TD Banknorth Reports 2006 Third Quarter Results and Announces Quarterly Dividend

(Third Quarter Earnings Conference Call at 10:30 a.m. Eastern Time today, October 25, 2006. Dial-in number for USA and Canada is 866-578-5771. International dial-in number is 617-213-8055. Passcode for both numbers is 44069096. Replay number for USA and Canada is 888-286-8010. International replay dial-in number is 617-801-6888. Replay passcode for both is 61826270. Live webcast and webcast replay available at www.tdbanknorth.com, Investor Relations.)

Highlights for the third quarter of 2006 include:

• Adjusted earnings increased to $117.0 million in the third quarter of 2006 up from $109.5 million in the third quarter of 2005, reflecting in part the acquisition of Hudson United Bancorp on January 31, 2006.
• Asset quality remained solid with the ratio of nonperforming assets to total assets amounting to 0.24% at September 30, 2006 as compared to 0.23% at June 30, 2006.
• The Company’s capital ratios improved in the third quarter of 2006 as compared to the second quarter of 2006 with the Company’s total risk-based capital ratio increasing to 11.39% at September 30, 2006 as compared to 11.15% at June 30, 2006.
• The Board of Directors declared a dividend of 22 cents per share payable on November 13, 2006 to shareholders of record as of the close of business on November 3, 2006.

Third Quarter Adjustments (Items of Note) 1
The following material items of note (net of tax) are included in the Company’s reported GAAP earnings for the third quarter of 2006 as compared to the third quarter of 2005. Share impact is on a per diluted share basis.
• Amortization of identifiable intangible assets of $24.0 million (10 cents per share) as compared to $19.5 million (11 cents per share) for the third quarter of 2005.
• Merger and restructuring charges of $9.4 million (4 cents per share) as compared to $756 thousand (de minimus per share impact) for the third quarter of 2005.
• Positive impact of $2.5 million (1 cent per share positive impact) related to the discontinued operations associated with certain subsidiaries engaged in energy operations acquired from Hudson United as compared to no related impact for the third quarter of 2005.

PORTLAND, Maine—October 25, 2006--TD Banknorth Inc. (“TD Banknorth” or the “Company”) (NYSE: BNK) today reported net income of $86.1 million for the quarter ended September 30, 2006 as compared to $88.7 million for the quarter ended September 30, 2005. On a per diluted share basis, reported net income was 38 cents for the third quarter of 2006 as compared to 51 cents for the third quarter of 2005.

Net income for the nine months ended September 30, 2006 was $255.7 million as compared to $218.4 million for the same period in 2005. On a per diluted share basis, net income for the nine months ended September 30, 2006 was $1.15 as compared to $1.23 for the same period a year ago.

Adjusted earnings were $117.0 million for the third quarter of 2006 as compared to $109.5 million for the third quarter of 2005. On a per diluted share basis, adjusted earnings were 51 cents for the third quarter of 2006 as compared to 63 cents for the same quarter a year ago.

Adjusted earnings for the nine months ended September 30, 2006 were $360.9 million as compared to $330.4 million for the same period in 2005. On a per diluted share basis, adjusted earnings for the nine months ended September 30, 2006 were $1.62 as compared to $1.86 for the same period a year ago.

The Company’s results for the third quarter of 2006 reflect the full impact of the acquisition of Hudson United Bancorp on January 31, 2006. On a per diluted share basis, results for both the third quarter of 2006 and for the nine months ended September 30, 2006 reflect the issuance of approximately 62 million shares of TD Banknorth common stock in conjunction with the acquisition of Hudson United Bancorp, which was in part offset by the Company’s repurchase of 8.5 million shares during the first quarter of 2006.

“This continues to be a challenging operating environment,” said William J. Ryan, TD Banknorth Chairman and Chief Executive Officer. “Deposit pricing and the inverted yield curve continue to put pressure on our margin while competition for high-quality loans remains as intense as ever. In light of the current operating environment, we are taking aggressive steps to reduce our costs and better position ourselves for future growth.”

Total Assets
Total assets at September 30, 2006 were $39.9 billion, up 24% from $32.1 billion at December 31, 2005. The increase was due primarily to the acquisition of Hudson United.

Average Loans and Leases
Average loans and leases increased by 28% to $25.8 billion for the quarter ended September 30, 2006 as compared to $20.1 billion for the third quarter of 2005, due primarily to the acquisition of Hudson United. For the nine months ended September 30, 2006, total average loans and leases were $25.1 billion as compared to $20.0 billion for the same period in 2005, also largely due to the acquisition of Hudson United.

Excluding the effects of acquisitions and purchase accounting adjustments, average commercial business loans and leases, commercial real estate mortgages and consumer loans and leases (including credit cards) increased 5.5% in the aggregate for the quarter ended September 30, 2006 as compared to the same period a year ago. Excluding the same, on a linked quarter basis, average commercial business loans and leases, commercial real estate mortgages and consumer loans and leases increased in the third quarter of 2006 by 0.5%, reflecting the competition for high-quality commercial and consumer loans.

Average Deposits
Average deposits increased by 34% to $27.0 billion for the quarter ended September 30, 2006 as compared to $20.2 billion for the quarter ended September 30, 2005, due primarily to the acquisition of Hudson United. For the nine months ended September 30, 2006, total average deposits were $26.1 billion as compared to $20.0 billion for the same period in 2005, also largely due to the acquisition of Hudson United.

Excluding the effects of acquisitions and purchase accounting adjustments, total average deposits for the quarter ended September 30, 2006 were comparable to the same period a year ago, reflecting the highly competitive environment for deposit gathering in the Company’s market areas. Excluding the same, on a linked quarter basis, total average deposits increased in the third quarter of 2006 by 0.8%.

Net Interest Income and Net Interest Margin
Net interest income was $301.1 million for the third quarter of 2006, a 21% increase from net interest income of $249.0 million for the same quarter of 2005. The increase was due primarily to the acquisition of Hudson United. For the nine months ended September 30, 2006, the Company’s net interest income amounted to $890.3 million as compared to $754.4 million for the same period in 2005, largely due to the acquisition of Hudson United.

The Company’s net interest margin for the quarter ended September 30, 2006 was 4.01% as compared to 4.09% for the quarter ended September 30, 2005 and 4.07% for the quarter ended June 30, 2006. On a linked quarter basis, the decrease in the Company’s net interest margin in the third quarter of 2006 was due primarily to competition for both loans and deposits.

Provision for Credit Losses and Asset Quality
The Company’s total provision for credit losses amounted to $14.1 million for the quarter ended September 30, 2006, as compared to $6.3 million for the quarter ended September 30, 2005 and $9.0 million for the quarter ended June 30, 2006. The increase in provision was due primarily to an increase in net chargeoffs, which amounted to $11.5 million in the three months ended September 30, 2006, as compared to $6.3 million and $8.7 million in the three months ended September 30, 2005 and June 30, 2006, respectively. Total nonperforming assets amounted to $93.8 million at September 30, 2006 as compared to $66.9 million at September 30, 2005, due primarily to the acquisition of Hudson United, and $91.2 million at June 30, 2006.

The Company’s asset quality ratios remained strong during the third quarter of 2006. The Company’s allowance for credit losses to total loans and leases was 1.12% at September 30, 2006 as compared to 1.18% at September 30, 2005 and 1.10% at June 30, 2006. As a percentage of total assets, nonperforming assets amounted to 0.24% at September 30, 2006, as compared to 0.21% at September 30, 2005 and 0.23% at June 30, 2006. Annualized net charge-offs to average loans remain historically low and for the quarter ended September 30, 2006 amounted to 0.18% as compared to 0.13% for the same period a year ago and 0.14% for the quarter ended June 30, 2006.

Noninterest Income
Noninterest income increased to $128.3 million in the third quarter of 2006 as compared $103.6 million in the third quarter of 2005 due primarily to the impact of the acquisition of Hudson United.

For the nine months ended September 30, 2006, noninterest income increased to $373.2 million as compared to $246.5 million for the same period in 2005, due to the acquisition of Hudson United and to $57.5 million in deleveraging-related losses incurred in the first nine months of 2005. For the nine months ended September 30, 2006, adjusted noninterest income increased to $373.5 million as compared to $298.0 million for the same period in 2005, primarily due to the acquisition of Hudson United.

On a linked quarter basis, noninterest income for the third quarter of 2006 increased by $1.2 million as compared to the second quarter of 2006.

Noninterest Expense
Noninterest expense increased $82.2 million to $294.0 million for the third quarter of 2006 as compared to $211.8 million for the third quarter of 2005, due primarily to increased Hudson United-related operating expenses and increases in the amortization of identifiable intangible assets and merger and restructuring charges. Adjusted noninterest expense increased $61.0 million to $240.5 million for the third quarter of 2006 as compared to $179.5 million for the third quarter of 2005, primarily due to operating expenses associated with the acquisition of Hudson United.

For the nine months ended September 30, 2006, noninterest expense increased to $857.1 million as compared to $655.2 million for the same period in 2005 largely due to increased operating expenses associated with the acquisition of Hudson United, increased amortization of identifiable intangible assets and restructuring charges incurred in the first nine months of 2006. For the nine months ended September 30, 2006, adjusted noninterest expense increased to $692.0 million as compared to $537.0 million for the same period in 2005, largely due to increased operating expenses associated with the acquisition of Hudson United.

On a linked quarter basis, noninterest expense for the third quarter of 2006 increased by $7.9 million to $294.0 million as compared to $286.1 million for the second quarter of 2006. The increase was due primarily to a $3.0 million increase in the Company’s litigation reserve included in other noninterest expense, a $2.7 million increase in advertising and marketing expenses associated with the Company’s fall certificate of deposit sales campaign, and a $2.9 million increase in salaries and employee benefits.

On a linked quarter basis, the Company’s adjusted efficiency ratio for the quarter ended September 30, 2006 increased to 56.01% from 53.47% for the quarter ended June 30, 2006. The Company has undertaken a number of initiatives to improve efficiencies and reduce costs in light of the current operating environment. It is estimated the full benefit of these initiatives, which have begun to be implemented, will be realized in 2007 and will assist the Company in meeting its earnings objectives in 2007 and beyond.

Capital
On a linked quarter basis, the Company’s capital ratios improved in the third quarter of 2006 and the Company and its banking subsidiary continue to qualify as “well capitalized” institutions under applicable laws and regulations. At September 30, 2006, the Company’s tier 1 capital ratio was 6.94% as compared to 7.07% at December 31, 2005 and up from 6.70% at June 30, 2006; its total risk-based capital ratio was 11.39% as compared to 11.73% at December 31, 2005 and up from 11.15% at June 30, 2006; and its ratio of tangible equity to tangible assets was 5.40% as compared to 5.69% at December 31, 2005 and up from 5.06% at June 30, 2006.

Shares Outstanding and Other Information
The number of diluted weighted average shares outstanding for the quarter ended September 30, 2006 was 229.1 million as compared to 174.4 million for the quarter ended September 30, 2005. The increase was due primarily to shares issued in conjunction with the acquisition of Hudson United.

The Company’s adjusted return on average tangible equity for the third quarter of 2006 was 26.75%, as compared to 29.39% for the third quarter of 2005 and 30.86% for the second quarter of 2006, while the Company’s adjusted return on average tangible assets for the third quarter of 2006 was 1.40%, as compared to 1.64% for the third quarter of 2005 and 1.54% for second quarter of 2006.

At September 30, 2006, the Company’s tangible book value per share was $7.84 as compared to $8.81 at December 31, 2005 and up from $7.42 at June 30, 2006.

Quarterly Dividend
TD Banknorth also announced that its Board of Directors has approved a quarterly dividend of 22 cents per share based on earnings for the quarter ended September 30, 2006. The dividend is level with the dividend paid following the quarter ended June 30, 2006 and will be paid on November 13, 2006 to shareholders of record at the close of business on November 3, 2006.

Acquisition of Interchange Financial Services Corporation
On April 13, 2006, the Company announced it had entered into a definitive agreement to acquire Interchange Financial Services Corporation (NASDAQ: IFCJ), Saddle Brook, New Jersey, for approximately $480.6 million in cash. As part of the transaction, TD Bank Financial Group has agreed to purchase 13 million shares of TD Banknorth common stock from TD Banknorth at a price of $31.17 per share. On October 16, 2006, Interchange shareholders overwhelmingly approved the merger with over 96% of shareholders voting in favor of the transaction. Both the Federal Reserve and the Office of the Comptroller of the Currency have approved the transaction, which is anticipated to close early in the first quarter of 2007 with a systems integration to follow shortly thereafter.

About TD Banknorth Inc.
TD Banknorth Inc. is a leading banking and financial services company headquartered in Portland, Maine and a majority-owned subsidiary of TD Bank Financial Group. At September 30, 2006, TD Banknorth had $40 billion of total consolidated assets and provided financial services to nearly 1.6 million households in the Northeast. TD Banknorth's banking subsidiary, TD Banknorth, N.A., operates banking divisions in Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania and Vermont. TD Banknorth and TD Banknorth, N.A. also operate subsidiaries and divisions in insurance, wealth management, merchant services, mortgage banking, government banking, private label credit cards, insurance premium financing and other financial services and offers investment products in association with PrimeVest Financial Services, Inc. The TD Banknorth common stock trades on the New York Stock Exchange under the symbol "BNK". For more information, visit www.TDBanknorth.com.

NOTES: This news release contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The Company’s management uses these non-GAAP measures in its analysis of the Company’s performance. The Company arrives at these measures, indicated by the use of the term “adjusted,” by removing “items of note” from the reported GAAP measure. The material items of note excluded from adjusted measures are described at the outset of this release, and a complete reconciliation of all non-GAAP measures to the most comparable GAAP measure can be found in the financial tables in the back of this release. The items of note relate to items which management does not believe are indicative of underlying business performance, and include the effects of charges and expenses related to mergers and acquisitions, the amortization of intangible assets and other significant gains or losses that are considered to be unusual in nature, such as securities gains or losses and prepayment penalties incurred in connection with deleveraging strategies. Because these items and their impact on the Company’s performance are difficult to predict, management believes that presentations of adjusted financial measures excluding the impact of these items of note provide useful supplemental information that is essential to a proper understanding of the operating results of the Company. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies.
This press release contains forward-looking statements with respect to the financial condition, results of operations and business of TD Banknorth. Words such as "expect", "feel", "believe", "will", "may", "anticipate", "plan", "estimate", "intend", "should" and similar expressions are intended to identify forward-looking statements. Forward-looking statements are subject to various factors which could cause actual results to differ materially from these estimates. These factors include, but are not limited to, changes in general economic conditions, interest rates, deposit flows, loan demand, competition, legislation or regulation and accounting principles, policies or guidelines, as well as other economic, competitive, governmental, regulatory and accounting and technological factors affecting TD Banknorth’s operations. In addition, acquisitions may result in large one-time charges to income, may not produce revenue enhancements or synergies at levels or within time frames originally anticipated and may result in unforeseen integration difficulties. Investors are encouraged to access TD Banknorth’s periodic reports filed with the Securities and Exchange Commission for financial and business information regarding TD Banknorth, including information which could affect TD Banknorth’s forward-looking statements. TD Banknorth does not undertake any obligation to update these forward-looking statements to reflect events or circumstances that may occur after the date on which such statements were made.
On May 16, 2005, the Company announced that it had adopted purchase accounting to account for TD Bank Financial Group’s acquisition of a majority interest in the Company on March 1, 2005. To most accurately reflect the application of purchase accounting, the Company uses the term “predecessor” to refer to the results of Banknorth Group, Inc., the predecessor entity to TD Banknorth Inc., at the dates and for the periods ended on or prior to February 28, 2005, which are based on historical accounting, and the term “successor” to refer to the results of TD Banknorth Inc. at the dates and for the periods beginning on or after March 1, 2005, which are based on the application of purchase accounting. To assist in the comparability of the Company’s financial results and to make it easier to discuss and understand these results, the financial information discussed herein and presented in the accompanying financial statements under the heading “Combined” combines the “predecessor period” January 1, 2005 to February 28, 2005 with the applicable “successor period” thereafter. Due to the application of purchase accounting as of March 1, 2005, results for the combined periods may not be comparable to the results for the respective predecessor periods. For a detailed discussion of the impact of purchase accounting on the Company’s balance sheet and income statement, reference is made to the Company’s first quarter 2005 earnings release dated May 16, 2005.

Source: TD Banknorth Inc.

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