TD Banknorth 10-Q 2007 Q1 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2007

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.

(Exact name of Registrant as specified in its charter)

Delaware	01-0437984
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
Two Portland Square, Portland, Maine	04112
(Address of principal executive offices)	(Zip Code)

(207) 761-8500
(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.
Yesþ Noo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filerþ      Accelerated filero      Non-accelerated filero

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yeso Noþ

The number of shares outstanding for each class of the Registrant’s common stock as of April 30, 2007 is:

Common stock, par value $0.01 per share	(1)
(Class)	(Outstanding)

(1) One hundred percent owned indirectly by The Toronto-Dominion Bank.

The Registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format as permitted by General Instruction H(2).

Available on the Web @www.tdbanknorth.com

INDEX
TD BANKNORTH INC. AND SUBSIDIARIES

	PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets		3
Consolidated Statements of Income		4
Consolidated Statements of Changes in Shareholders’ Equity		5
Consolidated Statements of Cash Flows		6
Notes to Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
Item 3. Quantitative and Qualitative Disclosures about Market Risk		37
Item 4. Controls and Procedures		38
Item 4T. Controls and Procedures		38
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		38
Item 1A. Risk Factors		39
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		39
Item 3. Defaults Upon Senior Securities		39
Item 4. Submission of Matters to a Vote of Security Holders		40
Item 5. Other Information		40
Item 6. Exhibits		40
Signatures		41
Exhibits		42
EX-12 Calculation of Ratios of Earnings to Fixed Charges
EX-31.1 Section 302 Certification of C.E.O.
EX-31.2 Section 302 Certification of C.F.O.
EX-32.1 Section 906 Certification of C.E.O.
EX-32.2 Section 906 Certification of C.F.O.

2

TD BANKNORTH INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data) (Unaudited)

	March 31, 2007			December 31, 2006
Assets
Cash and due from banks	$	789,936		$	906,553
Federal funds sold and other short-term investments		2,895			471,028
Securities purchased under agreements to resell		2,424,893			1,789,766
Securities available for sale, at market value		2,198,953			2,505,888
Securities held to maturity (fair value of $46,242 in 2007 and $49,491 in 2006)		45,327			48,457
Loans held for sale		26,037			19,112
Loans and leases:
Residential real estate mortgages		2,831,262			2,667,448
Commercial real estate mortgages		9,370,537			8,749,887
Commercial business loans and leases		6,927,150			6,534,792
Consumer loans and leases		7,037,943			7,046,638
Credit card receivables		441,459			462,736
Total loans and leases		26,608,351			25,461,501
Less: Allowance for loan and lease losses		301,409			279,638
Net loans and leases		26,306,942			25,181,863
Premises and equipment, net		500,888			486,143
Goodwill		6,378,992			6,022,534
Identifiable intangible assets		736,455			727,596
Bank-owned life insurance		828,691			791,489
Other assets		988,942			1,208,656
Total assets	$	41,228,951		$	40,159,085
Liabilities and Shareholders’ Equity
Deposits:
Savings accounts	$	3,703,857		$	3,685,872
Money market and NOW accounts		11,002,519			9,654,755
Certificates of deposit		7,859,196			7,393,218
Brokered deposits		225,292			227,545
Deposits in foreign office — interest bearing		192,317			153,237
Noninterest-bearing deposits		5,899,960			5,890,139
Total deposits		28,883,141			27,004,766
Short-term borrowings		1,581,697			2,223,512
Long-term debt		1,437,819			1,423,581
Deferred tax liability on identifiable intangible assets		288,617			286,069
Other liabilities		290,227			899,112
Total liabilities		32,481,501			31,837,040
Commitments and contingencies
Shareholders’ 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 - 263,910,577 in 2007 and 250,910,577 in 2006)		2,639			2,509
Common stock, Class B (par value $0.01 per share, authorized and issued 1 share in 2006 and 2005)		—			—
Paid-in capital		9,148,754			8,743,938
Retained earnings		287,055			290,185
Treasury stock, at cost (21,427,975 shares in 2007 and 22,030,878 shares in 2006)		(667,298	)		(686,073	)
Accumulated other comprehensive loss		(23,700	)		(28,514	)
Total shareholders’ equity		8,747,450			8,322,045
Total liabilities and shareholders’ equity	$	41,228,951		$	40,159,085

See accompanying notes to unaudited Consolidated Financial Statements.

3

TD BANKNORTH INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands) (Unaudited)

	Three Months Ended
	March 31, 2007			March 31, 2006
Interest and dividend income:
Interest and fees on loans and leases	$	456,510		$	378,698
Interest and dividends on securities		58,704			77,801
Total interest and dividend income		515,214			456,499
Interest expense:
Interest on deposits		177,738			106,682
Interest on borrowed funds		41,084			67,373
Total interest expense		218,822			174,055
Net interest income		296,392			282,444
Provision for loan and lease losses		30,000			6,900
Net interest income after provision for loan and lease losses		266,392			275,544
Noninterest income:
Deposit services		44,867			38,479
Insurance agency commissions		16,869			15,839
Merchant and electronic banking income, net		16,376			15,636
Wealth management services		11,380			11,348
Bank-owned life insurance		8,839			7,288
Investment planning services		5,042			5,142
Net securities gains (losses)		92			(90	)
Other noninterest income		30,054			24,197
		133,519			117,839
Noninterest expense:
Compensation and employee benefits		137,044			125,210
Occupancy		27,824			24,296
Equipment		17,512			14,884
Data processing		15,606			15,233
Advertising and marketing		7,328			8,191
Amortization of identifiable intangible assets		36,781			37,666
Merger and restructuring costs		30,594			19,818
Other noninterest expense		45,348			31,738
		318,037			277,036
Income before income tax expense		81,874			116,347
Provision for income taxes		26,186			38,799
Income from continuing operations		55,688			77,548
Discontinued operations
Loss from discontinued operations		(2,006	)		(2,599	)
Income tax benefit		1,486			1,257
Loss from discontinued operations, net of tax		(520	)		(1,342	)
Net income	$	55,168		$	76,206

See accompanying notes to unaudited Consolidated Financial Statements.

4

TD BANKNORTH INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(In thousands) (Unaudited)

																		Accumulated
	Common																	Other
	Shares			Common		Paid-in			Retained			Unearned			Treasury			Comprehensive
	Outstanding			Stock		Capital			Earnings			Compensation			Stock			Income (Loss)			Total
Balances at December 31, 2006		228,880		$	2,509	$	8,743,938		$	290,185		$	0			($686,073	)		($28,514	)	$	8,322,045
Net income		—			—		—			55,168			—			—			—			55,168
Change in unrealized losses on securities, net of reclassification adjustment net of tax		—			—		—			—			—			—			2,634			2,634
Change in unrealized gains on cash flow hedges, net of reclassification adjustment net of tax		—			—		—			—			—			—			332			332
Defined benefit pension plans : Net gains		—			—		—			—			—			—			1,848			1,848
Comprehensive income																						59,982
Adjustment to initially apply FIN 48, net of tax		—			—		—			(5,010	)		—			—			—			(5,010	)
Common stock issued to The Toronto-Dominion Bank for acquisitions		13,000			130		405,080			—			—			—			—			405,210
Treasury stock issued for employee benefit plans, including tax benefit of $1.4 million		603			—		(1,940	)		—			—			18,775			—			16,835
Stock option compensation expense		—			—		1,676			—			—			—			—			1,676
Treasury stock purchased		—			—		—			—			—			0			—			0
Decrease in unearned compensation		—			—		—			—			0			—			—			0
Cash dividends declared ($0.22 per share)		—			—		—			(53,288	)		—			—			—			(53,288	)
Balances at March 31, 2007		242,483		$	2,639	$	9,148,754		$	287,055		$	0			($667,298	)		($23,700	)	$	8,747,450
Balances at December 31, 2005		173,665		$	1,884	$	6,833,677		$	152,494			($1,131	)		($469,010	)		($34,041	)	$	6,483,873
Net income		—			—		—			76,206			—			—			—			76,206
Change in unrealized losses on securities, net of reclassification adjustment net of tax		—			—		—			—			—			—			(14,947	)		(14,947	)
Change in unrealized gains on cash flow hedges, net of reclassification adjustment net of tax		—			—		—			—			—			—			4,274			4,274
Comprehensive income																						65,533
Common stock issued for acquisitions		32,859			329		965,065			—			—			—			—			965,394
Common stock issued to The Toronto-Dominion Bank for acquisitions		29,625			296		941,494			—			—			—			—			941,790
Treasury stock issued for employee benefit plans, including tax benefit of $0.4 million		301			—		(1,827	)		—			—			9,471			—			7,644
Stock option compensation expense		—			—		1,917			—			—			—			—			1,917
Treasury stock purchased		(8,500	)		—		—			—			—			(255,470	)		—			(255,470	)
Decrease in unearned compensation		—			—		—			—			375			—			—			375
Cash dividends declared ($0.22 per share)		—			—		—			(50,833	)		—			—			—			(50,833	)
Balances at March 31, 2006		227,950		$	2,509	$	8,740,326		$	177,867			($756	)		($715,009	)		($44,714	)	$	8,160,223

See accompanying notes to unaudited Consolidated Financial Statements.

5

TD BANKNORTH INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three Months Ended
(In thousands)	March 31, 2007			March 31, 2006
Cash flows from operating activities:
Net income	$	55,168		$	76,206
Loss from discontinued operations, net of tax		520			1,342
Income from continuing operations		55,688			77,548
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan and lease losses		30,000			6,900
Depreciation of banking premises and equipment		17,497			14,451
Net amortization of premium and discounts		2,449			(1,710	)
Amortization of intangible assets		36,781			37,666
Deferred tax (benefit) provision		(4,369	)		4,800
Unearned compensation/stock option expense		—			375
Stock-based compensation expense		1,676			1,917
Net losses (gains) realized from sales of securities and loans		(92	)		73
Increase in cash surrender value of bank owned life insurance		(8,839	)		(7,288	)
Pension plan contributions		(1,195	)		—
Proceeds from sales of loans held for sale		147,963			84,953
Residential loans originated and purchased for sale		(154,888	)		(78,591	)
Change in fair value of derivatives		(121	)		—
Change in net deferred tax liability		2,930			(37,875	)
Net (increase) decrease in other assets		67,718			19,983
Net (decrease) increase in other liabilities		(54,326	)		(9,991	)
Net cash provided by operating activities		138,872			113,211
Cash flows from investing activities:
Proceeds from sales of securities available for sale		631,083			2,942,035
Proceeds from sale of securities as part of the deleveraging program		—			2,528,541
Proceeds from maturities and principal repayments of securities available for sale		149,389			275,756
Purchases of securities available for sale		(216,144	)		(899,363	)
Net (increase) in securities purchased under reverse repurchase agreements		(635,234	)		(3,200,000	)
Proceeds from maturities and principal repayments of securities held to maturity		3,130			4,100
Net increase in loans and leases		(52,622	)		(309,188	)
Proceeds from sales of portfolio loans		—			925
Net additions to premises and equipment		(19,661	)		(21,128	)
Proceeds from policy coverage on bank owned life insurance		636			19
Proceeds from sale of other real estate owned		1,188			—
Cash used in business acquisitions		(468,069	)		(941,874	)
Cash acquired from acquisitions		39,234			238,562
Net cash (used in) provided by investing activities		(567,070	)		618,385
Cash flows from financing activities:
Net increase (decrease) in deposits		636,781			(294,472	)
Net decrease in short-term borrowings		(641,815	)		(587,245	)
Payments on long-term debt		(113,059	)		(412,401	)
Excess tax benefits (expense) from stock-based compensation		1,218			(448	)
Treasury stock issued for employee benefit plans		15,617			7,644
Issuance of stock to The Toronto-Dominion Bank		—			941,790
Purchase of treasury stock		—			(255,470	)
Cash dividends paid to shareholders		(53,288	)		(50,833	)
Net cash (used in) financing activities		(154,546	)		(651,435	)
Cash flows from discontinued operations:
Operating activities		(2,006	)		(2,599	)
Net cash used in discontinued operations		(2,006	)		(2,599	)
(Decrease) increase in cash and cash equivalents		(584,750	)		77,562
Cash and cash equivalents at beginning of year		1,377,581			769,258
Cash and cash equivalents at end of period	$	792,831		$	846,820
In conjunction with the purchase acquisitions, assets were acquired and liabilities were assumed as follows:
Fair value of assets acquired	$	1,871,461		$	10,301,998
Less liabilities assumed		1,403,392			8,394,729
Supplemental cash flow disclosures
Cash paid for interest	$	209,173		$	157,569
Cash paid for income taxes		4,646			11,172

See accompanying notes to Consolidated Financial Statements.

6

TD BANKNORTH INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2007

(In thousands, except per share data and as noted) (Unaudited)

Note 1 — Basis of Presentation

We, TD Banknorth Inc. (“TD Banknorth”), are a bank/financial holding company under the Bank Holding Company Act of 1956, as amended, which conducts business through TD Banknorth, National Association (“TD Banknorth, NA” or the “Bank”) and various nonbanking subsidiaries. As of March 31, 2007, we were a majority-owned subsidiary of The Toronto-Dominion Bank. On April 18, 2007, our shareholders approved an agreement and plan of merger with The Toronto-Dominion Bank providing for the acquisition by The Toronto-Dominion Bank of all of the outstanding shares of common stock of TD Banknorth Inc. not owned by The Toronto-Dominion Bank or its affiliates for $32.33 per share in cash. On April 20, 2007, this acquisition was completed and TD Banknorth became an indirect wholly-owned subsidiary of The Toronto-Dominion Bank. As a result, no earnings per share computations have been included in these financial statements.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and predominant practices within the banking industry. We have not changed our significant accounting and reporting policies from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2006, except for the adoption of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”). See Note 2 below. There have been no significant changes in the methods or assumptions used in the accounting policies requiring material estimates and assumptions.

In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the unaudited consolidated financial statements have been included herein. The results of operations for the interim period of 2007 presented herein are not necessarily indicative of the results that may be expected for any other interim period or the year ending December 31, 2007. Certain amounts in the prior periods have been reclassified to conform to the current presentation. All significant intercompany balances and transactions have been eliminated in the accompanying unaudited consolidated financial statements.

Note 2 — Accounting Changes

The following is a discussion of recently adopted or pending accounting pronouncements.

Fair Value Option for Financial Assets and Financial Liabilities

In February 2007, the Financial Accounting Standards Board (“FASB”) issued FASB Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (FAS 159”), effective January 1, 2008. FAS 159 provides entities with an option to report selected financial assets and liabilities at fair value, with the objective to reduce both the complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. We are currently assessing the impact of this guidance on our financial statements.

Fair Value Measurement

In September 2006, FASB issued FASB Statement No. 157, “Fair Value Measurements” (“FAS 157”). FAS 157 provides guidance for using fair value to measure assets and liabilities. FAS 157 will apply whenever another standard requires (or permits) assets or liabilities to be measured at fair value. FAS 157 provides guidance about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value and the effect that fair value measurements have on earnings. FAS

7

157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The implementation of FAS 157 is not expected to have a material impact on our financial condition or results of operations.

Accounting for Uncertainty in Income Taxes

In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes and provides greater consistency in criteria used to recognize, derecognize and measure benefits related to income taxes. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken. FIN 48 also provides guidance on classification, interest and penalties, accounting in interim periods, disclosure and transition. We adopted the provisions of FIN 48 on January 1, 2007. See Note 17. The adoption of FIN 48 did not have a material impact on our financial condition.

Note 3 — Acquisitions

Acquisitions are an important part of our strategic plan. The following table summarizes bank acquisitions completed by us since January 1, 2006. The acquisitions were accounted for as purchases and, as a result, were included in our results of operations from the date of acquisition.

							Transaction-Related Items
			Balance at						Identifiable							Total
	Acquisition		Acquisition Date						Intangible		Cash		Shares			Purchase
(Dollars and shares in millions)	Date		Assets		Equity		Goodwill		Assets		Paid		Issued			Price
Interchange Financial Services Corporation		1/1/2007	$	1,567.0	$	176.5	$	366.6	$	26.4	$	468.1		—	(1)	$	468.1
Hudson United Bancorp		1/31/2006	$	8,771.0	$	518.3	$	1,463.6	$	222.5	$	941.8		32.9	(2)	$	1,907.3

(1)	13.0 million shares of common stock were sold by us to The Toronto-Dominion Bank to fund the cash paid by us in connection with the acquisition of Interchange Financial Services Corporation.
(2)	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.

Note 4 — Discontinued Operations

As a result of the Hudson acquisition on January 31, 2006, we acquired a 100% interest in United Gasco LLC, a 50% interest in Minnesota Methane and a 100% interest in United Cogen Fuel LLC. The 50% interest in Minnesota Methane is held by a 100% owned subsidiary, UC Investments, Inc., which was established by Hudson solely for that purpose. United Gasco, LLC and UC Investments, Inc. and their subsidiaries are engaged in the extraction and conversion of landfill gas into electricity, which is sold to utilities; this production qualifies as production of fuel from nonconventional sources and generates tax credits under the Internal Revenue Code. We have decided to divest our interests in these subsidiaries, and as a result reflect the businesses of these subsidiaries as discontinued operations. In May 2006, we divested our interest in United Cogen Fuel LLC. In accordance with FAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” our remaining investments have been classified as “held for sale” and recorded at estimated fair value less costs to sell.

Gross revenues from discontinued operations for the three months ended March 31, 2007 and 2006 amounted to $5.7 million and $3.6 million, respectively.

At March 31, 2007, the aggregate total assets and total liabilities of these investments amounted to $23.8 million and $18.4 million, respectively, and were recorded in other assets and other liabilities, respectively.

8

Note 5 — Stock Compensation Plans

General

Total stock-based compensation expense recorded for the three months ended March 31, 2007 and 2006 was $6.6 million and $7.5 million, respectively. The total income tax benefit recognized on stock-based compensation was $2.6 million and $2.9 million for the three months ended March 31, 2007 and 2006, respectively. At March 31, 2007, there was $45.8 million of unrecognized compensation cost related to nonvested stock-based awards. That cost is expected to be recognized over a weighted average period of 1.7 years.

Effective April 20, 2007, we became an indirect wholly-owned subsidiary of The Toronto-Dominion Bank and outstanding options to purchase our common stock were converted into cash or options to purchase common shares of The Toronto-Dominion Bank in accordance with the terms of the merger agreement. Upon completion of the acquisition, each outstanding and unexercised option to purchase a share of TD Banknorth common stock that would expire no later than December 31, 2008 vested and was converted into the right to receive an amount in cash equal to the product of (x) the excess, if any, rounded to the nearest whole cent, of (1) the merger consideration of $32.33 per share over (2) the exercise price per share of the TD Banknorth common stock subject to such cash-out option and (y) the number of shares of TD Banknorth common stock subject to such cash-out option. In addition, each outstanding and unexercised option to purchase shares of TD Banknorth common stock that would expire after December 31, 2008, whether or not vested or exercisable, was converted into an option to acquire a number of common shares of The Toronto-Dominion Bank equal to the product of (1) the number of shares of TD Banknorth common stock subject to the option multiplied by (2) 53.33%, at an exercise price per common share of The Toronto-Dominion Bank equal to (x) the exercise price per share of TD Banknorth common stock under the option divided by (y) 53.33%, rounded up to the nearest cent.

Restricted Stock and Restricted Stock Units

Under the 2003 Equity Incentive Plan, we have granted restricted stock and restricted stock units to our directors, officers and eligible employees. All outstanding restricted stock units will be settled in cash and had a three-year vesting period at the time of grant.

The following table summarizes the activity in our nonvested restricted stock and restricted stock units awards during the three months ended March 31, 2007.

				Weighted
	Restricted Stock			Average
	and Restricted			Grant-Date
Restricted Stock and Restricted Stock Units	Stock Units			Fair Value
Nonvested at January 1, 2007		1,360,837		$	30.02
Granted		672,514			32.28
Vested		(12,367	)		30.11
Forfeited		(70,767	)		30.75
Nonvested at March 31, 2007		1,950,217			30.77
Vested at March 31, 2007		33,320			30.22

The total fair value of restricted stock and restricted stock units that vested during the three months ended March 31, 2007 was $398. No restricted stock or restricted stock units vested during the three months ended March 31, 2006.

Upon completion of the merger which resulted in us becoming an indirect wholly-owned subsidiary of The Toronto-Dominion Bank, each restricted stock unit in respect of TD Banknorth common stock was

9

amended or adjusted to provide that (i) each restricted stock unit will be valued with reference to common shares of The Toronto-Dominion Bank, rather than valued with reference to shares of TD Banknorth common stock, and (ii) the number of notional common shares of The Toronto-Dominion Bank subject to such amended or adjusted award is equal to the product of (x) the number of notional shares of TD Banknorth common stock in respect of such award immediately prior to amendment or adjustment multiplied by (y) 53.33%. Restricted stock units with respect to the common shares of The Toronto-Dominion Bank granted under our 2005 Performance Based Restricted Share Unit Plan were not so adjusted. The performance criteria relating to all outstanding restricted stock units also were adjusted for certain periods to be substantially similar to the methodology used in The Toronto-Dominion Bank’s Performance Based Restricted Share Unit Plan.

Note 6 — Securities Purchased under Agreements to Resell

Securities purchased under agreements to resell consist of the purchase of a security with the commitment by us to resell the security to the original seller at a specified price. These securities purchased under agreements to resell are treated as collateralized financing transactions and are recorded at the amounts at which the securities were acquired plus accrued interest. Our policy is to take possession of the securities purchased. We pledge certain of these securities to collateralize public deposits and borrowings. At March 31, 2007 and December 31, 2006, we had $2.4 billion and $1.8 billion, respectively, of securities purchased under agreements to resell which mature in 2007.

Note 7 — Securities Available for Sale

The following table presents the fair value of our investments with continuous unrealized losses for less than one year and more than one year at March 31, 2007.

	Less than 1 year						More than 1 year						Total
	Number of		Fair		Unrealized		Number of		Fair		Unrealized		Number of		Fair		Unrealized
Available for Sale:	Investments		Value		Losses		Investments		Value		Losses		Investments		Value		Losses
U. S. Government obligations and obligations of U.S. Government agencies and Government sponsored enterprises		—	$	0	$	0		1	$	971	$	14		1	$	971	$	14
Tax-exempt bonds and notes		17		12,083		53		80		43,725		381		97		55,808		434
Other bonds and notes		13		26,944		212		42		36,169		433		55		63,113		645
Mortgage-backed securities		170		402,877		2,142		673		983,687		16,964		843		1,386,564		19,106
Collateralized mortgage obligations		1		371		5		12		47,234		635		13		47,605		640
Equity securities		2		89		10		1		114		27		3		203		37
		203	$	442,364	$	2,422		809	$	1,111,900	$	18,454		1,012	$	1,554,264	$	20,876

For securities with unrealized losses, the following information was considered in determining that the impairments are not other-than-temporary. U.S. Government securities are backed by the full faith and credit of the United States and therefore bear no credit risk. U.S. Government agencies securities have minimal credit risk as they play a vital role in the nation’s financial markets. Other bonds and notes are generally comprised of corporate securities and all investments maintain a credit rating of at least investment grade by one of the nationally recognized rating agencies. No unrealized losses were determined to be other-than-temporary for U.S. Government and agencies securities and for other bonds and notes. Mortgage-backed securities or collateralized mortgage obligations are either issued by federal government agencies or by private issuers with minimum security ratings of AA. We have the intent and ability to hold these investments until maturity or until fair value recovers above amortized cost.

U.S. Government, agency and Government-sponsored enterprises securities at March 31, 2007 consisted of one U.S. Treasury note.

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Note 8 — Goodwill and Other Intangible Assets

The following table summarizes activity in our goodwill and identifiable intangible asset accounts during the periods indicated and the amortization expense of identifiable intangible assets during the periods indicated.

							Other			Total
				Core Deposit			Identifiable			Identifiable
	Goodwill			Intangibles			Intangibles			Intangibles
Balance, December 31, 2006	$	6,022,534		$	516,200		$	211,396		$	727,596
Recorded during the year		366,736			26,350			—			26,350
Amortization expense		—			(32,318	)		(4,463	)		(36,781	)
Adjustment of purchase accounting estimates		(10,278	)		19,290			—			19,290
Balance, March 31, 2007	$	6,378,992		$	529,522		$	206,933		$	736,455
Estimated Annual Amortization Expense:
Remaining 2007		—		$	85,260		$	13,388		$	98,648
2008		—			93,801			16,809			110,610
2009		—			76,497			16,186			92,683
2010		—			62,024			15,440			77,464
2011		—			49,691			14,870			64,561
Thereafter		—			162,249			130,240			292,489

The following table sets forth the components of our identifiable intangible assets at March 31, 2007.

	March 31, 2007
	Gross Carrying		Accumulated		Net Carrying
	Amount		Amortization		Amount
Identifiable intangible assets:
Core deposit intangibles	$	788,741	$	259,219	$	529,522
Other identifiable intangibles:
Loan relationship intangibles		133,535		14,018		119,517
Other identifiable intangibles		110,629		23,213		87,416
		244,164		37,231		206,933
Total	$	1,032,905	$	296,450	$	736,455

Note 9 — Deposits

Certificates of deposits of $100,000 or more amounted to $3.1 billion and $2.9 billion at March 31, 2007 and December 31, 2006, respectively.

Note 10 — Short-term Borrowings

Short-term borrowings are all borrowings with an original maturity of one year or less. The following table sets forth our short-term borrowings at the dates indicated.

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	March 31, 2007		December 31, 2006
Securities sold under agreements to repurchase — retail	$	1,311,824	$	1,517,591
Federal funds purchased		269,700		689,000
Treasury, tax and loan notes		173		16,921
	$	1,581,697	$	2,223,512

At March 31, 2007, we had a $110 million unsecured line of credit with The Toronto-Dominion Bank. The line is renewable every 364 days and, if used, carries interest at LIBOR plus a maximum of 0.60%. There were no drawdowns on this line during 2007.

Note 11 — Long-term Debt

The following table sets forth our long-term debt (debt with original maturities of more than one year) at the dates indicated.

	March 31, 2007		December 31, 2006
Federal Home Loan Bank advances	$	67,306	$	68,610
Securities sold under agreements to repurchase — retail		8,636		10,415
Junior subordinated debentures issued to affiliated trusts		534,781		517,390
Subordinated debt 7.625% due 2011		219,094		220,313
Subordinated debt 7.00% due 2012		218,513		219,881
Subordinated debt 5.05% due 2022		233,847		231,680
Senior notes 3.75%, due 2008		149,535		149,411
Other long-term debt		6,107		5,881
Total	$	1,437,819	$	1,423,581

Borrowings callable by the lender amounted to $35.0 million at March 31, 2007 and December 31, 2006. In addition, junior subordinated debentures of $364 million are callable by us in 2007.

Note 12 — Changes in Accumulated Other Comprehensive Income

The following table presents the reconciliation of items affecting accumulated other comprehensive income included in shareholders’ equity for the periods indicated.

	Three Months Ended
	March 31, 2007									March 31, 2006
	Pre-tax			Tax			Net of			Pre-tax			Tax			Net of
	Amount			Effect			Tax			Amount			Effect			Tax
Change in:
Change in unrealized gain (loss) on securities available for sale	$	4,105			($1,411	)	$	2,694			($23,085	)	$	8,080			($15,005	)
Change in unrealized gain (loss) on cash flow hedges		2,912			(1,019	)		1,893			2,869			(1,004	)		1,865
Defined benefit plans: net gains		2,843			(995	)		1,848
Reclassification adjustment for losses (gains) realized in net income		(2,493	)		872			(1,621	)		3,796			(1,329	)		2,467
Net change in unrealized gains (losses)	$	7,367			($2,553	)	$	4,814			($16,420	)	$	5,747			($10,673	)

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Note 13 — Other Noninterest Income

The following table sets forth the primary categories of our other noninterest income during the periods indicated.

	Three Months Ended
	March 31, 2007			March 31, 2006
Loan fee income	$	16,920		$	12,392
Income on restricted stock		5,275			4,583
Mortgage banking services income		2,191			1,235
Venture capital (write-downs) gains		(15	)		508
Covered call premiums		—			922
Miscellaneous income		5,683			4,557
Total	$	30,054		$	24,197

Note 14 — Other Noninterest Expense

The following table sets forth the primary categories of our other noninterest expense during the periods indicated.

	Three Months Ended
	March 31, 2007		March 31, 2006
Other noninterest expense:
Professional fees	$	6,647	$	5,509
Telephone		4,391		3,932
Office supplies		3,117		3,061
Postage and freight		4,110		3,671
Corporate contributions (1)		8,264		31
Courier		2,728		2,404
Miscellaneous loan costs		1,916		1,205
Collection and carrying costs of non-performing assets		384		525
Deposits and other assessments		1,375		1,241
Miscellaneous		12,416		10,159
Total other noninterest expense	$	45,348	$	31,738

(1) Includes an $8 million special contribution to the TD Banknorth Charitable Foundation.

Note 15 — Pension and Other Postretirement Plans

The following table presents the amount of net periodic benefit cost recognized by us during the periods indicated.

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Components of net periodic benefit cost:

	Three Months Ended
	March 31, 2007			March 31, 2006
Qualified Pension
Service cost	$	4,443		$	4,475
Interest cost		4,106			4,270
Expected (gain) on plan assets		(7,592	)		(7,185	)
Net periodic benefit cost	$	957		$	1,560
Nonqualified Pension
Service cost	$	190		$	236
Interest cost		935			669
Amortization of prior service costs		264			312
Recognized actuarial (gain)		(2	)		—
Net periodic benefit cost	$	1,387		$	1,217
Other Postretirement Benefits
Service cost	$	48		$	50
Interest cost		279			339
Recognized actuarial (gain)		(102	)		(64	)
Net periodic benefit cost	$	225		$	325

We expect to contribute approximately $40.0 million to our pension plans in 2007, none of which is required to satisfy minimum funding requirements. The discretionary contribution is anticipated to be paid in December after final review of the 2007 pension obligation and, as in prior years, is expected to be paid entirely in cash.

Note 16 — Merger and Restructuring Costs

In connection with the consolidation and/or closing of 24 existing branch offices and a reduction in force of approximately 400 employees, we recorded a restructuring charge of $13.1 million, pre-tax, in the quarter ended March 31, 2007, including a charge of approximately $8.2 million, pre-tax, for severance payments to be made to employees upon termination.

The following table summarizes our merger and restructuring costs during the periods indicated.

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	Three Months Ended
	March 31, 2007			March 31, 2006
Interchange Financial Services Corporation Merger Charges
Personnel costs	$	2,970		$	—
Systems conversion and integration/customer communications		1,664			—
Other costs		958			—
		5,592			—
Hudson United Bancorp Merger Charges
Personnel costs		271			69
Systems conversion and integration/customer communications		48			5,441
Other costs		632			1,786
		951			7,296
Restructuring Costs
Personnel costs		7,638			10,623
Contract terminations		1,741
Branch closings		3,469			—
Other		211
		13,059			10,623
The Toronto-Dominion Bank Merger Charges (1)
Personnel costs		4,113			1,424
Transaction costs		6,680			35
Name change		—			293
		10,793			1,752
Other Merger Charges
BostonFed Bancorp, Inc. Merger Charges		8			24
American Financial Holdings, Inc. Merger Charges		—			7
CCBT Financial Companies, Inc. Merger Charges		(25	)		116
Acquisition of deposits from TD Bank USA		216			—
		199			147
Total Merger and Restructuring Costs	$	30,594		$	19,818

(1) Charges in 2006 relate to The Toronto-Dominion Bank’s initial acquisition of a majority interest in us on March 1, 2005 and charges in 2007 relate to The Toronto-Dominion Bank’s acquisition of the remaining outstanding shares of TD Banknorth common stock not owned by it on April 20, 2007.

The following table summarizes activity in the accruals for merger and restructuring costs during the periods indicated.

			Purchase								Non-cash
			Accounting		Merger and						Write Downs
��	Balance		Adjustments		Restructuring			Cash			and Other		Balance
	12/31/06		at Acquisition		Costs			Payments			Adjustments		3/31/07
Interchange Merger	$	—	$	13,336	$	5,592			($15,288	)	$	—	$	3,640
Hudson United Bancorp Merger		3,729		—		951			(1,323	)		—		3,357
Restructuring costs		—		—		13,059			(236	)		—		12,823
The Toronto-Dominion Bank Mergers		—		—		10,793			(2,508	)		—		8,285
BostonFed Bancorp, Inc. Merger		1,547		—		8			(40	)		—		1,515
CCBT Financial Companies, Inc. Merger		—		—		(25	)		25			—		—
Acquisition of deposits from TD Bank USA		—		—		216			(216	)		—		—
Total	$	5,276	$	13,336	$	30,594			($19,586	)	$	0	$	29,620

As a result of mergers, approximately 200 Interchange employees were released in 2007 and approximately 400 Hudson employees were released in 2006.

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Note 17 — Income Taxes

We adopted the provisions of FIN 48 on January 1, 2007. As a result of the implementation of FIN 48, we recognized approximately a $3.5 million increase in the liability for unrecognized tax benefits, $5.0 million which was accounted for as adjustments to the January 1, 2007 balance of retained earnings and $1.5 million as an adjustment to goodwill for pre-acquisition contingencies. As of the date of adoption, we had approximately $45.2 million of unrecognized tax benefits (including interest and penalties). If that $45.2 million were recognized, $28.7 million of it would affect our effective tax rate.

We are currently under audit by various states relative to filing positions taken. While we believe we have substantial defenses to any state tax assessments, there can be no assurance that the outcome of any such assessments will not have an adverse effect on our consolidated results of operations in any future period. We are unable to estimate a range of reasonably possible changes in the level of unrecognized tax benefits that may occur within the coming year. Tax years from 2002 and later are currently open for federal examination purposes. Years from 1998 and later are currently open for purposes of state examinations in the significant states where we do business.

We classify interest and penalties accrued related to unrecognized tax benefits as income tax expense. During the three months ended March 31, 2007, we recognized approximately $1.2 million in interest and penalties, net of tax. We had approximately $8.1 million for the payment of interest and penalties accrued at March 31, 2007, which is included in other liabilities.

Note 18 — Related Party Transactions

We and our subsidiaries participate in various transactions with The Toronto-Dominion Bank and its affiliates. Transactions involving our banking subsidiary, TD Banknorth, NA and its nonbanking affiliates (including TD Banknorth and The Toronto-Dominion Bank) are subject to review by regulatory authorities and are required to be on terms at least as favorable to TD Banknorth, NA as those prevailing at the time for similar non-affiliate transactions. Transactions between The Toronto-Dominion Bank and TD Banknorth and their respective affiliates have included interest rate swap agreements, foreign exchange activities, international services, cost reimbursements, referral fees, intercompany deposits and borrowings and TD Banknorth’s sale of 13.0 million and 29.6 million shares of common stock to The Toronto-Dominion Bank for $405.2 million and $941.8 million in connection with the Interchange acquisition on January 1, 2007 and the Hudson acquisition on January 31, 2006, respectively.

The following table sets forth the amounts due to and from The Toronto-Dominion Bank and off-balance sheet transactions with The Toronto-Dominion Bank at March 31, 2007.

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	March 31, 2007			December 31, 2006
Cash and due from banks	$	360		$	3,823
Other assets:
Positive fair value marks on derivatives		15,399			16,514
Deferred tax asset		1,132			878
Deferred debt issuance costs		991			1,014
Other		865			516
Interest-bearing deposits from The Toronto-Dominion Bank		15,725			15,544
Other liabilities:
Negative fair value marks on derivatives		18,739			14,398
Funds received for sale of stock on January 1, 2007		—			405,210
Shareholders’ Equity
Accumulated other comprehensive income		(3,233	)		(1,631	)
Broker commissions paid to TD Securities for common stock repurchases		(476	)		(476	)
Off-balance sheet transactions (notional amounts):
Interest rate swaps, caps and floors		3,101,750			2,988,244
Foreign exchange contracts		126,706			126,531

The effect on pre-tax income of transactions with The Toronto-Dominion Bank was an increase of $10.9 million and $2.4 million during the three months ended March 31, 2007 and 2006, respectively. The increase was largely due to the income recorded on interest rate swap agreements which are accounted for as cash flow hedges.

We and The Toronto-Dominion Bank have entered into a Stewardship Agreement under which TD Banknorth is reimbursed for the cost of certain services provided for the benefit of The Toronto-Dominion Bank. Services covered by the Stewardship Agreement include participation in The Toronto-Dominion Bank senior management meetings, participation in The Toronto-Dominion Bank strategic planning sessions, monthly financial reporting in The Toronto-Dominion Bank formats, corporate rebranding, Basel II planning, monitoring of compliance of intercompany activities and assistance in various corporate initiatives with The Toronto-Dominion Bank. We bill The Toronto-Dominion Bank monthly under the Stewardship Agreement. Monthly billings under this agreement averaged $0.6 million during the quarter ended March 31, 2007.

In September 2005, TD Banknorth, NA issued subordinated notes denominated in Canadian currency totaling $270 million (or approximately $229 million in U.S. dollars). The Canada Trust Company, a wholly-owned subsidiary of The Toronto-Dominion Bank, is the issuing and paying agent, note registrar and calculation agent for the notes.

At March 31, 2007, we also had a $110 million unsecured line of credit with The Toronto-Dominion Bank. The line is renewable every 364 days and, if used, carries interest at LIBOR plus 0.60%. TD Banknorth did not utilize the line of credit during the three months ended March 31, 2007.

TD Banknorth, NA has been approved to purchase up to $2.5 billion of Federal Funds from The Toronto-Dominion Bank at the Federal Funds market rate. There have been no purchases of Federal Funds from The Toronto-Dominion Bank to date.

Note 19 – Subsequent Events

On April 18, 2007, our shareholders approved the agreement and plan of merger with The Toronto-Dominion Bank providing for the acquisition by The Toronto-Dominion Bank of all of the outstanding

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shares of common stock of TD Banknorth Inc. not currently owned by The Toronto-Dominion Bank or its affiliates for $32.33 per share in cash. On April 20, 2007, this acquisition was completed and TD Banknorth became an indirect wholly-owned subsidiary of The Toronto-Dominion Bank.

In April 2007, plans were approved that will consolidate certain facilities, operations and employees in connection with becoming an indirect wholly-owned subsidiary of The Toronto-Dominion Bank. Additionally, we entered into amendments to employment and award agreements with two executives that accelerated certain retention payments and vesting of stock option and restricted stock unit awards under those agreements. In connection with these actions, we expect to record a restructuring charge of approximately $38.5 million, pre-tax, ($26.9 million after-tax) in the quarter ending June 30, 2007.

Item 2.

TD BANKNORTH INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(In thousands, except per share data and as noted)

General

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations describes the principal factors affecting the results of operations of TD Banknorth Inc. pursuant to General Instruction H(2)(a) of Form 10-Q.

We, TD Banknorth Inc., are a Delaware corporation and a registered bank/financial holding company under the Bank Holding Company Act of 1956, as amended. As of March 31, 2007, we were a majority-owned subsidiary of The Toronto-Dominion Bank. On April 20, 2007, we became an indirect wholly-owned subsidiary of The Toronto-Dominion Bank. See Note 19 to the unaudited consolidated financial statements. At March 31, 2007, we had consolidated assets of $41.2 billion and consolidated shareholders’ equity of $8.7 billion.

Our principal asset is all of the capital stock of TD Banknorth, NA, a national bank which was initially formed as a Maine-chartered savings bank in the mid-19^th century. At March 31, 2007, TD Banknorth, NA had 606 banking offices in Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania and Vermont and served approximately 1.6 million households and commercial customers. Through TD Banknorth, NA and its subsidiaries, we offer a full range of banking services and products to individuals, businesses and governments throughout our market areas, including commercial banking, consumer banking, investment management, investment planning, private label credit cards for certain retailers and other businesses, insurance premium financing and insurance agency services.

Executive Overview

• In March 2007, we announced various expense reductions and operational initiatives which are intended to improve our future operating performance. These initiatives are being taken in light of our recent financial results, the intensely competitive environment for banking services, current economic conditions and the recently-completed going-private transaction and are intended to reduce our annual operating expenses by 5% to 8% ($50 to $80 million, respectively) by 2008.

• Net income for the quarter ended March 31, 2007 amounted to $55.2 million compared to $76.2 million for the same period last year. This decrease was primarily attributable to increased merger and restructuring charges ($10.8 million pre-tax) and increased provisions for loan and lease losses ($23.1 million pre-tax) due to increases in nonperforming assets and net charge-offs, which reflect the

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	deterioration in new construction residential real estate loans, particularly in the Mid-Atlantic and southern New England regions.
•	We completed the acquisition of Interchange Financial Services Corporation (“Interchange”) on January 1, 2007. Interchange had $1.6 billion in assets at the acquisition date.
•	Noninterest income increased by $15.7 million or 13% as compared to the quarter ended March 31, 2006 due to the acquisition of Interchange on January 1, 2007 and a full quarter of income from the acquisition of Hudson on January 31, 2006.
•	Noninterest expense increased by $41.0 million or 15% due primarily to a $10.8 million increase in merger and restructuring costs, increased operating expenses related to Interchange and Hudson and an $8 million contribution to our charitable foundation in March 2007.
•	Nonperforming assets increased from $132.4 million at December 31, 2006 to $225.2 million at March 31, 2007 primarily as a result of increases in nonaccrual commercial real estate loans. At March 31, 2007, nonperforming assets as a percentage of total assets amounted to 0.55% compared to 0.33% at December 31, 2006. These increases resulted from the deterioration in the residential real estate construction markets in our lending areas.

     Our financial condition and liquidity remain strong. The following are important factors in understanding our financial condition and liquidity:

• using the definition of federal banking regulators, we continue to be “well-capitalized”;

• In March 2007, Moody’s raised our long-term debt rating to Aa3”; and

• our liquidity measures at March 31, 2007 met our policy guidelines.

Outlook

      We expect that 2007 will continue to be a challenging year. Earnings for the remainder of 2007 will depend on the interest rate environment, the shape of the yield curve, our ability to obtain loans and hold/grow deposits, asset quality and the success of revenue/expense initiatives now underway. Competition for high-quality loans and deposits will continue. Excluding the effects of acquisitions, we expect only single-digit loan and deposit growth in 2007. We are responding to these challenges with the following actions being implemented during 2007:

• Increase our focus on organic loan and deposit growth;

• Focus on process improvements and branch consolidations to reduce operating costs;

• Grow/develop deposit relationships by providing quality services, simplifying fee structures and eliminating certain fees;

• Continue to review the performance characteristics of our branch network; and

• Review our pricing on loans and deposits in certain market areas.

In addition, our nonperforming assets and our provision for loan and lease losses levels represent significant increases over historical levels, but given current conditions, we do not expect these levels to decline in the near future.

Acquisition by The Toronto-Dominion Bank

On April 18, 2007, our shareholders approved the agreement and plan of merger with The Toronto-Dominion Bank providing for the acquisition by The Toronto-Dominion Bank of all of the outstanding

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shares of common stock of TD Banknorth Inc. not currently owned by The Toronto-Dominion Bank or its affiliates for $32.33 per share in cash. On April 20, 2007, this transaction was completed and TD Banknorth became an indirect wholly-owned subsidiary of The Toronto-Dominion Bank.

Acquisitions

Our profitability and market share have been enhanced in recent years through acquisitions. Acquisitions typically involve the payment of a premium over book and market values, and therefore, some dilution of our tangible book value and net income per common share may occur in connection with these transactions. Moreover, acquisitions commonly result in significant one-time charges against earnings, although cost-savings, especially incident to in-market acquisitions, frequently are anticipated, as are revenue enhancements.

During 2006 and 2007, we acquired the two financial institutions listed below. Our financial statements include the results of these bank acquisitions since the date of acquisition.

Table 1 — Acquistions

							Transaction-Related Items
			Balance at						Identifiable							Total
	Acquisition		Acquisition Date						Intangible		Cash		Shares			Purchase
(Dollars and shares in millions)	Date		Assets		Equity		Goodwill		Assets		Paid		Issued			Price
Interchange Financial Services Corporation		1/1/2007	$	1,567.0	$	176.5	$	366.6	$	26.4	$	468.1		—	(1)	$	468.1
Hudson United Bancorp		1/31/2006	$	8,771.0	$	518.3	$	1,463.6	$	222.5	$	941.8		32.9	(2)	$	1,907.3

(1)	13.0 million shares of common stock were sold by us to The Toronto-Dominion Bank to fund the cash paid by us in connection with the acquisition of Interchange Financial Services Corporation.
(2)	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.

For additional information, see Note 3 to the unaudited Consolidated Financial Statements.

Net Interest Income and Margin

Fully-taxable equivalent net interest income for the first quarter of 2007 increased $16.0 million, or 6%, compared to the first quarter of 2006. This increase was primarily attributable to the following items:

• a full quarter of income from the acquisition of Hudson on January 31, 2006 compared to two months last year;

• an increase in net earning assets as a result of the acquisition of Interchange on January 1, 2007;

• a change in the mix of average earning assets resulting from the deleveraging program late in the first quarter of 2006 (loans comprised 85% of average earning assets during the three months ended March 31, 2007 compared to 79% for the same period last year); and

• changes in the composition of interest-bearing liabilities resulting from the deleveraging program late in the first quarter of 2006 (deposits comprised 87% of interest-bearing liabilities during 2007 compared to 76% during 2006).

The increase in net interest income related to the above items was offset in part by a lower net interest rate spread from the impact of rising short-term interest rates (which increased costs of funds faster than asset yields) and competitive conditions in our market areas.

Fully-taxable equivalent interest income increased by $60.7 million for the first quarter of 2007 as compared the same period last year. This increase was primarily the result of an increase in earning assets from $39.0 billion in the first quarter of 2006 to $41.4 billion in the first quarter of 2007, an increase of $2.4 billion. The increase in earning assets was primarily due to the acquisition of Interchange on January 1, 2007 and the effects of the Hudson acquisition for a full quarter. The increase in interest income also reflected rising short-term interest rates and the effects of a balance sheet deleveraging program late in the first quarter of 2006.

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Interest expense increased by $44.7 million in the first quarter of 2007 compared to the first quarter of 2006 as a result of rising short term interest rates, higher average interest-bearing liabilities and competitive conditions in our market areas. The weighted average rate paid on interest-bearing liabilities was 3.40% in the first quarter of 2007, up from 2.76% in the first quarter of 2006, an increase of 64 basis points. The weighted average cost of deposits increased by 94 basis points and the weighted average cost of borrowings increased by 48 basis points. Average interest-bearing deposits increased by $3.4 billion or 17%, primarily due to the Interchange acquisition and the effects of the Hudson acquisition for a full quarter. Average borrowings declined by $2.8 billion in the first quarter of 2007 compared to the first quarter of 2006 due to a balance sheet deleveraging program late in the first quarter of 2006, which were offset in part by borrowings assumed from the Interchange acquisition.

Net interest rate spread represents the difference between the weighted average yield earned on our interest-earning assets and the weighted average rate paid on our interest-bearing liabilities. Our net interest rate spread decreased to 3.34% in the first quarter of 2007 from 3.42% in the first quarter of 2006 because the 56 basis point increase in the weighted average yield on interest-earning assets was less than the 64 basis point increase in the weighted average rate paid on interest-bearing liabilities, primarily as a result of rising short-term interest rates and intense competition for deposits.

Table 2 sets forth, for the three months ended March 31, 2007 and 2006, information regarding (i) the total dollar amount of interest income from interest-earning assets and the resultant average yields; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average cost; (iii) net interest income; (iv) interest rate spread; and (v) net interest margin. For purposes of the tables and the above discussion, (i) income from interest-earning assets and net interest income is presented on a fully-taxable equivalent basis primarily by adjusting income and yields earned on tax-exempt interest received on loans to qualifying borrowers and on certain of our securities to make them equivalent to income and yields earned on fully-taxable investments, assuming a federal income tax rate of 35%, and (ii) nonaccrual loans have been included in the appropriate average balance loan category, but unpaid interest on nonaccrual loans has not been included for purposes of determining interest income. Average balances are based on average daily balances during the indicated periods.

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Table 2 — Average Balances, Yields and Rates

	2007 First Quarter								2006 First Quarter
						Yield/								Yield/
	Average Balance		Interest			Rate (1)			Average Balance		Interest			Rate (1)
Loans and leases (2):
Residential real estate mortgages	$	2,783,915	$	39,753			5.71	%	$	2,916,912	$	40,270			5.52	%
Commercial real estate mortgages		9,480,830		163,378			6.99	%		7,996,632		132,202			6.70	%
Commercial business loans and leases		6,754,580		124,314			7.46	%		5,722,504		94,361			6.71	%
Consumer loans and leases		7,121,969		118,421			6.74	%		6,908,585		105,468			6.19	%
Credit card receivables		440,651		13,222			12.17	%		243,287		7,843			13.07	%
Total loans and leases		26,581,945		459,088			6.99	%		23,787,920		380,144			6.48	%
Investment securities (3)		2,417,714		32,268			5.34	%		5,634,703		71,306			5.06	%
Securities purchased under agreements to resell		2,195,356		28,121			5.12	%		585,556		7,197			4.92	%
Federal funds sold and other short-term investments		5,643		48			3.43	%		23,813		140			2.39	%
Total earning assets		31,200,658		519,525			6.74	%		30,031,992		458,787			6.18	%
Bank-owned life insurance		823,502								697,668
Goodwill		6,382,995								5,509,988
Indentifiable intangible assets		750,764								801,665
Other noninterest-earning assets		2,254,577								1,944,528
Total assets	$	41,412,496							$	38,985,841
Interest-bearing deposits:
Regular savings	$	3,747,434		10,858			1.18	%	$	3,708,031		9,266			1.01	%
NOW and money market accounts		10,649,016		79,014			3.01	%		9,172,611		48,613			2.15	%
Certificates of deposit		7,891,421		83,214			4.28	%		6,226,033		46,456			3.03	%
Brokered deposits		224,970		2,997			5.40	%		211,689		2,347			4.50	%
Deposits in foreign office		163,420		1,655			4.11	%		—		—			—
Total interest-bearing deposits		22,676,261		177,738			3.18	%		19,318,364		106,682			2.24	%
Borrowed funds		3,418,646		41,084			4.84	%		6,250,112		67,373			4.36	%
Total interest-bearing liabilities		26,094,907		218,822			3.40	%		25,568,476		174,055			2.76	%
Non-interest bearing deposits		5,766,859								5,166,252
Deferred tax liability related to identifiable intangible assets		296,209								315,498
Other liabilities		512,954								334,445
Shareholders’ equity		8,741,567								7,601,170
Total liabilities and shareholders’ equity	$	41,412,496							$	38,985,841
Net earning assets	$	5,105,751							$	4,463,516
Net interest income (fully-taxable equivalent)				300,703								284,732
Less: fully-taxable equivalent adjustments				(4,311	)							(2,288	)
Net interest income			$	296,392							$	282,444
Net interest rate spread (fully-taxable equivalent)							3.34	%							3.42	%
Net interest margin (fully-taxable equivalent)							3.89	%							3.83	%

(1)	Annualized.
(2)	Loans and leases include loans held for sale.
(3)	Includes securities available for sale and held to maturity.

The following table presents certain information on a fully-taxable equivalent basis regarding changes in our interest income and interest expense for the periods indicated. For each category of interest-earning assets and interest- bearing liabilities, information is provided with respect to changes attributable to (i) changes in volume (change in volume multiplied by old rate) and (ii) changes in rate (change in rate multiplied by old volume). Changes in rate/volume (change in rate multiplied by change in volume) were prorated between the changes in volume and rate.

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Table 3 — Rate /Volume Analysis

	Three Months Ended
	March 31, 2007 vs. March 31, 2006
	Increase (decrease) due to
						Total
	Volume (1)			Rate		Change
Interest income:
Loans and leases	$	47,270		$	31,674	$	78,944
Investment securities		(43,228	)		4,190		(39,038	)
Securities purchased under agreements to resell		20,619			305		20,924
Federal funds sold and other short-term investements		(214	)		122		(92	)
Total interest income		24,447			36,291		60,738
Interest expense:
Interest-bearing deposits:
Regular savings		95			1,497		1,592
NOW and money market accounts		8,723			21,678		30,401
Certificates of deposit		14,459			22,299		36,758
Brokered deposits		155			495		650
Foreign branch deposits		1,655			—		1,655
Total interest-bearing deposits		25,087			45,969		71,056
Borrowed funds		(34,729	)		8,440		(26,289	)
Total interest expense		(9,642	)		54,409		44,767
Net interest income (fully taxable equivalent)	$	34,089		$	(18,118)	$	15,971

(1) Volume increases include the effects of the acquisition of Interchange Financial Services Corporation on January 1, 2007.

Provision and Allowance for Loan and Lease Losses

The provision for loan and lease losses is recorded to bring the allowance for loan and lease losses to a level deemed appropriate by management based on factors discussed under “Analysis and Determination of the Allowance for Loan and Lease Losses” in the “Risk Management” section below. Although we use our best judgment in providing for losses, for the reasons discussed under the “Risk Management” section, there can be no assurance that we will not have to increase the amount of our provision for loan and lease losses in future periods, which would adversely affect our results of operations.

We provided $30.0 million and $6.9 million for loan and lease losses in the quarters ended March 31, 2007 and 2006, respectively. The increase in the provision for loan and lease losses in the first quarter of 2007 reflects increases in nonperforming loans and net charge-offs compared to the quarters ended December 31, 2006 and March 31, 2006. Nonperforming loans amounted to $222.5 million compared to $131.4 million and $78.6 million at December 31, 2006 and March 31, 2006, respectively. Net charge-offs amounted to $19.7 million in the three months ended March 31, 2007, as compared to $14.1 million and $6.2 million in the three months ended December 31, 2006 and March 31, 2006, respectively. The ratio of net charge-offs to average loans and leases was 0.30% (annualized) in the first quarter of 2007 and 0.10% (annualized) in the first quarter of 2006. The coverage ratio (ratio of the allowance for credit losses to nonperforming loans) was 141% at March 31, 2007, as compared to 220% at December 31, 2006 and 362% at March 31, 2006.

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In addition to the provisions made for on-balance sheet loans and leases, we provided $1.8 million and $300 thousand for loss reserves related to off-balance sheet loan commitments in the quarters ended March 31, 2007 and 2006, respectively. This provision for off-balance sheet loan commitments is included with other noninterest expense.

See “Risk Management” below for further information on the provision for loan and lease losses, net charge-offs, nonperforming assets, allowance for credit losses and other factors we consider in assessing the credit quality of our loan and lease portfolio and establishing the allowance for loan and lease losses.

Noninterest Income

Noninterest income increased by $15.7 million, or 13%, during the three months ended March 31, 2007, as compared to the same period in 2006, primarily due to increased income from deposit services, bank-owned life insurance and other noninterest income, including loan fee income. Our new focus on simplifying fee structures and increased volumes has driven the increases in deposit services fee income and loan fee income. Income from bank-owned life insurance increased primarily due to additional investment earnings on higher average balances. The increased volumes resulted primarily from the acquisitions of Interchange and Hudson.

The following table presents noninterest income during the periods indicated.

Table 4 — Noninterest Income

	Three Months Ended March 31,						Change
	2007			2006			Amount			Percent
Noninterest income:
Deposit services	$	44,867		$	38,479		$	6,388			17	%
Insurance agency commissions		16,869			15,839			1,030			7	%
Merchant and electronic banking income, net		16,376			15,636			740			5	%
Wealth management services		11,380			11,348			32			0	%
Bank-owned life insurance		8,839			7,288			1,551			21	%
Investment planning services		5,042			5,142			(100	)		(2	%)
Net securities gains (losses)		92			(90	)		182			N/M
Other noninterest income:
Loan fee income		16,920			12,392			4,528			37	%
Income on restricted stock		5,275			4,583			692			15	%
Mortgage banking services income		2,191			1,235			956			77	%
Venture capital income (write-downs)		(15	)		508			(523	)		N/M
Covered call option premiums		—			922			(922	)		N/M
Miscellaneous income		5,683			4,557			1,126			25	%
Total other noninterest income		30,054			24,197			5,857			24	%
Total noninterest income	$	133,519		$	117,839		$	15,680			13	%

N/M — not meaningful

Deposit services income for the three months ended March 31, 2007 increased $6.4 million, or 17%, compared to the same period last year, primarily due to volume increases and the benefits of new initiatives to simplify overdraft fee structures.

Income from bank-owned life insurance (“BOLI”) for the three months ended March 31, 2007 increased $1.5 million, or 21%, compared to the same period last year. The cash surrender value of our BOLI was $828.7 million at March 31, 2007 compared to $791.5 million at December 31, 2006. The $37.2 million increase was primarily due to amounts acquired from Interchange and investment earnings. Investment in BOLI provides a tax-advantaged means to mitigate increasing employee benefit costs.

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Other noninterest income increased $5.9 million, or 24%, in the three months ended March 31, 2007 as compared to the same period last year. For the quarter, the increase was primarily due to a $4.5 million increase in loan fee income, largely due to an increase of $1.7 million in commercial swap fees and an increase of $923 thousand in fees on credit card receivables. Miscellaneous other noninterest income includes commissions on our official check program, gains on sales of expired leases and other miscellaneous items.

Noninterest Expense

Noninterest expense increased by $41.0 million, or 15%, in the three months ended March 31, 2007 compared to the same period in the prior year. These increases were primarily due to merger and restructuring costs, compensation and employee benefits and corporate contributions.

The following table presents noninterest expense during the periods indicated.

Table 5 — Noninterest Expense

	Three Months Ended March 31,				Change
	2007		2006		Amount			Percent
Noninterest expense:
Compensation and employee benefits	$	137,044	$	125,210	$	11,834			9	%
Occupancy		27,824		24,296		3,528			15	%
Equipment		17,512		14,884		2,628			18	%
Data processing		15,606		15,233		373			2	%
Advertising and marketing		7,328		8,191		(863	)		(11	%)
Amortization of identifiable intangible assets		36,781		37,666		(885	)		(2	%)
Merger and restructuring costs		30,594		19,818		10,776			54	%
Other noninterest expense:
Professional fees		6,647		5,509		1,138			21	%
Telephone		4,391		3,932		459			12	%
Office supplies		3,117		3,061		56			2	%
Corporate contributions		8,264		31		8,233			N/M
Postage and freight		4,110		3,671		439			12	%
Courier		2,728		2,404		324			13	%
Miscellaneous loan costs		1,916		1,205		711			59	%
Collection and carrying costs of non-performing assets		384		525		(141	)		(27	%)
Deposits and other assessments		1,375		1,241		134			11	%
Miscellaneous		12,416		10,159		2,257		NM
Total other noninterest expense		45,348		31,738		13,610			43	%
Total noninterest expense	$	318,037	$	277,036	$	41,001			15	%

N/M — not meaningful

Compensation and employee benefits expense increased $11.8 million, or 9%, in the first quarter of 2007 compared to the same period last year. The increase was primarily due to higher salaries and benefit costs resulting from the acquisition of Interchange and additional expenses from the Hudson acquisition (three months of expense in 2007 compared to two months of expense in 2006) and, to a lesser extent, higher incentive costs in the first quarter of 2007 compared to the same period last year.

Occupancy expense increased $3.5 million, or 15%, in the first quarter of 2007 compared to the same period last year. The increase was primarily due to expenses associated with additional facilities from acquisitions, including depreciation.

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Equipment expense increased $2.6 million, or 18%, in the first quarter of 2007 compared to the same period last year. The increase was primarily due to increased costs from acquisitions, depreciation on new equipment purchases and higher equipment maintenance expenses.

Merger and restructuring costs increased $10.8 million, or 54%, in the first quarter of 2007 compared to the same period last year. The increase was primarily attributable to a $9.0 million increase in costs incurred in connection with the going-private transaction, $5.6 million increase in costs incurred in connection with the acquisition of Interchange and $2.4 million increase in restructuring costs, offset by $6.3 million reduction in Hudson merger related costs. For a tabular analysis of our merger and restructuring costs, see Note 16 to the unaudited Consolidated Financial Statements.

Corporate contributions increased $8.2 million in the first quarter of 2007 compared to the same period last year due to an $8 million contribution made to our charitable foundation. Our Board approved an $8.0 million contribution to the TD Banknorth Charitable Foundation in connection with the going-private transaction to reflect our continued commitment to the communities we do business in after the going-private transaction is completed.

Taxes

The effective tax rate on income from continuing operations was 32.0% for the three months ended March 31, 2007 compared to 33.3% for the three months ended March 31, 2006. This decrease related primarily to increased tax-exempt income (as a percent of pre-tax income). The effective tax rate for the remainder of 2007 is expected to be approximately 31% on income from continuing operations.

We are subject to examinations by various federal and state governmental tax authorities from time to time regarding tax returns we have filed. Certain state income tax returns filed by us in recent years have been examined and assessments have been made by state tax authorities with respect to certain of these returns. We believe that we have substantial defenses to these assessments and intend to appeal them in accordance with administrative procedures. Based on currently available information, audits in process, our assessment of risks and established reserves, we believe that the eventual outcome of existing and potential state tax assessments will not have a material effect on our consolidated financial position, liquidity or results of operations. In view of the inherent difficulty of predicting such matters, there can be no absolute assurance that the outcome of any such assessments will not have an adverse effect on our consolidated results of operations in any future reporting period.

Comprehensive Income

Our comprehensive income amounted to $60.0 million for the three months ended March 31, 2007 as compared to $65.5 million for the same period last year. Comprehensive income differs from our net income as a result of changes in the amount of unrealized gains and losses on our portfolio of securities available for sale and on our derivative contracts that are accounted for as cash flow hedges and on net gains in our defined benefit pension plans. For additional information, see the Consolidated Statements of Changes in Shareholders’ Equity and Note 12 to the unaudited Consolidated Financial Statements.

Off-Balance Sheet Arrangements

We are party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers and to reduce our own exposure to fluctuations in interest rates. These financial instruments include commitments to originate loans, commitments to invest in real estate limited partnerships, standby letters of credit, recourse arrangements on serviced loans, forward commitments to sell loans, foreign currency forward contracts, interest rate swaps and other derivative contracts. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in our Consolidated Balance

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Sheets. The contract or notional amounts of those instruments reflect the extent of involvement we have in particular classes of financial instruments.

Our exposure to credit loss in the event of nonperformance by the other party to the financial instrument for loan commitments, standby letters of credit and recourse arrangements generally is represented by the contractual amount of those instruments. We use the same credit policies in making these commitments and conditional obligations as we do for on-balance sheet instruments. For forward commitments to sell loans, the contract or notional amounts do not represent exposure to credit loss.

The following table summarizes our contractual cash obligations, other commitments and derivative financial instruments at March 31, 2007.

Table 6 — Contractual Obligations and Other Commitments

			Payments Due By Period
			Less than		1 - 3		4 - 5		After 5
Contractual Obligations (1)	Total		1 Year		Years		Years		Years
Long-term debt	$	1,431,712	$	26,606	$	178,182	$	246,655	$	980,269
Capital lease obligations		6,107		444		1,336		1,656		2,671
Total long-term debt		1,437,819		27,050		179,518		248,311		982,940
Operating lease obligations		234,792		44,976		76,338		45,104		68,374
Pension plan contribution (2)		40,000		40,000		—		—		—
Other benefit plan payments — estimated		175,603		12,459		27,530		31,159		104,455
Other vendor obligations (3)		125,775		9,617		23,342		23,666		69,150
Total contractual obligations	$	2,013,989	$	134,102	$	306,728	$	348,240	$	1,224,919

(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.

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	Total		Amount of Commitment Expiration — Per Period
	Amounts		Less than		1 - 3		4 - 5		After 5
Other commitments	Committed		1 Year		Years		Years		Years
Unused portions on lines of credit	$	8,246,107	$	3,218,888	$	944,322	$	498,523	$	3,584,374
Standby letters of credit		733,917		165,731		126,062		147,555		294,569
Commercial letters of credit		62,039		38,928		17,076		3,080		2,955
Commitments to originate loans		3,094,334		1,985,963		626,581		131,336		350,454
Other commitments		232,089		22,030		4,593		3,370		202,096
Total commitments	$	12,368,486	$	5,431,540	$	1,718,634	$	783,864	$	4,434,448

	Total			Amount of Commitment Expiration — Per Period
	Amounts			Less than		1 - 3			4 - 5		After 5
Derivative Financial Instruments	Committed			1 Year		Years			Years		Years
Interest rate swaps (notional amount):
Commercial loan swap program:
Interest rate swaps with commercial borrowers (1)	$	1,778,412		$	23,535	$	214,413		$	230,420	$	1,310,044
Interest rate swaps with dealers (2)		1,778,412			23,535		214,413			230,420		1,310,044
Interest rate caps with commercial borrowers		47,812			—		24,315			3,975		19,522
Interest rate caps with dealers		47,812			—		24,315			3,975		19,522
Cross currency swap (USD) (3)		228,620			—		—			—		228,620
Total return swap (4)		20,031			20,031		—			—		—
Interest rate swaps		770,000			550,000		75,000			10,000		135,000
Interest rate floors purchased		2,000,000			—		2,000,000
Interest rate floors written		(2,000,000	)		—		(2,000,000	)		—		—
Forward commitments to sell loans		22,820			22,820		—			—		—
Foreign currency rate contracts: (5)
Forward contracts with customers		126,706			80,829		44,396			1,481		—
Forward contracts with dealers		126,706			80,829		44,396			1,481		—
Rate-locked loan commitments		12,081			12,081		—			—		—

(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

Shareholders’ equity amounted to $8.7 billion at March 31, 2007, an increase of $424 million from our $8.3 billion of shareholders’ equity at December 31, 2006. This increase was primarily attributable to our sale of $405.2 million of TD Banknorth common stock to The Toronto-Dominion Bank in connection with our acquisition of Interchange. Comprehensive income of $60.0 million also contributed to the increase. These increases were offset in part by the payment of $53.3 million of cash dividends declared on our common stock during the three months ended March 31, 2007. Dividends declared in the first quarter of 2007 and 2006 were $0.22 per share.

RISK MANAGEMENT

The primary goal of our risk management program is to determine how certain existing or emerging issues in the financial services industry affect the nature and extent of the risks faced by us. Based on a periodic self-evaluation, we determine key issues and develop plans and/or objectives to address risk. Our board of directors and management believe that there are seven applicable “risk categories,” consisting of credit, interest rate, liquidity,

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transaction, compliance, strategic and reputation risk. Each risk category is viewed from a quantity of risk perspective (high, medium or low) coupled with a quality of risk management perspective. In addition, an aggregate level of risk is assigned as a whole, as well as the direction of risk (stable, increasing or decreasing). Each risk category and the overall risk level is compared to regulatory views on a regular basis and then reported to the board with an accompanying explanation as to the existence of any differences. The risk program includes risk identification, measurement, control and monitoring.

Our board of directors establishes the overall strategic direction for TD Banknorth. It approves our overall risk policies and oversees our overall risk management process. The board has established the Audit Committee and, through TD Banknorth, NA, the Board Risk Committee, to oversee key risks. In addition, there is a management Operational Risk Committee, which is comprised of senior officers in key business lines, which identifies and monitors key operational risks. The Operational Risk Committee reports on a regular basis to the Board Risk Committee.

CREDIT RISK MANAGEMENT

General

The Board Risk Committee monitors our credit risk management. Our strategy for credit risk management includes centralized policies and uniform underwriting criteria for all loans. The strategy also includes diversification on a geographic, industry and customer level, regular credit examinations and quarterly management review of large loans and loans with a deterioration of credit quality. We maintain an internal rating system that provides a mechanism to regularly monitor the credit quality of our loan portfolio. The rating system is intended to identify and measure the credit quality of lending relationships. For consumer loans, we utilize standard credit scoring systems to assess consumer credit risks and to price consumer products accordingly. We strive to identify potential problem loans early, take any necessary charge-offs promptly and maintain adequate reserve levels for potential losses.

The following table presents the composition of our loan and lease portfolio at the dates indicated.

Table 7 — Composition of Loans and Leases

	March 31, 2007								December 31, 2006
			Percent			Percent					Percent			Percent
	Amount		of Loans			Nonperforming			Amount		of Loans			Nonperforming
Residential real estate mortgages	$	2,831,262		11	%		0.55	%	$	2,667,448		10	%		0.51	%
Commercial real estate mortgages		9,370,537		35	%		1.41	%		8,749,887		34	%		0.61	%
Commercial business loans and leases		6,927,150		26	%		0.90	%		6,534,792		26	%		0.81	%
Consumer loans and leases		7,037,943		26	%		0.16	%		7,046,638		28	%		0.17	%
Credit card receivables		441,459		2	%		—			462,736.00		2	%		—
	$	26,608,351		100	%		0.83	%	$	25,461,501		100	%		0.52	%

Our residential loans are generally secured by single-family homes (one-to-four units) and have a maximum loan-to-value ratio of 80%, unless the excess is protected by mortgage insurance.

Our commercial real estate mortgage loan portfolio consists primarily of loans secured by income-producing commercial real estate (including office and industrial buildings), service industry real estate (including hotels and health care facilities), multi-family (over four units) residential properties and retail trade real estate. These loans generally are secured by properties located in the New England states, Pennsylvania, New Jersey and New York.

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Our commercial business loans and leases, which include term loans and lines of credit, are generally made to small to medium size businesses located within our market areas. These loans are not concentrated in any particular industry, but reflect the broad-based economy of New England, New Jersey, Pennsylvania and New York. Commercial loans are primarily secured by various equipment, machinery and other corporate assets including real estate, as well as loans to provide working capital to businesses in the form of lines of credit. At March 31, 2007, commercial loans also included $342.6 million of loans to finance insurance premiums, which are offered by Flatiron, a subsidiary acquired in the Hudson acquisition. Through a subsidiary, we also offer direct equipment leases, which amounted to $140.6 million at March 31, 2007. From time to time we also purchase participations in shared national credits. At March 31, 2007, we had $862.6 million of outstanding participations in shared national credits and had an additional $826.8 million of unfunded commitments related to these participations.

Consumer loans and leases consist primarily of home equity lines and loans and indirect automobile loans.
The following table presents a breakdown of our consumer loans and leases by type at March 31, 2007 and December 31, 2006.

Table 8 — Composition of Consumer Loans and Leases

	March 31,					December 31,
	2007					2006
			% of					% of			Change
	Amount		Total			Amount		Total			Amount			Percent
Home equity loans and lines	$	4,225,929		60.05	%	$	4,181,249		59.34	%	$	44,680			1.07	%
Automobile		2,510,273		35.67	%		2,555,083		36.26	%		(44,810	)		(1.75	%)
Education		79,484		1.13	%		77,432		1.10	%		2,052			2.65	%
Mobile home		80,547		1.14	%		84,200		1.19	%		(3,653	)		(4.34	%)
Other (including leases)		141,710		2.01	%		148,674		2.11	%		(6,964	)		(4.68	%)
Total	$	7,037,943		100.00	%	$	7,046,638		100.00	%		($8,695	)		(0.12	%)

Credit card receivables represent receivables originating from the use of private label credit cards issued on behalf of approximately 100 retailers with locations throughout the United States which offer unsecured sales financing to their customers. Our relationships with the merchants are generally multi-year relationships. The relationships are developed through marketing efforts or are purchased from other financial institutions. We receive a fee from the merchants when funding a purchase. In addition, we receive interest and late fees from the individual customers that maintain balances on their private label accounts.

Nonperforming Assets

Nonperforming assets consist of nonperforming loans (which do not include accruing loans 90 days or more overdue), other real estate owned and repossessed assets. Total nonperforming assets as a percentage of total assets amounted to 0.55% at March 31, 2007, 0.33% at December 31, 2006 and 0.22% at March 31, 2006. Total nonperforming assets as a percentage of total loans and total other nonperforming assets amounted to 0.84% at March 31, 2007, 0.52% at December 31, 2006 and 0.35% at March 31, 2006. See Table 9 for a summary of nonperforming assets for the last five quarters. On a dollar basis, our nonperforming assets increased to $225.2 million at March 31, 2007 from $132.4 million at December 31, 2006 and $90.7 million at March 31, 2006. The increase at March 31, 2007 compared to December 31, 2006 was primarily due to the continued deterioration in residential real estate construction loans, particularly in the Mid-Atlantic and southern New England regions, and nonperforming assets acquired from our recent acquisitions.

The following table presents information regarding our nonperforming assets for the last five quarters.

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Table 9 — Nonperforming Assets

	2007			2006
	March 31			December 31			September 30			June 30			March 31
Nonaccrual loans and leases:
Residential real estate loans	$	16,482		$	13,607		$	9,713		$	10,714		$	9,827
Commercial real estate loans		132,541			53,345			28,520			35,439			31,192
Commercial business loans and leases		62,104			52,758			46,051			35,768			31,460
Consumer loans and leases		11,418			11,667			7,386			7,123			6,090
Total nonaccrual loans and leases		222,545			131,377			91,670			89,044			78,569
Other nonperforming assets:
Other real estate owned, net of related reserves		541			397			1,098			1,076			10,928
Repossessions, net of related reserves		2,076			617			990			1,083			1,173
Total other nonperforming assets		2,617			1,014			2,088			2,159			12,101
Total nonperforming assets	$	225,162		$	132,391		$	93,758		$	91,203		$	90,670
Accruing loans and leases 90 days or more overdue:
Credit card receivables	$	7,643		$	8,486		$	6,949		$	5,900		$	6,351
Other loans and leases		7,411			8,211			7,174			5,646			6,583
Total accruing loans and leases 90 days or more overdue	$	15,054		$	16,697		$	14,123		$	11,546		$	12,934
Total nonperforming loans as a percentage of total loans and leases(1)		0.84	%		0.52	%		0.36	%		0.34	%		0.31	%
Total nonperforming assets as a percentage of total assets		0.55	%		0.33	%		0.23	%		0.23	%		0.22	%
Total nonperforming assets as a percentage of total loans and leases (1) and total other nonperforming assets		0.85	%		0.52	%		0.36	%		0.35	%		0.35	%

(1) Total loans and leases exclude residential real estate loans held for sale.

We continue to focus on asset quality issues and to allocate significant resources to the key asset quality control functions of credit policy and administration and loan review. The collection and workout functions focus on the reduction of nonperforming assets. Despite the ongoing focus on asset quality, there can be no assurance that adverse changes in the real estate markets and economic conditions in our primary market areas will not result in higher net loan charge-offs, higher nonperforming asset levels in the future and negatively impact our operations through higher provisions for loan losses, decreased accrual of interest income and increased noninterest expenses as a result of the allocation of resources to the collection and workout of nonperforming assets, all of which would adversely affect our results of operations.

Residential real estate loans are generally placed on nonaccrual when they become 120 days past due or are in the process of foreclosure. All closed-end consumer loans 90 days or more past due, unless well secured and in the process of collection, and any equity lines of credit in the process of foreclosure are placed on nonaccrual status. Consumer loans are charged-off upon reaching 120 or 180 days past due depending on the type of loan. Credit card receivables are charged-off upon reaching 180 days past due. We generally place all commercial real estate loans and commercial business loans and leases which are 90 days or more past due on nonaccrual status, unless secured by sufficient cash or other assets immediately convertible to cash. At March 31, 2007, we had $15.1 million of accruing loans which were 90 days or more delinquent, as compared to $16.7 million at December 31, 2006 and $12.9 million at March 31, 2006. We may also place loans which are less than 90 days past due on nonaccrual (and, therefore, nonperforming) status when in our judgment these loans are likely to present future principal and/or interest repayment problems and ultimately would be classified as nonperforming.

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Net Charge-offs

Net charge-offs amounted to $19.7 million during the three months ended March 31, 2007, as compared to $6.2 million during the three months ended March 31, 2006. The increase was largely due to a $10.6 million increase in net charge-offs on commercial loans and a $2.6 million increase in net charge-offs on credit card receivables compared to the first quarter of 2006. The commercial loan charge-offs were largely attributable to a few credits in the Mid-Atlantic and southern New England regions.

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The following table presents net charge-offs by loan type and the activity in the allowance for credit losses during the periods indicated.

Table 10 — Allowance for Credit Losses

	2007 First			2006 Fourth			2006 Third			2006 Second			2006 First
	Quarter			Quarter			Quarter			Quarter			Quarter
Allowance for loan and lease losses at beginning of period	$	279,638		$	278,568		$	276,361		$	276,342		$	223,030
Additions due to acquisitions		11,439			—			—			—			52,563
Charge-offs:
Residential real estate mortgages		86			75			—			42			128
Commercial real estate mortgages		2,734			467			1,251			447			95
Commercial business loans and leases		9,364			6,317			3,124			3,328			1,583
Consumer loans and leases		7,669			7,527			7,712			5,647			7,081
Credit card receivables		6,138			5,040			4,288			4,386			3,305
Total loans and leases charged off		25,991			19,426			16,375			13,850			12,192
Recoveries:
Residential real estate mortgages		103			22			137			105			17
Commercial real estate mortgages		251			373			270			564			101
Commercial business loans and leases		2,862			1,965			1,351			1,227			3,167
Consumer loans and leases		2,192			1,870			2,185			2,243			2,096
Credit card receivables		915			1,066			885			1,011			660
Total loans and leases recovered		6,323			5,296			4,828			5,150			6,041
Net charge-offs		19,668			14,130			11,547			8,700			6,151
Provision for loan and lease losses		30,000			15,200			13,754			8,719			6,900
Allowance for loan and lease losses at end of period	$	301,409		$	279,638		$	278,568		$	276,361		$	276,342
Total Allowance for Credit Losses:
Allowance for loan and lease losses	$	301,409		$	279,638		$	278,568		$	276,361		$	276,342
Liability for unfunded credit commitments		10,927			9,107			8,807			8,507			8,207
Total allowance for credit losses	$	312,336		$	288,745		$	287,375		$	284,868		$	284,549
Ratio of net charge-offs to average loans and leases outstanding during the period, annualized (1)		0.30	%		0.22	%		0.18	%		0.14	%		0.10	%
Ratio of allowance for credit losses to total loans and leases at end of period (1)		1.17	%		1.13	%		1.12	%		1.10	%		1.11	%
Ratio of allowance for credit losses to nonperforming loans and leases at end of period		140	%		220	%		313	%		320	%		362	%
Ratio of net charge-offs (recoveries) as a percent of average outstanding loans and leases, annualized (1):
Residential real estate mortgages		(0.002	%)		0.008	%		(0.019	%)		(0.009	%)		0.016	%
Commercial real estate mortgages		0.106	%		0.004	%		0.044	%		(0.005	%)		0.000	%
Commercial business loans and leases		0.390	%		0.266	%		0.108	%		0.131	%		(0.112	%)
Consumer loans and leases		0.312	%		0.316	%		0.306	%		0.190	%		0.293	%
Credit card receivables		4.807	%		3.576	%		3.119	%		3.358	%		4.409	%
Total portfolio loans and leases at end of period (1)	$	26,608,351		$	25,461,501		$	25,729,950		$	25,822,787		$	25,620,512
Total nonperforming loans and leases at end of period		222,545			131,377			91,670			89,044			78,569
Average loans and leases outstanding during the period (1)		26,562,636			25,618,565			25,777,617			25,702,904			23,770,023

(1) Excludes residential real estate loans held for sale.

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Potential Problem Loans

In addition to the nonperforming loans discussed under “Credit Risk Management” above, we also have loans that are 30 to 89 days delinquent and still accruing. These loans amounted to $318 million at March 31, 2007 and $302 million at December 31, 2006. These loans and related delinquency trends are considered in the evaluation of the allowance for loan and lease losses and the determination of the provision for loan and lease losses.

Analysis and Determination of the Allowance for Loan and Lease Losses

The allowance for loan and lease losses is maintained at a level determined to be adequate by us to cover potential charge-offs on loans and leases deemed uncollectible based on continuous review of a variety of factors. This allowance is increased by provisions charged to income and by recoveries on loans previously charged off. For purposes of determining our allowance for loan and lease losses, we specifically evaluate each commercial business and commercial real estate loan which is rated substandard and has a balance in excess of $300 thousand. We evaluate all other loans by loan type on a pooled basis.

Arriving at an appropriate level of allowance for loan and lease losses necessarily involves a high degree of judgment and is determined based on our ongoing evaluation. As discussed under “Critical Accounting Policies,” we believe that the methods used by us in determining the allowance for loan and lease losses constitute a critical accounting policy. Although we utilize judgment in providing for losses, for the reasons discussed under “Critical Accounting Policies” and “Credit Risk Management – Nonperforming Assets,” there can be no assurance that we will not have to increase the amount of our provision for loan and lease losses in future periods.

The allowance for loan and lease losses amounted to $301.4 million at March 31, 2007 and $279.6 million at December 31, 2006. The $21.8 million increase was attributable to $11.4 million of general reserves from Interchange and the provision of $30.0 million for loan and lease losses in the three months ended March 31, 2007. Net charge-offs represented 0.30% of average loans and leases outstanding for the quarter ended March 31, 2007 and 0.10% for the same period in 2006. The ratio of the allowance for credit losses to nonperforming loans and leases was 141% at March 31, 2007 and 220% at December 31, 2006. The ratio of the allowance for credit losses to total portfolio loans and leases was 1.17% at March 31, 2007 compared to 1.13% at December 31, 2006.

Derivative Instruments

Purpose and Benefits

Derivative financial instruments are important tools that we use to manage interest rate risk and, to a lesser degree, currency risk and price risk.

The following table shows our derivative positions at March 31, 2007 scheduled by maturity.

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Table 11 — Derivative Positions
Asset-Liability Management Positions

	Notional Amount Maturing														Fair
March 31, 2007	2007		2008		2009			2010		Thereafter		Total			Value
Cross currency swap agreement	$	—	$	—	$	—		$	—	$	228,620	$	228,620		$	8,849
Total return swap		—		20,031		—			—		—		20,031			3,314
Interest rate swaps		550,000		45,000		30,000			—		145,000		770,000			(3,835	)
Interest rate floors with commercial brokers						2,000,000							2,000,000			2,654
Interest rate floors with The Toronto-Dominion Bank		—		—		(2,000,000	)		—		—		(2,000,000	)		(2,654	)
Forward commitments to sell loans		22,820		—		—			—		—		22,820			—

Customer-related Positions

	Notional Amount Maturing												Fair
March 31, 2007	2007		2008		2009		2010		Thereafter		Total		Value
Interest rate contracts
Receive fixed, pay variable	$	11,905	$	88,540	$	127,779	$	117,522	$	1,480,479	$	1,826,225	$	11,087
Pay fixed, receive variable		11,905		88,540		127,779		117,522		1,480,479		1,826,225		(11,087	)
Foreign currency rate contracts
Forward contracts with customers		66,613		51,119		7,123		1,851		—		126,706		1,762
Forward contracts with dealers		66,613		51,119		7,123		1,851		—		126,706		(1,762	)
Rate-locked loan commitments (1)		12,081		—		—		—		—		12,081		4

(1) No value has been assigned to potential mortagage servicing rights related to rate-locked loan commitments.

Customer-related Positions

Interest rate derivatives, primarily interest-rate swaps, offered to commercial borrowers through our hedging program are designated as speculative under SFAS No. 133. However, we believe that our exposure to commercial customer derivatives is limited because these contracts are simultaneously matched at inception with an identical dealer transaction. The commercial customer hedging program allows us to retain variable-rate commercial loans while allowing the customer to synthetically fix the loan rate by entering into a variable-to-fixed interest rate swap. For the quarter ended March 31, 2007, we recorded a total notional amount of $223.3 million of interest rate swap agreements with commercial borrowers and an equal notional amount of dealer transactions.It is anticipated that over time customer interest rate derivatives will reduce the interest rate risk inherent in our longer-term, fixed-rate commercial business and real estate loans. The customer-related positions summarized in Table 11 include both the customer and offsetting dealer transactions.

Foreign Exchange or Market Risk

Our earnings are not directly nor materially impacted by movements in foreign currency rates or commodity prices. Virtually all transactions are denominated in the U.S. dollar. Movements in equity prices may have an indirect but modest impact on earnings by affecting the volume of activity or the amount of fees from investment-related businesses.

We enter into foreign currency forward and option contracts as an accommodation for customers involved in international trade for the future delivery or purchase of foreign currency at a specified price. For these creditworthy customers, we set aside a percentage of the customer’s available line of credit until the foreign currency contract is settled. All foreign exchange services and some aspects of trade services are provided under a private label arrangement with a correspondent bank. Risks arise from the possible inability of the seller and/or our customer to

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perform and from any resultant exposure to movement in foreign currency exchange rates, limiting our exposure to the replacement value of the contracts rather than the notional principal or contract amounts.

CAPITAL

We are committed to managing capital for shareholder benefit and maintaining protection for deposits and creditors. At March 31, 2007, shareholders’ equity amounted to $8.7 billion, or 21.22% of total assets, compared to $8.3 billion, or 20.72% of total assets at December 31, 2006.

Capital guidelines issued by the Federal Reserve Board and the OCC, respectively, require us and our banking subsidiary to maintain certain capital ratios, set forth below. At March 31, 2007, TD Banknorth Inc. and TD Banknorth, NA were deemed to be “well capitalized” under the regulations of the Federal Reserve Board and the OCC, respectively, and in compliance with applicable capital requirements.

Table 12 — Capital Ratios

	Actual					Capital Requirements					Excess
	Amount		Ratio			Amount		Ratio			Amount		Ratio
March 31, 2007
TD Banknorth Inc.
Total capital (to risk-weighted assets)	$	3,409,672		11.53	%	$	2,365,148		8.00	%	$	1,044,524		3.53	%
Tier 1 capital (to risk-weighted assets)		2,469,530		8.35	%		1,182,574		4.00	%		1,286,956		4.35	%
Tier 1 leverage capital ratio (to average assets)		2,469,530		7.17	%		1,376,969		4.00	%		1,092,561		3.17	%
TD Banknorth, NA
Total capital (to risk-weighted assets)		3,414,641		11.57	%		2,361,882		8.00	%		1,052,759		3.57	%
Tier 1 capital (to risk-weighted assets)		2,473,609		8.38	%		1,180,941		4.00	%		1,292,668		4.38	%
Tier 1 leverage capital ratio (to average assets)		2,473,609		7.20	%		1,374,535		4.00	%		1,099,074		3.20	%
December 31, 2006
TD Banknorth Inc.
Total capital (to risk-weighted assets)	$	3,307,963		11.64	%	$	2,273,913		8.00	%	$	1,034,050		3.64	%
Tier 1 capital (to risk-weighted assets)		2,395,074		8.43	%		1,136,957		4.00	%		1,258,117		4.43	%
Tier 1 leverage capital ratio (to average assets)		2,395,074		7.20	%		1,330,640		4.00	%		1,064,434		3.20	%
TD Banknorth, NA
Total capital (to risk-weighted assets)		3,338,918		11.79	%		2,266,276		8.00	%		1,072,642		3.79	%
Tier 1 capital (to risk-weighted assets)		2,433,607		8.59	%		1,133,138		4.00	%		1,300,469		4.59	%
Tier 1 leverage capital ratio (to average assets)		2,433,607		7.33	%		1,327,835		4.00	%		1,105,772		3.33	%

Net risk-weighted assets were $29.5 billion for each of TD Banknorth Inc. and TD Banknorth, NA at March 31, 2007 and $28.4 billion for TD Banknorth Inc. and $28.3 billion for TD Banknorth, NA at December 31, 2006, respectively.

On November 2, 2006, the Federal Deposit Insurance Corporation (“FDIC”) adopted final regulations to implement the Federal Deposit Insurance Reform Act of 2005 (the “Reform Act”) passed by Congress earlier this year to create a stronger and more stable insurance system. The final regulation includes the annual assessment rates that will take effect at the beginning of 2007. The new assessment rates for nearly all banks will vary between five and seven cents for every $100 of domestic deposits. Applied to TD Banknorth’s assessment base of approximately $30 billion, this translates to an annual deposit premium estimated to be between $15 million and $21 million. Most banks, including TD Banknorth, have not been required to pay any deposit insurance premiums since 1995. As part of the Reform Act, Congress provided credits to institutions that paid high premiums in the past to bolster the

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FDIC’s insurance reserves. As a result, according to the FDIC, the majority of banks will have assessment credits to initially offset all of their premiums in 2007. The preliminary assessment credit for TD Banknorth was calculated at $31 million. This amount will be recognized only to the extent the credit is used to reduce future deposit premiums that would otherwise be due. Accordingly, we expect the reinstitution of deposit premiums by the FDIC will not have a material effect on our financial condition, results of operations or cash flows until 2008 or 2009.

CRITICAL ACCOUNTING POLICIES

Our accounting and reporting policies comply with accounting principles generally accepted in the United States of America and conform to general practices within the banking industry. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. The financial position and results of operations can be affected by these estimates and assumptions, which are integral to understanding reported results. Management has discussed the development and the selection of critical accounting policies with the Audit Committee of our board of directors. We have not changed our critical accounting policies from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2006, except for the adoption of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”). As discussed in our 2006 Annual Report on Form 10-K, we have identified the following critical accounting policies: allowance for loan and lease losses, accounting for acquisitions and review of related goodwill and other intangible assets, accounting for pension plans, accrued income taxes and accounting for derivatives and hedging activities. We consider these policies as our critical accounting policies due to the potential impact on our results of operations and the carrying value of certain of our assets based on any changes in judgments and assumptions required to be made by us in the application of these policies.

IMPACT OF NEW ACCOUNTING STANDARDS

For information on the impact of new accounting standards, see Note 2 to the unaudited Consolidated Financial Statements.

FORWARD LOOKING STATEMENTS

Certain statements contained herein are not based on historical facts and are “forward-looking statements”. Forward-looking statements, which are based on various assumptions (some of which are beyond our control), may be identified by reference to a future period or periods, or by the use of forward-looking terminology, such as “may,” “will,” “believe,” “expect,” “estimate,” “anticipate,” “continue” or similar terms or variations on those terms or the negative of those terms. 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, accounting and technological factors affecting our operations. In addition, acquisitions may result in large one-time charges to income, may not produce revenue enhancements or cost savings at levels or within time frames originally anticipated and may result in unforeseen integration difficulties. We do not undertake, and specifically disclaim any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Omitted pursuant to General Instruction H(2)(c) of Form 10-Q.

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Item 4. Controls and Procedures

Our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and regulations and are operating in an effective manner.

In the ordinary course of business, we routinely enhance our internal controls and procedures for financial reporting by either upgrading our current systems or implementing new systems. Changes have been made and will be made to our internal controls and procedures for financial reporting as a result of these efforts. No change in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Securities Exchange Act of 1934) occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 4T. Controls and Procedures

Not applicable.

Part II — Other Information

Item 1. Legal Proceedings

Ordinary Course Litigation: In the ordinary course of business, TD Banknorth and its subsidiaries are routinely defendants in or parties to a number of pending and threatened legal actions, including actions brought on behalf of various putative classes of claimants. Certain of these actions assert claims for substantial monetary damages against TD Banknorth and its subsidiaries. Based on currently available information, advice of counsel, available insurance coverage and established reserves, management does not believe that the eventual outcome of pending litigation against TD Banknorth and its subsidiaries will have a material adverse effect on the consolidated financial position, liquidity or results of operations of TD Banknorth. In view of the inherent difficulty of predicting such matters, however, there can be no assurance that the outcome of any such action will not have a material adverse effect on TD Banknorth’s consolidated results of operations in any future reporting period.

Shareholder Litigation regarding Going-Private Transaction: On November 20, 2006, the day the merger agreement between TD Banknorth and The Toronto-Dominion Bank was announced, five complaints were filed in the Delaware Court of Chancery against TD Banknorth, TD Banknorth’s Board of Directors (the “Board”), and with the exception of one complaint, The Toronto-Dominion Bank. A sixth complaint was filed on November 21, 2006

One week later, two complaints were filed in the Supreme Court of New York on November 28 and 30, 2006, respectively.

Finally, an action was filed on December 8, 2006 in Superior Court of the State of Maine. All nine complaints are putative class actions filed on behalf of TD Banknorth’s former public stockholders, which sought to enjoin the recently completed transaction or collect damages on the grounds that disclosure has been inadequate and that the consideration offered by The Toronto-Dominion Bank is inadequate. They all allege that TD Banknorth’s directors and its majority shareholder, The Toronto-Dominion Bank, have breached fiduciary duties to the public shareholders by allowing The Toronto-Dominion Bank to exert undue control over TD Banknorth within the merger process.

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In an order issued on November 29, 2006, the Delaware Court of Chancery approved the Delaware plaintiffs’ motion to consolidate the six Delaware cases into one comprehensive action within that court. On or about February 21, 2007, the parties to the consolidated actionIn re TD Banknorth Shareholders Litigation., entered into a memorandum of understanding providing for the settlement of the six lawsuits comprising this consolidated action, without admission of any wrongdoing by any of the defendants. The memorandum of understanding provides for, among other things, the establishment by The Toronto-Dominion Bank of a settlement fund for the benefit of public TD Banknorth stockholders in an aggregate amount of approximately $2.95 million. While TD Banknorth and The Toronto-Dominion Bank believe that these lawsuits are without merit, they sought a settlement in order to avoid the burdens and expense of further litigation. Notice is being provided to all qualified stockholders of a “fairness hearing” in the Delaware Chancery Court for Newcastle County to be held on the proposed settlement on June 27, 2007. Voluntary stays of the New York and Maine actions have been filed with the respective courts.

Item 1A. Risk Factors.

In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Item 1A of Part I in our Annual Report on Form 10-K for the year ended December 31, 2006, which could materially affect our business, financial condition or results of operations. As of March 31, 2007, there have been no material changes to the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2006.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

     (a) – (b) Not applicable.

     (c) There were no purchases made by TD Banknorth or any “affiliated purchaser,” as defined in §240.10b-18(a)(3) under the Securities Exchange Act of 1934, other than The Toronto-Dominion Bank, of shares of TD Banknorth common stock during the three months ended March 31, 2007.

          The following table presents the number of shares of TD Banknorth common stock purchased by our majority shareholder, The Toronto-Dominion Bank. During the three months ended March 31, 2007, 13 million shares were purchased from us at $31.17 per share in connection with our acquisition of Interchange and the remainder of which were purchased pursuant to our former dividend reinvestment program.

					Total Number of
					Shares Purchased as		Maximum Number of
	Total Number		Average		Part of Publicly		Shares that May Yet Be
	of Shares		Price Paid		Announced Plans or		Purchased Under the
Period	Purchased		Per Share		Programs		Plans or Programs (1)
January 1 — 31, 2007		13,000,000	$	31.17		—		—
February 1 — 28, 2007		933,106	$	32.24		—		—
March 1 — 31, 2007		—	$	0.00		—		—

Item 3. Default Upon Senior Securities.

          Omitted pursuant to General Instruction H(2)(b) of Form 10-Q.

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Item 4. Submission of Matters to a Vote of Security Holders.

(a)	A special meeting of shareholder of TD Banknorth was held on April 18, 2007 (“Special Meeting”).
(b)	Not applicable.
(c)	There were 242,419,587 shares of TD Banknorth common stock eligible to be voted at the Special Meeting and 213,989,200 shares were represented, in person or by proxy, at the meeting, which constituted a quorum. The only item voted upon at the Special Meeting was the proposal to approve the Agreement and Plan of Merger, dated as of November 19, 2006, among TD Banknorth Inc., The Toronto-Dominion Bank and Bonn Merger Co. The vote was as follows:

	For		Against		Abstain		Broker-Non-votes
All shareholders		210,052,626		3,561,429		375,145	none
Shareholders unaffiliated with The Toronto-Dominion Bank		65,158,616		3,561,429		375,145	none

Item 5. Other Information.

          Not applicable.

Item 6. Exhibits.

          The following exhibits are filed as part of this report.

Exhibit 12	Calculation of Ratios of Earnings to Fixed Charges
Exhibit 31.1	Certification of Chief Executive Officer under Rules 13a-14 and 15d-14.
Exhibit 31.2	Certification of Chief Financial Officer under Rules 13a-14 and 15d-14.
Exhibit 32.1	Certification of Chief Executive Officer under 18 U.S.C. § 1350.
Exhibit 32.2	Certification of Chief Financial Officer under 18 U.S.C. § 1350.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	TD BANKNORTH INC.
Date: May 8, 2007	By:	/s/ Bharat B. Masrani
		Bharat B. Masrani
		President and Chief Executive Officer (principal executive officer)
Date: May 8, 2007	By:	/s/ Stephen J. Boyle
		Stephen J. Boyle
		Executive Vice President and Chief Financial Officer (principal financial and accounting officer)

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EXHIBIT INDEX

Exhibit 12	Calculation of Ratios of Earnings to Fixed Charges
Exhibit 31.1	Certification of Chief Executive Officer under Rules 13a-14 and 15d-14.
Exhibit 31.2	Certification of Chief Financial Officer under Rules 13a-14 and 15d-14.
Exhibit 32.1	Certification of Chief Executive Officer under 18 U.S.C. § 1350.
Exhibit 32.2	Certification of Chief Financial Officer under 18 U.S.C. § 1350.

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