PORTLAND – TD Banknorth Inc. said Wednesday its third-quarter earnings fell 3 percent, hurt by a drop in securities income and higher interest expenses.

TD Banknorth, a unit of Canada’s TD Bank Financial Group, said net income fell to $86.1 million, or 38 cents per share, from $88.7 million, or 51 cents per share, a year ago. Earnings adjusted to exclude one-time items rose to $117 million, or 51 cents per share, from $109.5 million, or 63 cents per share, last year.

The discrepancy in per-share earnings is caused by an increase of shares outstanding after the company issued 62 million shares to acquire Hudson United Bancorp in January.

Analysts expected a profit of 52 cents per share, according to Thomson Financial.

Net interest income rose 21 percent to $301.1 million from $249 million last year, boosted by the acquisition of Hudson United. However, interest expense doubled to $203 million.

“Deposit pricing and the inverted yield curve continue to put pressure on our margin while competition for high-quality loans remains as intense as ever,” the bank said in a statement.

The Federal Reserve increased short-term interest rates at 17 consecutive meetings, before holding steady in August and again in September. At 5.25 percent, the Fed rate target is at its highest level since April 2001, while long-term rates have remained fairly stagnant. This narrow gap between short- and long-term interest rates, also known as a flat yield curve, has put the squeeze on lenders even as new loan development continues to surge.

Non-interest income added 24 percent to $128.3 million from $103.6 million a year ago, also on the back of the acquisition. The company’s income from securities investments fell to $7,000 from $1 million last year.

TD Banknorth declared a regular quarterly dividend of 22 cents, payable Nov. 13 to shareholders of record on Nov. 3.