TD Bank Group Newsroom
TD Banknorth Reports First Quarter Results
An investor call to discuss the completion of the privatization of TD Banknorth on April 20, 2007 as well as the expected earnings impact, will be webcast live via TDBFG's website at 11:00 a.m. ET today, May 7, 2007. Presentation material referenced during the call will be available on TDBFG's Investor Relations website at www.td.com/investor/earnings.jsp by 11:00 a.m. ET. A listen-only telephone line is available at 416-644-3417 or toll free at 1-800-732-9307. First Quarter Adjustments (Items of Note)(1) The following items of note (net of tax) are included in the Company's reported GAAP earnings for the first quarter of 2007. All comparisons are between the first quarter of 2007 and the first quarter of 2006. -- Amortization of identifiable intangible assets of $22.4 million as compared to $22.9 million for the first quarter of 2006. -- Merger and restructuring charges of $20.9 million as compared to $14.9 million for the first quarter of 2006. -- $520,000 impact to the discontinued operations associated with certain subsidiaries engaged in energy operations acquired from Hudson United as compared to $1.3 million impact for the first quarter of 2006. PORTLAND, MAINE, May 7 /CNW/ - TD Banknorth Inc. ("TD Banknorth" or the "Company"), a wholly-owned subsidiary of TD Bank (NYSE:TD), today reported net income of $55.2 million for the quarter ended March 31, 2007 as compared to $76.2 million for the quarter ended March 31, 2006. Adjusted earnings (reported GAAP earnings excluding the items of note listed above) were $99.0 million for the first quarter of 2007 as compared to $115.6 million for the first quarter of 2006. "The operating environment continues to be challenging for U.S. banks, with intense competition for loans and deposits," said Bharat B. Masrani, TD Banknorth President and Chief Executive Officer. "At the same time, we remain focused on our strategy of organically growing our loans, deposits and fee income while managing expenses closely." Earnings for the first quarter of 2007 were impacted by a number of events including $20.9 million in after-tax restructuring charges associated with the acquisition of Interchange Financial Services Corporation ("Interchange") and expense reduction initiatives previously announced on March 23, 2007; a $5.3 million after-tax contribution to the TD Banknorth Charitable Foundation to support the ongoing work of the Foundation; and an increase in the Company's provision for credit losses. Interchange Acquisition TD Banknorth completed the acquisition of Interchange Financial Services Corporation, Saddle Brook, New Jersey, on January 1, 2007. The Company issued 13 million shares to TD Bank Financial Group at a price of $31.17 per share to fund the transaction. Average Loans and Leases Year-over-year comparison Average loans and leases for the quarter increased 12% from the prior year to $26.6 billion, due primarily to the timing of the acquisitions of Hudson United Bancorp and Interchange. Prior quarter comparison Average loans and leases for the quarter increased 4% from the prior quarter from $25.6 billion, due primarily to the acquisition of Interchange. Excluding the effects of acquisitions, average commercial business loans and leases, commercial real estate mortgages and consumer loans and leases (including credit cards) for the quarter declined by 1.0% from the prior quarter, reflecting the competition for high-quality commercial and consumer loans. Average Deposits Year-over-year comparison Average deposits for the quarter increased by 16% from the prior year to $28.4 billion, due primarily to the timing of acquisitions of Hudson United and Interchange. Prior quarter comparison Average deposits for the quarter increased by $1.1 billion, or 4%, from the prior quarter, due primarily to the acquisition of Interchange. On a linked quarter basis, excluding the effects of acquisitions, average deposits for the quarter were essentially flat compared to the prior quarter due to seasonality and competition for deposits in the Company's market area. In response to the competitive deposit environment, the Company successfully introduced a high-yield money market account late in the first quarter which has allowed the Company to attract new deposits while at the same time reducing the outflow of deposits by consumers searching for higher yields. Net Interest Income Year-over-year comparison Net interest income was $296.4 million for the quarter, an increase of $13.9 million or 5%, as compared to the prior year reflecting the acquisitions of Hudson United and Interchange. Prior quarter comparison Net interest income for the quarter increased $1.3 million from the prior quarter. Interest and dividend income increased 2% to $515.2 million in the first quarter while interest expense increased 5% to $218.8 million, reflecting higher interest costs associated with the Company's deposits. Net Interest Margin Year-over-year comparison The Company's net interest margin for the quarter was 3.89% as compared to 3.83% for the prior year. Prior quarter comparison The Company's net interest margin for the quarter declined 6 basis points from 3.95% in the prior quarter. The decline in net interest margin was due to higher rates paid on interest bearing deposits reflecting the competitive deposit environment. Provision for Credit Losses Year-over-year comparison During the quarter, the Company recorded a provision for credit losses of $31.8 million as compared to $7.2 million for the prior year. Prior quarter comparison The Company's provision for credit losses increased $16.3 million from the prior quarter. The increase was related to an increase in nonperforming assets associated with commercial real estate mortgages of $79.2 million due primarily to the slowdown in the housing industry in the U.S. and to an increase in total net chargeoffs of $5.5 million during the quarter. Noninterest Income Year-over-year comparison Noninterest income for the quarter increased 13% to $133.5 million as compared to the prior year due primarily to the timing of the acquisitions of Hudson United and Interchange. Prior quarter comparison Noninterest income for the quarter increased $4.7 million from the prior quarter largely due to a similar increase in insurance brokerage commissions. Noninterest Expense Year-over-year comparison Adjusted noninterest expense for the quarter increased 14% to $250.7 million from the prior year. Prior quarter comparison Adjusted noninterest expense for the quarter increased $13.5 million as compared to the prior quarter largely due to an increase in merger and restructuring charges of $19.4 million associated with the acquisition of Interchange and expense reduction initiatives previously announced on March 23, 2007 and to an $8.0 million contribution to the TD Banknorth Charitable Foundation. The Company continues to manage expenses closely. Adjusted noninterest expense, excluding the contribution to the Charitable Foundation and personnel-related expenses associated with Interchange, was essentially flat from the prior quarter. Subsequent Events Following The Close of the First Quarter TD Banknorth announced that Peter J. Verrill, Vice Chairman and Chief Operating Officer, is retiring effective June 30, 2007. TD Banknorth's shareholders approved the going-private transaction with TD Bank Financial Group on April 18, 2007 and the transaction closed on April 20, 2007. During the month of April, the Board of Directors approved two additional restructuring charges related to human resources, real estate, privatization, Interchange/Hudson, and technology. Taken together, the Company expects to record a restructuring charge of approximately $27.0 million, after-tax, in the quarter ending June 30, 2007. About TD Banknorth Inc. TD Banknorth Inc. is a leading banking and financial services company headquartered in Portland, Maine and a wholly-owned subsidiary of TD Bank headquartered in Toronto, Canada. TD Banknorth is one of the 25 largest commercial banking organizations in the United States, with over $40 billion in assets. TD Banknorth's banking subsidiary, TD Banknorth, N.A., operates banking divisions in Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania and Vermont. TD Banknorth and TD Banknorth, N.A. also operate subsidiaries and divisions in insurance, wealth management, merchant services, mortgage banking, government banking, private label credit cards, insurance premium financing and other financial services and offers investment products in association with PrimeVest Financial Services, Inc. For more information, visit http://www.TDBanknorth.com. NOTES: This news release contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The Company's management uses these non-GAAP measures in its analysis of the Company's performance. The Company arrives at these measures, indicated by the use of the term "adjusted," by removing "items of note" from the reported GAAP measure. The items of note excluded from adjusted measures are described at the outset of this release, and a reconciliation of these non-GAAP measures to the most comparable GAAP measure can be found in the financial tables in the back of this release. The items of note relate to items which management does not believe are indicative of underlying business performance, and typically are the effects of charges and expenses related to the consummation of mergers and acquisitions and costs related to the integration of merged entities, as well as the amortization of intangible assets. Items of note may also be other significant gains or losses that are unusual in nature, such as securities gains or losses and prepayment penalties incurred in connection with deleveraging strategies. Because these items and their impact on the Company's performance are difficult to predict, management believes that presentations of adjusted financial measures excluding the impact of these items of note provide useful supplemental information that is essential to a proper understanding of the operating results of the Company. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies. This press release contains forward-looking statements with respect to the financial condition, results of operations and business of TD Banknorth. Words such as "expect", "feel", "believe", "will", "may", "anticipate", "plan", "estimate", "intend", "should" and similar expressions are intended to identify forward-looking statements. Forward-looking statements are subject to various factors which could cause actual results to differ materially from these estimates. These factors include, but are not limited to, changes in general economic conditions, interest rates, deposit flows, loan demand, competition, legislation or regulation and accounting principles, policies or guidelines, as well as other economic, competitive, governmental, regulatory and accounting and technological factors affecting TD Banknorth's operations. In addition, acquisitions may result in large one-time charges to income, may not produce revenue enhancements or synergies at levels or within time frames originally anticipated and may result in unforeseen integration difficulties. Investors are encouraged to access TD Banknorth's periodic reports filed with the Securities and Exchange Commission for financial and business information regarding TD Banknorth, including information which could affect TD Banknorth's forward-looking statements. TD Banknorth does not undertake any obligation to update these forward-looking statements to reflect events or circumstances that may occur after the date on which such statements were made. (1) All references in this release to "adjusted" results reflect the exclusion of the impact of these items of note. For a detailed explanation of the use of non-GAAP financial measures, please see the "Notes" section of this release, and for a reconciliation of adjusted financial measures to the most comparable reported GAAP financial measures, please see the reconciliation table in the financial tables which accompany this release. Results for the quarter ended March 31, 2006 include the acquisition of Hudson United Bancorp ("Hudson United") on January 31, 2006 and results for the quarter ended March 31, 2007 include the acquisition of Interchange Financial Services Corporation ("Interchange") on January 1, 2007. << TD Banknorth Inc. and Subsidiaries ---------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS (Unaudited) March 31, December 31, % (In thousands) 2007 2006 Change ------------ ------------ ------ Assets Cash and due from banks $789,936 $906,553 -13% Federal funds sold, securities purchased under agreements to resell, and other short term investments 2,427,788 2,260,794 7% Securities available for sale 2,198,953 2,505,888 -12% Securities held to maturity 45,327 48,457 -6% Loans and leases held for sale 26,037 19,112 36% Loans and leases: Residential real estate mortgages 2,831,262 2,667,448 6% Commercial real estate mortgages 9,370,537 8,749,887 7% Commercial business loans and leases 6,927,150 6,534,792 6% Consumer loans and leases, exc credit cards 7,037,943 7,046,638 0% Credit card receivables 441,459 462,736 -5% ------------ ------------ Total loans and leases 26,608,351 25,461,501 5% Less: Allowance for loan and lease losses 301,409 279,638 8% ------------ ------------ Loans and leases, net 26,306,942 25,181,863 4% Premises and equipment 500,888 486,143 3% Goodwill 6,378,992 6,022,534 6% Identifiable intangible assets 736,455 727,596 1% Bank-owned life insurance 828,691 791,489 5% Other assets 988,942 1,208,656 -18% ------------ ------------ Total Assets $41,228,951 $40,159,085 3% ------------ ------------ -------------------------------------------------- ------------------- Liabilities & Shareholders' Equity Deposits: Regular savings $3,703,857 $3,685,872 0% Retail money market and NOW accounts 11,002,519 9,654,755 14% Retail certificates of deposit 7,859,196 7,393,218 6% Brokered deposits 225,292 227,545 -1% Other interest bearing deposits 192,317 153,237 26% Noninterest bearing deposits 5,899,960 5,890,139 0% ------------ ------------ Total deposits 28,883,141 27,004,766 7% Borrowings from the Federal Home Loan Bank 67,306 68,610 -2% Federal funds purchased and securities sold under repurchase agreements 1,590,160 2,217,007 -28% Subordinated debt and senior notes 820,989 821,284 0% Other borrowings 6,280 22,802 -72% Junior subordinated debentures 534,781 517,390 3% Deferred tax liability related to other identifiable intangible assets 288,617 286,069 1% Other liabilities 290,227 899,112 -68% ------------ ------------ Total liabilities 32,481,501 31,837,040 2% ------------ ------------ Shareholders' equity 8,747,450 8,322,045 5% ------------ ------------ Total Liabilities and Shareholders' Equity $41,228,951 $40,159,085 3% ------------ ------------ ---------------------------------------------------------------------- NM - Calculated % change is not meaningful. >> << TD Banknorth Inc. and Subsidiaries ---------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (In thousands, except per share data) Three Three months months ended ended March March % 31, 31, Change 2007 2006 --------- --------- ------- Interest and dividend income $515,214 $456,499 13% Interest expense 218,822 174,055 26% --------- --------- Net interest income 296,392 282,444 5% Noninterest income: Deposit services 44,867 38,479 17% Insurance brokerage commissions 16,869 15,839 7% Merchant and electronic banking income, net 16,376 15,636 5% Wealth management services 11,380 11,348 0% Loan fee income 16,920 12,392 37% Bank-owned life insurance 8,839 7,288 21% Investment planning services 5,042 5,142 -2% Net securities gains/(losses) 92 (90) -202% Other noninterest income 13,134 11,805 11% --------- --------- Total noninterest income 133,519 117,839 13% --------- --------- --------- --------- Total Revenue 429,911 400,283 7% --------- --------- Provision for loan and lease losses 30,000 6,900 335% Noninterest expense: Salaries and employee benefits 137,044 125,210 9% Occupancy and equipment 45,336 39,180 16% Data processing 15,606 15,233 2% Advertising and marketing 7,328 8,191 -11% Amortization of identifiable intangible assets 36,781 37,666 -2% Merger and restructuring charges 30,594 19,818 232% Other noninterest expense 45,348 31,738 43% --------- --------- Total noninterest expense 318,037 277,036 15% --------- --------- Income before income tax expense 81,874 116,347 -30% Income tax expense 26,186 38,799 -33% --------- --------- Net income from continuing operations 55,688 77,548 -28% Income (loss) from discontinued operations, net of tax (520) (1,342) -139% --------- --------- Net income $55,168 $76,206 -28% --------- --------- NM - calculated % change is not meaningful >> << TD Banknorth Inc. and Subsidiaries ---------------------------------------------------------------------- Asset Quality (unaudited) (Dollars in thousands) 3/31/2007 12/31/2006 9/30/2006 6/30/2006 3/31/2006 ---------- ----------- ---------- ---------- ---------- Nonperforming assets: Residential real estate mortgages $16,482 $13,607 $9,713 $10,714 $9,827 Commercial real estate mortgages 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 non- performing loans and leases 222,545 131,377 91,670 89,044 78,569 Other non- performing assets, net 2,617 1,014 2,088 2,159 12,101 ---------- ----------- ---------- ---------- ---------- Total non- performing assets $225,162 $132,391 $93,758 $91,203 $90,670 ---------- ----------- ---------- ---------- ---------- Accruing loans which are 90 days overdue $15,054 $16,697 $14,123 $11,546 $12,934 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 ---------- ----------- ---------- ---------- ---------- Net loan charge- offs (recoveries): Residential real estate mortgages ($17) $53 ($137) ($63) $111 Commercial real estate mortgages 2,483 94 981 (117) (6) -------------------------------------------- ---------- Total real estate mortgages 2,466 147 844 (180) 105 Commercial business loans and leases 6,502 4,352 1,773 2,101 (1,584) Consumer loans and leases excl credit cards 5,477 5,657 5,527 3,404 4,985 Credit card receiv- ables 5,223 3,974 3,403 3,375 2,645 ---------- ----------- ---------- ---------- ---------- Total net charge-offs $19,668 $14,130 $11,547 $8,700 $6,151 ---------- ----------- ---------- ---------- ---------- Provision for credit losses: Provision for loan and lease losses $30,000 $15,200 $13,754 $8,719 $6,900 Provision for off balance sheet commitments (1) 1,800 300 300 300 300 ---------- ----------- ---------- ---------- ---------- Total provision for credit losses $31,800 $15,500 $14,054 $9,019 $7,200 ---------- ----------- ---------- ---------- ---------- Ratios: Allowance for credit losses to total loans and leases 1.17% 1.13% 1.12% 1.10% 1.11% Allowance for credit losses to non- performing loans 140.35% 219.78% 313.49% 319.91% 362.16% Nonperforming loans to total loans and leases 0.84% 0.52% 0.36% 0.34% 0.31% Nonperforming assets to total assets 0.55% 0.33% 0.23% 0.23% 0.22% Net charge- offs to average loans, annualized (2) 0.30% 0.22% 0.18% 0.14% 0.10% ---------------------------------------------------------------------- (1) Included in other noninterest expense (2) Excludes residential real estate loans held for sale >> << TD Banknorth Inc. and Subsidiaries ---------------------------------------------------------------------- Reconciliation Table - Non-GAAP Financial Information (Unaudited) ---------------------------------------------------------------------- 2007 2006 --------- --------------------------------------- (In thousands, except per share data) First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter ------------------- --------- --------- --------- Net income (GAAP) $55,168 $83,436 $86,102 $93,386 $76,206 Add back the following, net of tax: Merger and re- structuring charges 20,899 8,873 9,400 9,556 14,924 Loss (gain) from discontinued operations 520 1,509 (2,511) 1,323 1,342 Deleveraging losses (1) - - - - 214 Amortization of intangibles 22,366 24,019 24,007 24,025 22,904 --------- --------- --------- --------- --------- Net income, as adjusted $98,953 $117,837 $116,998 $128,290 $115,590 --------- --------- --------- --------- --------- Noninterest income (GAAP) $133,519 $128,828 $128,305 $127,069 $117,839 Deleveraging securities losses - - - - 330 --------- --------- --------- --------- --------- Noninterest income, as adjusted $133,519 $128,828 $128,305 $127,069 $118,169 --------- --------- --------- --------- --------- Noninterest expense (GAAP) $318,037 $287,821 $294,034 $286,069 $277,036 Merger costs 17,572 10,874 13,452 14,135 9,225 Restructuring 13,022 325 637 448 10,593 Amortization of intangibles 36,781 39,491 39,480 39,508 37,666 --------- --------- --------- --------- --------- Noninterest expense, as adjusted $250,662 $237,131 $240,465 $231,978 $219,552 --------- --------- --------- --------- --------- (1) Deleveraging losses include losses on sale of securities, lower of cost or market adjustments on loans held for sale and prepayment penalties on borrowings. Ratios are annualized where appropriate. >>
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