mortgages
    
    $
    2,883,543
    
    
    $
    120,617
    
    
    
    5.58
    %
    
    $
    3,570,839
    
    
    $
    143,339
    
    
    
    5.35
    %Commercial real estate mortgages
    
    
    8,549,170
    
    
    
    440,552
    
    
    
    6.89
    %
    
    
    6,609,569
    
    
    
    295,675
    
    
    
    5.98
    %Commercial business loans and leases
    
    
    6,243,458
    
    
    
    331,670
    
    
    
    7.10
    %
    
    
    4,121,366
    
    
    
    178,754
    
    
    
    5.80
    %Consumer loans and leases
    
    
    7,086,394
    
    
    
    339,390
    
    
    
    6.40
    %
    
    
    5,703,486
    
    
    
    246,528
    
    
    
    5.78
    %Credit card loans
    
    
    360,440
    
    
    
    33,216
    
    
    
    12.32
    %
    
    
    
    
    
    
    
    
    
    
    0.00
    %Total loans and leases
    
    
    25,123,005
    
    
    
    1,265,445
    
    
    
    6.73
    %
    
    
    20,005,260
    
    
    
    864,296
    
    
    
    5.77
    %Investment securities (3)
    
    
    3,462,476
    
    
    
    134,705
    
    
    
    5.19
    %
    
    
    5,002,727
    
    
    
    177,642
    
    
    
    4.73
    %Securities purchased under agreements to resell
    
    
    1,663,156
    
    
    
    62,803
    
    
    
    4.98
    %
    
    
    
    
    
    
    Federal funds sold and other short-term investments
    
    
    13,472
    
    
    
    322
    
    
    
    3.20
    %
    
    
    14,434
    
    
    
    225
    
    
    
    2.09
    %Total earning assets
    
    
    30,262,109
    
    
    
    1,463,275
    
    
    
    6.46
    %
    
    
    25,022,421
    
    
    
    1,042,163
    
    
    
    5.56
    %Bank-owned life insurance
    
    
    748,689
    
    
    
    
    
    
    
    
    
    
    
    555,616Goodwill
    
    
    5,850,722
    
    
    
    
    
    
    
    
    
    
    
    3,875,544Indentifiable intangible assets
    
    
    808,780
    
    
    
    
    
    
    
    
    
    
    
    588,958Other noninterest-earning assets
    
    
    2,108,947
    
    
    
    
    
    
    
    
    
    
    
    1,444,604Total assets
    
    $
    39,779,247
    
    
    
    
    
    
    
    
    
    
    $
    31,487,143Interest-bearing deposits:Regular savings
    
    $
    4,035,908
    
    
    
    36,636
    
    
    
    1.21
    %
    
    $
    2,648,151
    
    
    
    5,992
    
    
    
    0.30
    %NOW and money market accounts
    
    
    9,635,634
    
    
    
    181,216
    
    
    
    2.51
    %
    
    
    8,102,660
    
    
    
    77,095
    
    
    
    1.27
    %Certificates of deposit
    
    
    6,611,830
    
    
    
    167,777
    
    
    
    3.39
    %
    
    
    4,775,911
    
    
    
    69,969
    
    
    
    1.96
    %Brokered deposits
    
    
    233,801
    
    
    
    8,670
    
    
    
    4.96
    %
    
    
    68,256
    
    
    
    1,967
    
    
    
    3.85
    %Foreign branch deposits
    
    
    24,727
    
    
    
    755
    
    
    
    4.08
    %
    
    
    
    
    
    
    
    
    
    
    0.00
    %Total interest-bearing deposits
    
    
    20,541,900
    
    
    
    395,054
    
    
    
    2.57
    %
    
    
    15,594,978
    
    
    
    155,023
    
    
    
    1.33
    %Borrowed funds
    
    
    5,007,034
    
    
    
    168,024
    
    
    
    4.48
    %
    
    
    5,228,368
    
    
    
    127,389
    
    
    
    3.25
    %Total interest-bearing liabilities
    
    
    25,548,934
    
    
    
    563,078
    
    
    
    2.95
    %
    
    
    20,823,346
    
    
    
    282,412
    
    
    
    1.81
    %Non-interest bearing deposits
    
    
    5,537,407
    
    
    
    
    
    
    
    
    
    
    
    4,374,659Deferred tax liability related to
identifiable intangible assets
    
    
    323,149
    
    
    
    
    
    
    
    
    
    
    
    178,710Other liabilities
    
    
    361,621
    
    
    
    
    
    
    
    
    
    
    
    311,701Shareholders equity
    
    
    8,008,136
    
    
    
    
    
    
    
    
    
    
    
    5,798,727Total liabilities and shareholders equity
    
    $
    39,779,247
    
    
    
    
    
    
    
    
    
    
    $
    31,487,143Net earning assets
    
    $
    4,713,175
    
    
    
    
    
    
    
    
    
    
    $
    4,199,075Net interest income (fully-taxable equivalent)
    
    
    
    
    
    
    900,197
    
    
    
    
    
    
    
    
    
    
    
    759,751Less: fully-taxable equivalent adjustments
    
    
    
    
    
    
    (9,856
    )
    
    
    
    
    
    
    
    
    
    
    (5,388
    )Net interest income
    
    
    
    
    
    $
    890,341
    
    
    
    
    
    
    
    
    
    
    $
    754,363Net interest rate spread (fully-taxable equivalent)
    
    
    
    
    
    
    
    
    
    
    3.51
    %
    
    
    
    
    
    
    
    
    
    
    3.75
    %Net interest margin (fully-taxable equivalent)
    
    
    
    
    
    
    
    
    
    
    3.97
    %
    
    
    
    
    
    
    
    
    
    
    4.06
    %
 
 (1)
    
    Annualized.(2)
    
    Loans and leases include loans held for sale.(3)
    
    Includes securities available for sale and held to maturity.(4)
    
    Includes the effects of the acquisition of Hudson on January 31, 2006. 29




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##### Table of Contents



Table 5   Rate /Volume Analysis
 Three Months Ended
    
    Nine Months EndedSeptember 30, 2006 (Successor) vs. Three Months Ended
    
    September 30, 2006 (Successor) vs. Nine Months EndedSeptember 30, 2005 (Successor)
    
    September 30, 2005 (Combined)Increase (decrease) due to
    
    Increase (decrease) due toTotal
    
    
    
    
    
    
    
    
    
    TotalVolume (1)
    
    Rate
    
    Change
    
    Volume (1)
    

    Rate
    

    ChangeInterest income:Loans and leases
    
    $
    92,191
    
    
    $
    57,150
    
    
    $
    149,341
    
    
    $
    242,563
    
    
    $
    158,586
    
    
    $
    401,149Investment securities
    
    
    (25,648
    )
    
    
    6,356
    
    
    
    (19,292
    )
    
    
    (60,495
    )
    
    
    17,558
    
    
    
    (42,937
    )Securities purchased under agreements to resell
    
    
    25,358
    
    
    
    
    
    
    
    25,358
    
    
    
    62,803
    
    
    
    
    
    
    
    62,803Federal funds sold and
other short-term investments
    
    
    (6
    )
    
    
    25
    
    
    
    19
    
    
    
    (22
    )
    
    
    119
    
    
    
    97Total interest income
    
    
    91,895
    
    
    
    63,531
    
    
    
    155,426
    
    
    
    244,849
    
    
    
    176,263
    
    
    
    421,112Interest expense:Interest-bearing deposits:Regular savings
    
    
    1,545
    
    
    
    9,644
    
    
    
    11,189
    
    
    
    4,513
    
    
    
    26,131
    
    
    
    30,644NOW and money market 
accounts
    
    
    6,292
    
    
    
    32,518
    
    
    
    38,810
    
    
    
    15,752
    
    
    
    88,369
    
    
    
    104,121Certificates of deposit
    
    
    12,643
    
    
    
    26,193
    
    
    
    38,836
    
    
    
    33,344
    
    
    
    64,464
    
    
    
    97,808Brokered deposits
    
    
    2,301
    
    
    
    246
    
    
    
    2,547
    
    
    
    6,129
    
    
    
    574
    
    
    
    6,703Foreign branch deposits
    
    
    747
    
    
    
    
    
    
    
    747
    
    
    
    755
    
    
    
    
    
    
    
    755Total interest-bearing deposits
    
    
    23,528
    
    
    
    68,601
    
    
    
    92,129
    
    
    
    60,493
    
    
    
    179,538
    
    
    
    240,031Borrowed funds
    
    
    (1,924
    )
    
    
    11,147
    
    
    
    9,223
    
    
    
    (4,699
    )
    
    
    45,334
    
    
    
    40,635Total interest expense
    
    
    21,604
    
    
    
    79,748
    
    
    
    101,352
    
    
    
    55,794
    
    
    
    224,872
    
    
    
    280,666Net interest income (fully taxable equivalent)
    
    $
    70,291
    
    
    
    ($16,217
    )
    
    $
    54,074
    
    
    $
    189,055
    
    
    
    ($48,609
    )
    
    $
    140,446
 
 (1)
    
    Volume increases include the effects of the acquisition of Hudson United Bancorp
on January 31, 2006 and BostonFed Bancorp, Inc. on January 21, 2005.  30




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##### Table of Contents



Table 6  Analysis of Net Interest Income
 Successor
    
    
    Successor
    
    
    
    
    
    
    Successor
    
    
    CombinedThree Months Ended
    
    
    Three Months Ended
    
    
    
    
    
    
    Nine Months Ended
    
    
    Nine Months EndedSeptember 30, 2006
    
    
    September 30, 2005
    
    
    Change
    
    
    September 30, 2006
    
    
    September 30, 2005
    
    
    ChangeComponents of net interest incomeIncome on earning assets (fully-taxable equivalent)
    
    $
    507,979
    
    
    $
    352,553
    
    
    $
    155,426
    
    
    $
    1,463,275
    
    
    $
    1,042,163
    
    
    $
    421,112Expense on interest-bearing liabilities
    
    
    203,034
    
    
    
    101,682
    
    
    
    101,352
    
    
    
    563,078
    
    
    
    282,412
    
    
    
    280,666Net interest income (fully-taxable equivalent)
    
    
    304,945
    
    
    
    250,871
    
    
    
    54,074
    
    
    
    900,197
    
    
    
    759,751
    
    
    
    140,446Less: fully-taxable equivalent adjustments
    
    
    (3,881
    )
    
    
    (1,874
    )
    
    
    (2,007
    )
    
    
    (9,856
    )
    
    
    (5,388
    )
    
    
    (4,468
    )Net interest income, as reported
    
    $
    301,064
    
    
    $
    248,997
    
    
    $
    52,067
    
    
    $
    890,341
    
    
    $
    754,363
    
    
    $
    135,978Average balancesLoans and leases
    
    $
    25,797,806
    
    
    $
    20,065,785
    
    
    $
    5,732,021
    
    
    $
    25,123,005
    
    
    $
    20,005,259
    
    
    $
    5,117,746Investment securities
    
    
    2,448,455
    
    
    
    4,341,490
    
    
    
    (1,893,035
    )
    
    
    3,462,476
    
    
    
    5,002,727
    
    
    
    (1,540,251
    )Securities purchased under agreements to resell
    
    
    1,962,348
    
    
    
    
    
    
    
    1,962,348
    
    
    
    1,663,156
    
    
    
    
    
    
    
    1,663,156Federal funds sold and other short-term investments
    
    
    13,952
    
    
    
    15,611
    
    
    
    (1,659
    )
    
    
    13,472
    
    
    
    14,434
    
    
    
    (962
    )Total earning assets
    
    
    30,222,561
    
    
    
    24,422,886
    
    
    
    5,799,675
    
    
    
    30,262,109
    
    
    
    25,022,420
    
    
    
    5,239,689Total interest-bearing liabilities
    
    
    25,337,679
    
    
    
    20,107,340
    
    
    
    5,230,339
    
    
    
    25,548,934
    
    
    
    20,823,346
    
    
    
    4,725,588Net earning assets
    
    $
    4,884,882
    
    
    $
    4,315,546
    
    
    $
    569,336
    
    
    $
    4,713,175
    
    
    $
    4,199,074
    
    
    $
    514,101Average yields and rates paidEarning assets yield (fully-taxable equivalent)
    
    
    6.67
    %
    
    
    5.74
    %
    
    
    0.93
    %
    
    
    6.46
    %
    
    
    5.56
    %
    
    
    0.90
    %Rate paid on interest-bearing liabilities
    
    
    3.18
    %
    
    
    2.01
    %
    
    
    1.17
    %
    
    
    2.95
    %
    
    
    1.81
    %
    
    
    1.14
    %Net interest rate spread (fully-taxable equivalent)
    
    
    3.49
    %
    
    
    3.73
    %
    
    
    (0.24
    %)
    
    
    3.51
    %
    
    
    3.75
    %
    
    
    (0.24
    %)Net interest margin (fully-taxable equivalent)
    
    
    4.01
    %
    
    
    4.09
    %
    
    
    (0.08
    %)
    
    
    3.97
    %
    
    
    4.06
    %
    
    
    (0.09
    %)
 Provision and Allowance for Loan and Lease Losses
   Noninterest Income
  31




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##### Table of Contents



Table 7  Noninterest Income
 Successor
    
    
    
    
    
    
    
    
    
    
    Successor
    
    
    CombinedThree Months Ended September 30,
    
    
    Change
    
    
    Nine Months Ended September 30,
    
    
    Change2006
    
    
    2005
    
    
    Amount
    
    
    Percent
    
    
    2006
    
    
    2005
    
    
    Amount
    
    
    PercentNoninterest income:Deposit services
    
    $
    42,213
    
    
    $
    34,558
    
    
    $
    7,655
    
    
    
    22
    %
    
    $
    123,318
    
    
    $
    94,493
    
    
    $
    28,825
    
    
    
    31
    %Insurance agency commissions
    
    
    12,755
    
    
    
    12,216
    
    
    
    539
    
    
    
    4
    %
    
    
    43,145
    
    
    
    39,712
    
    
    
    3,433
    
    
    
    9
    %Merchant and electronic banking
income, net
    
    
    17,532
    
    
    
    15,824
    
    
    
    1,708
    
    
    
    11
    %
    
    
    51,323
    
    
    
    43,665
    
    
    
    7,658
    
    
    
    18
    %Wealth management services
    
    
    11,009
    
    
    
    10,662
    
    
    
    347
    
    
    
    3
    %
    
    
    34,092
    
    
    
    31,561
    
    
    
    2,531
    
    
    
    8
    %Bank-owned life insurance
    
    
    8,273
    
    
    
    5,994
    
    
    
    2,279
    
    
    
    38
    %
    
    
    23,664
    
    
    
    18,198
    
    
    
    5,466
    
    
    
    30
    %Investment planning services
    
    
    4,838
    
    
    
    4,708
    
    
    
    130
    
    
    
    3
    %
    
    
    15,339
    
    
    
    14,859
    
    
    
    480
    
    
    
    3
    %Net securities gains (losses)
    
    
    7
    
    
    
    1,014
    
    
    
    (1,007
    )
    
    
    N/M
    
    
    
    (3
    )
    
    
    (48,022
    )
    
    
    48,019
    
    
    
    (100
    %)Loans held for sale  lower of cost or
market adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    N/M
    
    
    
    
    
    
    
    (7,114
    )
    
    
    7,114
    
    
    
    (100
    %)Change in unrealized loss on
derivatives
    
    
    
    
    
    
    (711
    )
    
    
    711
    
    
    
    N/M
    
    
    
    
    
    
    
    5,954
    
    
    
    (5,954
    )
    
    
    (100
    %)Other noninterest income:Loan fee income
    
    
    14,168
    
    
    
    8,031
    
    
    
    6,137
    
    
    
    76
    %
    
    
    42,084
    
    
    
    23,843
    
    
    
    18,241
    
    
    
    77
    %Income on restricted stock
    
    
    6,473
    
    
    
    2,104
    
    
    
    4,369
    
    
    
    208
    %
    
    
    14,395
    
    
    
    6,702
    
    
    
    7,693
    
    
    
    115
    %Mortgage banking services income
    
    
    1,435
    
    
    
    2,910
    
    
    
    (1,475
    )
    
    
    (51
    %)
    
    
    3,995
    
    
    
    6,567
    
    
    
    (2,572
    )
    
    
    (39
    %)Venture capital income
(write-downs)
    
    
    127
    
    
    
    (840
    )
    
    
    967
    
    
    
    N/M
    
    
    
    1,069
    
    
    
    (1,233
    )
    
    
    2,302
    
    
    
    187
    %Covered call option premiums
    
    
    
    
    
    
    1,951
    
    
    
    (1,951
    )
    
    
    N/M
    
    
    
    922
    
    
    
    6,080
    
    
    
    (5,158
    )
    
    
    (85
    %)Miscellaneous income
    
    
    9,476
    
    
    
    5,186
    
    
    
    4,290
    
    
    
    83
    %
    
    
    19,870
    
    
    
    11,236
    
    
    
    8,634
    
    
    
    77
    %Total other noninterest income
    
    
    31,679
    
    
    
    19,342
    
    
    
    12,337
    
    
    
    64
    %
    
    
    82,335
    
    
    
    53,195
    
    
    
    29,140
    
    
    
    55
    %Total noninterest income
    
    $
    128,306
    
    
    $
    103,607
    
    
    $
    24,699
    
    
    
    24
    %
    
    $
    373,213
    
    
    $
    246,501
    
    
    $
    126,712
    
    
    
    51
    %
 
 N/M   not meaningful    32




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##### Table of Contents



33




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##### Table of Contents



Noninterest Expense
   Table 8  Noninterest Expense
 Successor
    
    
    Successor
    
    
    
    
    
    
    
    
    
    
    Successor
    
    
    CombinedThree Months Ended
    
    
    Three Months Ended
    
    
    Change
    
    
    Nine Months Ended
    
    
    Nine Months Ended
    
    
    ChangeSeptember 30, 2006
    
    
    September 30, 2005
    
    
    Amount
    
    
    Percent
    
    
    September 30, 2006
    
    
    September 30, 2005
    
    
    Amount
    
    
    PercentNoninterest expense:Compensation and employee
benefits
    
    $
    130,643
    
    
    $
    102,059
    
    
    $
    28,584
    
    
    
    28
    %
    
    $
    383,575
    
    
    $
    308,023
    
    
    $
    75,552
    
    
    
    25
    %Occupancy
    
    
    26,003
    
    
    
    17,114
    
    
    
    8,889
    
    
    
    52
    %
    
    
    77,047
    
    
    
    53,081
    
    
    
    23,966
    
    
    
    45
    %Equipment
    
    
    16,648
    
    
    
    12,831
    
    
    
    3,817
    
    
    
    30
    %
    
    
    48,064
    
    
    
    38,650
    
    
    
    9,414
    
    
    
    24
    %Data processing
    
    
    15,172
    
    
    
    11,675
    
    
    
    3,497
    
    
    
    30
    %
    
    
    46,193
    
    
    
    34,327
    
    
    
    11,866
    
    
    
    35
    %Advertising and marketing
    
    
    12,718
    
    
    
    7,503
    
    
    
    5,215
    
    
    
    70
    %
    
    
    30,915
    
    
    
    22,284
    
    
    
    8,631
    
    
    
    39
    %Amortization
of identifiable intangible assets
    
    
    39,480
    
    
    
    31,041
    
    
    
    8,439
    
    
    
    27
    %
    
    
    116,653
    
    
    
    74,193
    
    
    
    42,460
    
    
    
    57
    %Merger and restructuring
costs
    
    
    14,089
    
    
    
    1,163
    
    
    
    12,926
    
    
    
    N/M
    
    
    
    48,490
    
    
    
    37,722
    
    
    
    10,768
    
    
    
    29
    %Prepayment penalties on
borrowings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,303
    
    
    
    (6,303
    )
    
    
    (100
    %)Other noninterest expense:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Professional fees
    
    
    7,164
    
    
    
    5,469
    
    
    
    1,695
    
    
    
    31
    %
    
    
    18,955
    
    
    
    16,355
    
    
    
    2,600
    
    
    
    16
    %Telephone
    
    
    4,638
    
    
    
    3,078
    
    
    
    1,560
    
    
    
    51
    %
    
    
    13,379
    
    
    
    10,062
    
    
    
    3,317
    
    
    
    33
    %Office supplies
    
    
    3,192
    
    
    
    3,626
    
    
    
    (434
    )
    
    
    (12
    %)
    
    
    10,339
    
    
    
    9,246
    
    
    
    1,093
    
    
    
    12
    %Postage and freight
    
    
    3,576
    
    
    
    2,893
    
    
    
    683
    
    
    
    24
    %
    
    
    11,339
    
    
    
    8,647
    
    
    
    2,692
    
    
    
    31
    %Courier
    
    
    2,844
    
    
    
    1,749
    
    
    
    1,095
    
    
    
    63
    %
    
    
    8,142
    
    
    
    4,951
    
    
    
    3,191
    
    
    
    64
    %Miscellaneous loan costs
    
    
    1,296
    
    
    
    1,215
    
    
    
    81
    
    
    
    7
    %
    
    
    4,009
    
    
    
    3,858
    
    
    
    151
    
    
    
    4
    %Collection and carrying costs
of non-performing assets
    
    
    811
    
    
    
    608
    
    
    
    203
    
    
    
    33
    %
    
    
    2,019
    
    
    
    1,747
    
    
    
    272
    
    
    
    16
    %Deposits and other
assessments
    
    
    1,257
    
    
    
    993
    
    
    
    264
    
    
    
    27
    %
    
    
    3,824
    
    
    
    3,139
    
    
    
    685
    
    
    
    22
    %Miscellaneous
    
    
    14,504
    
    
    
    8,712
    
    
    
    5,792
    
    
    
    66
    %
    
    
    34,195
    
    
    
    22,583
    
    
    
    11,612
    
    
    
    51
    %Total other
noninterest expense
    
    
    39,282
    
    
    
    28,343
    
    
    
    10,939
    
    
    
    39
    %
    
    
    106,201
    
    
    
    80,588
    
    
    
    25,613
    
    
    
    32
    %Total noninterest
expense
    
    $
    294,035
    
    
    $
    211,729
    
    
    $
    82,306
    
    
    
    39
    %
    
    $
    857,138
    
    
    $
    655,171
    
    
    $
    201,967
    
    
    
    31
    %
 
 N/M  not meaningful    34




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##### Table of Contents



Discontinued Operations
  Taxes
   35




---



##### Table of Contents



Comprehensive Income
   FINANCIAL CONDITION
   Securities Purchased under Agreements to Resell
  Securities
   36




---



##### Table of Contents



Loans and Leases
      37




---



##### Table of Contents



Deposits
       Other Funding Sources
   38




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##### Table of Contents



Table 9   Subordinated Debt
 Issuance
    
    Balance at
    
    
    Interest
    
    
    MaturityDate
    
    9/30/2006
    
    
    Rate
    
    
    DateSeptember 20, 2005
    
    $
    241,568
    (1)
    
    
    5.05
    %
    
    
    9/20/2022May 6, 2002
    
    
    220,965
    
    
    
    7.00
    %
    
    
    5/6/2012June 22, 2001
    
    
    221,531
    
    
    
    7.63
    %
    
    
    6/15/2011$
    684,064
 
 (1)
    
    Issued Can$270 million and are unconditionally guaranteed by The Toronto-Dominion Bank.  Off-Balance Sheet Arrangements
  39




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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
    
    $
    1,438,025
    
    
    $
    39,495
    
    
    $
    182,566
    
    
    $
    45,551
    
    
    $
    1,170,413Capital lease obligations
    
    
    6,000
    
    
    
    230
    
    
    
    1,244
    
    
    
    1,546
    
    
    
    2,980Total long-term debt
    
    
    1,444,025
    
    
    
    39,725
    
    
    
    183,810
    
    
    
    47,097
    
    
    
    1,173,393Operating lease obligations
    
    
    207,302
    
    
    
    41,154
    
    
    
    68,673
    
    
    
    41,664
    
    
    
    55,811Pension plan contribution (2)
    
    
    30,029
    
    
    
    30,029
    
    
    
    
    
    
    
    
    
    
    
    Other benefit plan payments  estimated
    
    
    61,289
    
    
    
    4,581
    
    
    
    11,130
    
    
    
    19,099
    
    
    
    26,479Other vendor obligations (3)
    
    
    74,441
    
    
    
    10,215
    
    
    
    6,455
    
    
    
    6,748
    
    
    
    51,023Total contractual obligations
    
    $
    1,817,086
    
    
    $
    125,704
    
    
    $
    270,068
    
    
    $
    114,608
    
    
    $
    1,306,706
 
 (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. 40




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##### Table of Contents



Total
    
    

Amount of Commitment Expiration  Per PeriodAmounts
    
    
    Less than
    
    
    1  3
    
    
    4  5
    
    
    After 5Other commitments
    
    Committed
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    YearsUnused portions on lines of credit
    
    $
    7,501,412
    
    
    $
    3,028,071
    
    
    $
    657,670
    
    
    $
    298,915
    
    
    $
    3,516,756Standby letters of credit
    
    
    623,309
    
    
    
    181,321
    
    
    
    115,761
    
    
    
    109,462
    
    
    
    216,765Commercial letters of credit
    
    
    63,009
    
    
    
    41,063
    
    
    
    1,758
    
    
    
    16,784
    
    
    
    3,404Commitments to originate loans
    
    
    3,009,861
    
    
    
    1,755,591
    
    
    
    774,556
    
    
    
    142,717
    
    
    
    336,997Other commitments
    
    
    227,063
    
    
    
    10,325
    
    
    
    10,988
    
    
    
    3,559
    
    
    
    202,191Total commitments
    
    $
    11,424,654
    
    
    $
    5,016,371
    
    
    $
    1,560,733
    
    
    $
    571,437
    
    
    $
    4,276,113
 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)
    
    $
    1,600,298
    
    
    $
    11,974
    
    
    $
    176,858
    
    
    $
    226,624
    
    
    $
    1,184,842Interest rate swaps with dealers (2)
    
    
    1,600,298
    
    
    
    11,974
    
    
    
    176,858
    
    
    
    226,624
    
    
    
    1,184,842Interest rate caps with commercial borrowers
    
    
    48,786
    
    
    
    
    
    
    
    24,830
    
    
    
    4,348
    
    
    
    19,608Interest rate caps with dealers
    
    
    48,786
    
    
    
    
    
    
    
    24,830
    
    
    
    4,348
    
    
    
    19,608Cross currency swap (USD) (3)
    
    
    228,620
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    228,620Total return swap (4)
    
    
    20,031
    
    
    
    
    
    
    
    20,031
    
    
    
    
    
    
    
    Interest rate swaps
    
    
    1,120,000
    
    
    
    700,000
    
    
    
    75,000
    
    
    
    
    
    
    
    345,000Interest rate floors
    
    
    2,000,000
    
    
    
    
    
    
    
    2,000,000
    
    
    
    
    
    
    
    Forward commitments to sell loans
    
    
    19,494
    
    
    
    19,494
    
    
    
    
    
    
    
    
    
    
    
    Foreign
currency rate contracts: (5)Forward contracts with customers
    
    
    105,657
    
    
    
    57,929
    
    
    
    45,877
    
    
    
    1,851
    
    
    
    Forward contracts with dealers
    
    
    105,657
    
    
    
    57,929
    
    
    
    45,877
    
    
    
    1,851
    
    
    
    Foreign exchange options:
    
    
    Options with customers
    
    
    1,800
    
    
    
    1,800
    
    
    
    
    
    
    
    
    
    
    
    Options with dealers
    
    
    1,800
    
    
    
    1,800
    
    
    
    
    
    
    
    
    
    
    
    Rate-locked loan commitments
    
    
    87,766
    
    
    
    87,766
    
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    Swaps with commercial loan customers (TD Banknorth receives fixed, pays variable).(2)
    
    Swaps with dealers (TD Banknorth pays fixed, receives variable), which offset the interest rate swaps with commercial borrowers.(3)
    
    Swap on subordinated debt issued in Canadian dollars in September 2005.(4)
    
    Swap to hedge restricted stock units tied to the price of The Toronto-Dominion Bank common shares.(5)
    
    Forward contracts for customer accommodations. Shareholders Equity
    41




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##### Table of Contents



RISK MANAGEMENT
   CREDIT RISK MANAGEMENT
 General
   Table 11  Composition of Loans and Leases
 September 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
    
    $
    2,788,235
    
    
    
    11
    %
    
    
    0.50
    %
    
    $
    2,878,323
    
    
    
    14
    %
    
    
    0.40
    %Commercial real estate mortgages
    
    
    8,735,919
    
    
    
    34
    %
    
    
    0.33
    %
    
    
    6,776,837
    
    
    
    34
    %
    
    
    0.37
    %Commercial business loans and
leases
    
    
    6,614,394
    
    
    
    26
    %
    
    
    0.70
    %
    
    
    4,278,048
    
    
    
    21
    %
    
    
    0.48
    %Consumer loans and leases
    
    
    7,141,738
    
    
    
    28
    %
    
    
    0.14
    %
    
    
    6,186,519
    
    
    
    31
    %
    
    
    0.16
    %Credit card receivables
    
    
    449,664
    
    
    
    1
    %
    
    
    1.55
    %
    
    
    
    
    
    
    
    
    
    
    $
    25,729,950
    
    
    
    100
    %
    
    
    0.41
    %
    
    $
    20,119,727
    
    
    
    100
    %
    
    
    0.34
    %
  42




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##### Table of Contents



Table 12  Composition of Consumer Loans and Leases
 September 30,
    
    
    December 31,2006
    
    
    2005
    
    
    Change% of
    
    
    
    
    
    
    % ofAmount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    Amount
    
    
    PercentHome equity loans and lines
    
    $
    4,223,715
    
    
    
    59.14
    %
    
    $
    3,648,033
    
    
    
    58.96
    %
    
    $
    575,682
    
    
    
    15.78
    %Automobile
    
    
    2,615,619
    
    
    
    36.62
    %
    
    
    2,020,774
    
    
    
    32.66
    %
    
    
    594,845
    
    
    
    29.44
    %Education
    
    
    68,533
    
    
    
    0.96
    %
    
    
    202,044
    
    
    
    3.27
    %
    
    
    (133,511
    )
    
    
    (66.08
    %)Mobile home
    
    
    88,306
    
    
    
    1.24
    %
    
    
    88,519
    
    
    
    1.43
    %
    
    
    (213
    )
    
    
    (0.24
    %)Other (including leases)
    
    
    145,565
    
    
    
    2.04
    %
    
    
    227,149
    
    
    
    3.68
    %
    
    
    (81,584
    )
    
    
    (35.92
    %)Total
    
    $
    7,141,738
    
    
    
    100.00
    %
    
    $
    6,186,519
    
    
    
    100.00
    %
    
    $
    955,219
    
    
    
    15.44
    %
   Nonperforming Assets
  43




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##### Table of Contents



Table 13  Nonperforming Assets
 2006
    
    
    2005September 30
    
    
    June 30
    
    
    March 31
    
    
    December 31
    
    
    September 30Nonaccrual loans and leases:Residential real estate loans
    
    $
    9,713
    
    
    $
    10,714
    
    
    $
    9,827
    
    
    $
    7,970
    
    
    $
    6,531Commercial real estate loans
    
    
    28,520
    
    
    
    35,439
    
    
    
    31,192
    
    
    
    25,219
    
    
    
    29,224Commercial business loans and leases
    
    
    46,051
    
    
    
    35,768
    
    
    
    31,460
    
    
    
    20,211
    
    
    
    21,306Consumer loans and leases
    
    
    7,386
    
    
    
    7,123
    
    
    
    6,090
    
    
    
    7,165
    
    
    
    6,899Total nonaccrual loans and leases
    
    
    91,670
    
    
    
    89,044
    
    
    
    78,569
    
    
    
    60,565
    
    
    
    63,960Other nonperforming assets:Other real estate owned, net of related reserves
    
    
    1,098
    
    
    
    1,076
    
    
    
    10,928
    
    
    
    234
    
    
    
    1,554Repossessions, net of related reserves
    
    
    990
    
    
    
    1,083
    
    
    
    1,173
    
    
    
    736
    
    
    
    1,375Total other nonperforming assets
    
    
    2,088
    
    
    
    2,159
    
    
    
    12,101
    
    
    
    970
    
    
    
    2,929Total nonperforming assets
    
    $
    93,758
    
    
    $
    91,203
    
    
    $
    90,670
    
    
    $
    61,535
    
    
    $
    66,889Accruing loans and leases 90 days or more overdue:Credit card receivables
    
    $
    6,949
    
    
    $
    5,900
    
    
    $
    6,351
    
    
    $
    
    
    
    $
    Other loans
    
    
    7,174
    
    
    
    5,646
    
    
    
    6,583
    
    
    
    6,887
    
    
    
    6,489Total accruing loans and leases 90 days or more overdue
    
    $
    14,123
    
    
    $
    11,546
    
    
    $
    12,934
    
    
    $
    6,887
    
    
    $
    6,489Total nonperforming loans as a percentage of total
loans and leases(1)
    
    
    0.36
    %
    
    
    0.34
    %
    
    
    0.31
    %
    
    
    0.30
    %
    
    
    0.32
    %Total nonperforming assets as a percentage of total assets
    
    
    0.23
    %
    
    
    0.23
    %
    
    
    0.22
    %
    
    
    0.19
    %
    
    
    0.21
    %Total nonperforming assets as a percentage of total loans
and leases (1) and total other nonperforming assets
    
    
    0.36
    %
    
    
    0.35
    %
    
    
    0.35
    %
    
    
    0.31
    %
    
    
    0.33
    %
 
 (1)
    
    Total loans and leases exclude residential real estate loans held for sale.  44




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##### Table of Contents







Net Charge-offs




45



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##### Table of Contents



Table 14  Allowance for Credit Losses
 2006 Third
    
    
    2006 Second
    
    
    2006 First
    
    
    2005 Fourth
    
    
    2005 ThirdQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterAllowance for loan and lease losses at beginning of
period
    
    $
    276,361
    
    
    $
    276,342
    
    
    $
    223,030
    
    
    $
    228,334
    
    
    $
    228,168Additions due to acquisitions
    
    
    
    
    
    
    
    
    
    
    52,563
    
    
    
    
    
    
    
    Charge-offs:Residential real estate mortgages
    
    
    
    
    
    
    42
    
    
    
    128
    
    
    
    89
    
    
    
    17Commercial real estate mortgages
    
    
    1,251
    
    
    
    447
    
    
    
    95
    
    
    
    315
    
    
    
    2,194Commercial business loans and leases
    
    
    3,124
    
    
    
    3,328
    
    
    
    1,583
    
    
    
    5,092
    
    
    
    2,828Consumer loans and leases
    
    
    7,712
    
    
    
    5,647
    
    
    
    7,081
    
    
    
    8,479
    
    
    
    6,716Credit card receivables
    
    
    4,288
    
    
    
    4,386
    
    
    
    3,305
    
    
    
    
    
    
    
    Total loans and leases charged off
    
    
    16,375
    
    
    
    13,850
    
    
    
    12,192
    
    
    
    13,975
    
    
    
    11,755Recoveries:Residential real estate mortgages
    
    
    137
    
    
    
    105
    
    
    
    17
    
    
    
    102
    
    
    
    142Commercial real estate mortgages
    
    
    270
    
    
    
    564
    
    
    
    101
    
    
    
    345
    
    
    
    477Commercial business loans and leases
    
    
    1,351
    
    
    
    1,227
    
    
    
    3,167
    
    
    
    738
    
    
    
    2,825Consumer loans and leases
    
    
    2,185
    
    
    
    2,243
    
    
    
    2,096
    
    
    
    1,486
    
    
    
    1,977Credit card receivables
    
    
    885
    
    
    
    1,011
    
    
    
    660
    
    
    
    
    
    
    
    Total loans and leases recovered
    
    
    4,828
    
    
    
    5,150
    
    
    
    6,041
    
    
    
    2,671
    
    
    
    5,421Net charge-offs
    
    
    11,547
    
    
    
    8,700
    
    
    
    6,151
    
    
    
    11,304
    
    
    
    6,334Provision for loan and lease losses
    
    
    13,754
    
    
    
    8,719
    
    
    
    6,900
    
    
    
    6,000
    
    
    
    5,500Specific reserves applied to reduce impaired loan
carrying values
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000Allowance for loan and lease losses at end of period
    
    $
    278,568
    
    
    $
    276,361
    
    
    $
    276,342
    
    
    $
    223,030
    
    
    $
    228,334Total Allowance for Credit Losses:Allowance for loan and lease losses
    
    $
    278,568
    
    
    $
    276,361
    
    
    $
    276,342
    
    
    $
    223,030
    
    
    $
    228,334Liability for unfunded credit commitments
    
    
    8,807
    
    
    
    8,507
    
    
    
    8,207
    
    
    
    7,907
    
    
    
    7,607Total allowance for credit losses
    
    $
    287,375
    
    
    $
    284,868
    
    
    $
    284,549
    
    
    $
    230,937
    
    
    $
    235,941Ratio of net charge-offs to average loans and
leases outstanding during the period, annualized
(1)
    
    
    0.18
    %
    
    
    0.14
    %
    
    
    0.10
    %
    
    
    0.22
    %
    
    
    0.13
    %Ratio of allowance for credit losses to total loans and leases
at end of period (1)
    
    
    1.12
    %
    
    
    1.10
    %
    
    
    1.11
    %
    
    
    1.15
    %
    
    
    1.18
    %Ratio of allowance for credit losses to nonperforming loans
and leases at end of period
    
    
    313
    %
    
    
    320
    %
    
    
    362
    %
    
    
    381
    %
    
    
    369
    %Ratio
of net charge-offs (recoveries) as a percent of
average outstanding loans and leases, annualized (1):Residential real estate mortgages
    
    
    (0.019
    %)
    
    
    (0.009
    %)
    
    
    0.016
    %
    
    
    (0.002
    %)
    
    
    (0.015
    %)Commercial real estate mortgages
    
    
    0.044
    %
    
    
    (0.005
    %)
    
    
    0.000
    %
    
    
    (0.002
    %)
    
    
    0.101
    %Commercial business loans and leases
    
    
    0.108
    %
    
    
    0.131
    %
    
    
    (0.112
    %)
    
    
    0.413
    %
    
    
    0.000
    %Consumer loans and leases
    
    
    0.306
    %
    
    
    0.190
    %
    
    
    0.293
    %
    
    
    0.453
    %
    
    
    0.318
    %Credit card receivables
    
    
    3.119
    %
    
    
    3.358
    %
    
    
    4.409
    %
    
    
    0.000
    %
    
    
    0.000
    %Total portfolio loans and leases at end of period (1)
    
    $
    25,729,950
    
    
    $
    25,822,787
    
    
    $
    25,620,512
    
    
    $
    20,119,727
    
    
    $
    19,971,184Total nonperforming loans and leases at end of period
    
    
    91,670
    
    
    
    89,044
    
    
    
    78,569
    
    
    
    60,565
    
    
    
    63,960Average loans and leases outstanding
during the period (1)
    
    
    25,777,617
    
    
    
    25,702,904
    
    
    
    23,770,023
    
    
    
    20,140,514
    
    
    
    20,021,651
 
 (1)
    
    Excludes residential real estate loans held for sale. 46




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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
   47




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##### Table of Contents




    
    Evaluating and managing the impact of rising or falling interest rates on NII and economic value;
    
    Measuring the contribution of each banking product on a risk-adjusted, fully-hedged
basis, including the impact of derivative financial instruments; and
    
    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
 September 30, 2006
    
    December 31, 2005 (1)$ Change
    
    % Change
    
    $ Change
    
    % Change100 basis point rate increase
    
    
    ($3,260
    )
    
    
    (0.15
    %)
    
    $
    20,150
    
    
    
    1.21
    %100 basis point rate decrease
    
    
    (14,911
    )
    
    
    (0.70
    %)
    
    
    (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)
   48




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Derivative Instruments
 Purpose and Benefits
     Table 16  Derivative Positions Asset-Liability Management Positions
 Notional Amount Maturing
    
    
    
    
    
    FairSuccessor - September 30, 2006
    
    2006
    
    2007
    
    2008
    
    2009
    
    Thereafter
    
    Total
    
    ValueCross currency swap agreement
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    228,620
    
    
    $
    228,620
    
    
    $
    18,339Total return swap
    
    
    
    
    
    
    
    
    
    
    20,031
    
    
    
    
    
    
    
    
    
    
    
    20,031
    
    
    
    2,824Interest rate swaps
    
    
    
    
    
    
    700,000
    
    
    
    45,000
    
    
    
    30,000
    
    
    
    345,000
    
    
    
    1,120,000
    
    
    
    (793
    )Interest rate floors
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,000,000
    
    
    
    
    
    
    
    2,000,000
    
    
    
    4,247Forward commitments to sell loans
    
    
    19,494
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,494
    
    
    
    (27
    )
 Customer-related Positions
 Notional Amount Maturing
    
    
    
    
    
    FairSuccessor - September 30, 2006
    
    2006
    
    2007
    
    2008
    
    2009
    
    Thereafter
    
    Total
    
    ValueInterest rate contractsReceive fixed, pay variable
    
    $
    2,000
    
    
    $
    16,923
    
    
    $
    100,809
    
    
    $
    100,866
    
    
    $
    1,428,486
    
    
    $
    1,649,084
    
    
    $
    5,709Pay fixed, receive variable
    
    
    2,000
    
    
    
    16,923
    
    
    
    100,809
    
    
    
    100,866
    
    
    
    1,428,486
    
    
    
    1,649,084
    
    
    
    (5,709
    )Foreign currency rate contractsForward contracts with customers
    
    
    28,779
    
    
    
    38,097
    
    
    
    30,021
    
    
    
    6,909
    
    
    
    1,851
    
    
    
    105,657
    
    
    
    968Forward contracts with dealers
    
    
    28,779
    
    
    
    38,097
    
    
    
    30,021
    
    
    
    6,909
    
    
    
    1,851
    
    
    
    105,657
    
    
    
    (968
    )Foreign exchange options to purchase
    
    
    1,800
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,800
    
    
    
    10Foreign exchange options to sell
    
    
    1,800
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,800
    
    
    
    (10
    )Rate-locked loan commitments (1)
    
    
    87,766
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    87,766
    
    
    
    68
 
 (1)
    
    No value has been assigned to potential mortgage servicing rights related to rate-locked loan commitments. 49




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Customer-related Positions
 .
 Foreign Exchange or Market Risk
   LIQUIDITY
  Parent Company
  50




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##### Table of Contents



Banking Subsidiary
        51




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##### Table of Contents



CAPITAL
     Table 17  Capital Ratios
 Actual
    
    Capital Requirements
    
    ExcessAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioSeptember 30, 2006TD Banknorth Inc.Total capital (to risk-weighted assets)
    
    $
    3,246,366
    
    
    
    11.41
    %
    
    $
    2,276,321
    
    
    
    8.00
    %
    
    $
    970,045
    
    
    
    3.41
    %Tier 1 capital (to risk-weighted assets)
    
    
    2,323,242
    
    
    
    8.16
    %
    
    
    1,138,161
    
    
    
    4.00
    %
    
    
    1,185,081
    
    
    
    4.16
    %Tier 1 leverage capital ratio (to average assets)
    
    
    2,323,242
    
    
    
    6.94
    %
    
    
    1,338,315
    
    
    
    4.00
    %
    
    
    984,927
    
    
    
    2.94
    %TD Banknorth, NATotal capital (to risk-weighted assets)
    
    
    3,277,600
    
    
    
    11.53
    %
    
    
    2,274,780
    
    
    
    8.00
    %
    
    
    1,002,820
    
    
    
    3.53
    %Tier 1 capital (to risk-weighted assets)
    
    
    2,361,344
    
    
    
    8.30
    %
    
    
    1,137,390
    
    
    
    4.00
    %
    
    
    1,223,954
    
    
    
    4.30
    %Tier 1 leverage capital ratio (to average assets)
    
    
    2,361,344
    
    
    
    7.07
    %
    
    
    1,335,932
    
    
    
    4.00
    %
    
    
    1,025,412
    
    
    
    3.07
    %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
    %
   52




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##### Table of Contents



Table 18  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
    
    
    
    9.07
    %
    
    
    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
    
    
    
    8.18
    %
    
    
    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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,204$
    520,736
 
 (1)
    
    Amounts include junior subordinated debentures acquired by affiliated trusts from us
with the capital contributed by us in exchange for the common securities of such trusts.
Junior subordinated debentures are equal to capital securities plus common securities.      53




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##### Table of Contents



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




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4. Controls and Procedures
   
 Part II  Other Information
 
   
   55




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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 Programs (1)July 1  31, 2006
    
    
    
    
    
    $
    0.00
    
    
    
    
    
    
    
    2,000,000August 1
 31, 2006
    
    
    
    
    
    $
    0.00
    
    
    
    
    
    
    
    2,000,000September 1
 30, 2006
    
    
    
    
    
    $
    0.00
    
    
    
    
    
    
    
    2,000,000
  Total Number ofShares Purchased as
    
    Maximum Number ofTotal Number
    
    Average
    
    Part of Publicly
    
    Shares that May Yet Beof Shares
    
    Price Paid
    
    Announced Plans or
    
    Purchased Under thePeriod
    
    Purchased
    
    Per Share
    
    Programs
    
    Plans or Programs (1)July 1
 31, 2006
    
    
    
    
    
    $
    0.00
    
    
    
    
    
    
    
    August 1
 31, 2006
    
    
    919,690
    
    
    $
    29.30
    
    
    
    
    
    
    
    September 1
 30, 2006
    
    
    
    
    
    $
    0.00
    
    
    
    
    
    
    
    
 
  
  
  
   
 56




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##### Table of Contents



SIGNATURES
  TD BANKNORTH INC.Date: November 3, 2006
    By:
    /s/ William J. RyanWilliam J. RyanChairman and
Chief Executive Officer
(principal executive officer) Date:      November 3, 2006
    By:
    /s/ Stephen J. BoyleStephen J. BoyleExecutive Vice President and
Chief Financial Officer
(principal financial and accounting officer) 57




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58