SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C. 20549

                                  FORM 10-K

               Annual Report Pursuant to Section 13 or 15 (d)
                   of the Securities Exchange Act of 1934

      For the fiscal year ended                 Commission File No. 0-14895
      December 31, 2001

                       Granite State Bankshares, Inc.
           (Exact name of registrant as specified in its charter)

        New Hampshire                                02-0399222
(State or other jurisdiction of         (I.R.S. Employer Identification No.)
 incorporation or organization)

122 West Street, Keene, New Hampshire                 03431
   (Address of Principal Executive Offices)         (Zip Code)

Registrant's telephone number, including area code:             (603) 352-1600

Securities registered pursuant to Section 12 (b) of the Act:    None

Securities registered pursuant to Section 12 (g) of the Act:    Common Stock,
                                                                $1.00 par value

      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.   Yes (X) No ( )

      Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained to the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  (X)

      The aggregate market value of the voting common stock held by non-
affiliates of the Registrant, based on the closing bid price of March 1,
2002, was $109,001,906. For purposes of this calculation, the affiliates of
the Registrant include its directors and executive officers. Although such
directors and executive officers of the Registrant performing policy-making
functions were assumed to be "affiliates" of the Registrant, this
classification is not to be interpreted as an admission of such status.

      As of March 1, 2002, the number of shares of the Registrant's common
stock outstanding of record (exclusive of treasury shares) was 5,191,274.


<PAGE>  1


                           DOCUMENTS INCORPORATED
                                BY REFERENCE

      The following documents, in whole or in part, are specifically
incorporated by reference in the indicated Part of the Annual Report on
Form 10-K:


        Document                     Part
        --------                     ----

Annual Report to Stockholders for    Part I, Item 1 (c) (5),
the year ended December 31, 2001     "Statistical Information"

                                     Part II, Item 6
                                     "Selected Financial Data"

                                     Part II, Item 7,
                                     "Management's Discussion and
                                     Analysis of Financial Condition and
                                     Results of Operations"

                                     Part II, Item 7a,
                                     "Quantitative and Qualitative
                                     Disclosures About Market Risk"

                                     Part II, Item 8
                                     "Financial Statements and
                                     Supplementary Data"

Proxy Statement for the 2002         Part III, Item 10,
Annual Meeting of Stockholders       "Directors and Executive Officers
                                     of the Registrant"

                                     Part III, Item 11,
                                     "Executive Compensation"

                                     Part III, Item 12,
                                     "Security Ownership of Certain
                                     Beneficial Owners and Management"

                                     Part III, Item 13,
                                     "Certain Relationships and
                                     Related Transactions"


<PAGE>  2


                Form 10-K Annual Report -- Table of Contents

                                   PART I

                                                                      Page
                                                                      ----

Item 1.   Description of Business                                       5

      a.  General Development of Business                               5
      b.  Financial Information About Industry Segments                 5
      c.  Narrative Description of Business                             5

            1. General Description of Business                          6
            2. Regulation & Supervision                                 7
            3. Monetary Policies                                       12
            4. Employees                                               12
            5. Statistical Information                                 12

                  A. Distribution of Assets, Liabilities,
                     and Stockholders' Equity; Interest
                     Rates and Interest Differential                   13
                  B. Rate/Volume Analysis                              13
                  C. Investment Portfolio                              13
                  D. Loan Portfolio                                    17
                  E. Maturity of Loans                                 17
                  F. Nonperforming Loans and Assets                    18
                  G. Summary of Loan Loss Experience and
                     Allocation of the Allowance for
                     Possible Loan Losses                              19
                  H. Risks Associated with Commercial Real
                      Estate, Commercial and Construction Loans        22
                  I. Deposits                                          22
                  J. Maturities of Time Deposits                       23
                  K. Return on Equity and Assets                       23
                  L. Borrowings                                        23
                  M. Competition                                       25
                  N. Subsidiaries                                      26

      d.  Financial Information About Foreign and
          Domestic Operations and Export Sales                         26

Item 2.   Properties                                                   27

Item 3.   Legal Proceedings                                            27

Item 4.   Submission of Matters to a Vote of Security Holders          27

Additional Item.  Executive Officers                                   28


<PAGE>  3


                                   PART II

                                                                      Page
                                                                      ----

Item 5.   Market for Registrant's Common Equity and
          Related Stockholder Matters                                  29

      a.  Market Information                                           29
      b.  Holders                                                      29
      c.  Dividends                                                    29

Item 6.   Selected Financial Data                                      29

Item 7.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations                          30

Item 7a.  Quantitative and Qualitative Disclosures About
          Market Risk                                                  30

Item 8.   Financial Statements and Supplementary Data                  30

      a.  Financial Statements Required by Regulation S-X              30
      b.  Supplementary Financial Information                          30

            1. Selected Quarterly Financial Data                       30
            2. Information on the Effects of Changing Prices           30
            3. Information About Oil and Gas Producing Activities      30

Item 9.   Changes in and Disagreements with Accountants
          on Accounting and Financial Disclosure                       30

                                  PART III

Item 10.  Directors and Executive Officers of the Registrant           31

Item 11.  Executive Compensation                                       31

Item 12.  Security Ownership of Certain Beneficial Owners
          and Management                                               31

Item 13.  Certain Relationships and Related Transactions               31

                                   PART IV

Item 14.  Exhibits, Financial Statement Schedules, and
          Reports on Form 8-K                                          31

      a.  List of Documents filed as Part of this Report               31

            1. Financial Statements                                    31
            2. Financial Statement Schedules                           32

      b.  Reports on Form 8-K                                          32
      c.  Exhibits                                                     32

Signatures                                                             34


<PAGE>  4


                                   PART I

Item 1.   Description of Business

      (a) General Development of Business

      Granite State Bankshares, Inc. ("Granite State" or "Company") is a
single-bank holding company which was formed in 1986 to acquire all of the
stock of the Granite Bank, formerly Granite Bank of Keene and Keene Savings
Bank, upon its conversion from a mutual savings bank to a state-chartered
guaranty (stock) savings bank. Since that time, the Company has acquired
the two branch offices of Olde Port Bank (a division of Webster Bank),
Primary Bank, the Durham Trust Company, First Northern Co-operative Bank,
First National Bank of Peterborough and the Granite Bank of Amherst.

      In March of 1987, Granite State organized a mortgage corporation,
GSBI Mortgage Corporation, for purposes of expanding the residential loan
programs it could offer, as well as improving the efficiency and
effectiveness of its participation in the secondary mortgage markets. The
mortgage corporation now operates as a division of Granite Bank and
services Cheshire, Hillsborough, Strafford, Merrimack and Rockingham
counties, New Hampshire, with a wide variety of mortgage loan products.

      In July of 1987, the Granite Bank of Amherst opened for business as a
state-chartered guaranty (stock) savings bank, and was the result of the
purchase from the Amoskeag Bank of their Amherst branch office. In June of
1989 it was merged into the First National Bank of Peterborough under the
name of Granite Bank, N.A. In March of 1990 Granite Bank, N.A. was merged
into Granite Bank.

      In October of 1988, First Peterborough Bank Corp. was merged into
Granite State, leaving Granite State with the First National Bank of
Peterborough ("First National"). First National was a national bank engaged
in substantially all of the business operations customarily conducted by a
commercial bank in New Hampshire. In June of 1989 the name was changed to
Granite Bank, N.A., when it absorbed Granite Bank of Amherst. In March of
1990, Granite Bank, N.A. was merged into Granite Bank.

      In August of 1991, Granite Bank entered into a purchase and
assumption agreement with the Resolution Trust Company ("RTC"), whereby it
acquired certain assets and assumed certain liabilities of First Northern
Co-operative Bank ("First Northern"), headquartered in Keene, New
Hampshire, which was under RTC conservatorship.

      In November of 1991, Granite Bank entered into a purchase and
assumption agreement with the Federal Deposit Insurance Corporation
("FDIC"), whereby it acquired certain assets and assumed certain
liabilities of Durham Trust Company ("Durham"), headquartered in Durham,
New Hampshire. The FDIC was the liquidating agent of Durham Trust Company.

      Granite Bank completed its conversion from a state-chartered guaranty
(stock) savings bank to a New Hampshire state-chartered commercial bank
during 1991.

      Effective after the close of business October 31, 1997, the Company
completed its acquisition of Primary Bank by the merger of Primary Bank
with and into the Company's subsidiary, Granite Bank.

      Effective at year end 2000, the Company completed its acquisition of
two branch offices of Olde Port Bank, a division of Webster Bank. See also
Note 2 to the Consolidated Financial Statements in the Annual Report to
Stockholders for the year ended December 31, 2001, which is incorporated
herein by reference.

      (b) Financial Information about Industry Segments

      Not applicable.

      (c) Narrative Description of Business


<PAGE>  5


            (1) General Description of Business

      Granite State operates as a single bank holding company by virtue of
its ownership of 100% of the stock of Granite Bank, a New Hampshire
chartered commercial bank (referred to as the "Bank"). The Company has
grown profitably over the past several years through several strategic
acquisitions and by leveraging its capital. This activity strengthened the
franchise and assisted in the transition from a thrift institution into a
full-service commercial bank. Currently, the Company does not transact any
significant business other than through the Bank.

      The Bank is a community oriented commercial bank offering a variety
of financial services. The principal business of the Bank consists of
attracting deposits from the general public and underwriting loans secured
by residential and commercial real estate and other loans. The Bank also
originates residential real estate loans for sale in the secondary mortgage
market.

      The Company has devoted and continues to devote considerable
resources toward the enhancement of computer systems and operating
procedures to position itself to compete effectively in its local markets.

      The Bank offers a wide range of consumer and commercial services,
including: commercial demand deposits, consumer regular and interest-
bearing (NOW) checking and regular savings accounts; certificates of
deposit; residential and commercial real estate loans; secured and
unsecured consumer and commercial loans; and cash management services.

      The Company's distribution network for its services is comprised of
its main office in Keene, full-service banking offices in Antrim,
Chesterfield, Concord, Durham, Hampton, Hillsborough, Jaffrey, Merrimack,
Milford, Nashua, Portsmouth, Peterborough and Weare and 45 automatic teller
machines ("ATMs") located in Antrim, Amherst, Chesterfield, Concord,
Dublin, Durham, Fitzwilliam, Greenfield, Hampton, Hillsborough, Jaffrey,
Keene, Merrimack, Milford, Nashua, Portsmouth, Peterborough, West Swanzey,
North Swanzey and Weare. All of the office and ATM locations are in the
State of New Hampshire. The Bank offers its products and services online
through its internet banking branch, GRANITe-bank.

Risk Management
---------------

      In the normal course of business, the Company is subject to various
risks, the most significant of which are credit, liquidity and market risk,
which includes interest rate risk. Although the Company cannot eliminate
these risks, it has risk management processes designed to provide for risk
identification, measurement, monitoring and control. The Board of Directors
establishes policies with respect to risk management, lending, investment,
asset/liability management and interest rate risk and reviews and approves
these policies annually. The Board of Directors delegates the
responsibility for carrying out these policies to management.

Credit Risk
-----------

      Credit risk represents the possibility that a customer or
counterparty may not perform in accordance with contractual terms. Credit
risk results from extending credit to customers, purchasing securities and
entering into certain off-balance-sheet financial transactions (which are
primarily commitments to originate loans, unused lines and standby letters
of credit or unadvanced portions of construction loans). Risk associated
with the extension of credit (including off-balance sheet items) includes
general risk, which is inherent in the lending business, and risk specific
to individual borrowers. Risk associated with purchasing securities
primarily centers around the credit quality of the issuer of the security.
The Company seeks to manage credit risk through portfolio diversification,
investments in highly rated securities, loan underwriting policies and
procedures and loan monitoring practices.


<PAGE>  6


Liquidity Risk
--------------

      Liquidity represents an institution's ability to generate cash or
otherwise obtain funds at reasonable rates to satisfy commitments to
borrowers and demands of depositors and to invest in strategic initiatives.
Liquidity risk represents the likelihood the Company would be unable to
generate cash or otherwise obtain funds at reasonable rates for such
purposes. Liquidity is managed through the coordination of the relative
maturities of assets, liabilities and off-balance sheet positions and is
enhanced by the ability to raise funds with direct borrowings.

Market Risk
-----------

      Market risk reflects the risk of economic loss resulting from adverse
changes in market prices and interest rates. The risk of loss can be
reflected in diminished current values and/or reduced potential net
interest income in future periods. The Company's market risk arises
primarily from interest rate risk. The Company is also exposed to market
price risk through its investments in marketable equity securities. Market
price risk related to investments in marketable equity securities is the
potential loss in estimated fair value resulting from adverse changes in
prices quoted by stock markets. The Company manages this risk by closely
monitoring market developments and reviewing current financial statements
and other reports published by the issuers of the equity securities.

Interest Rate Risk
------------------

      Interest rate risk arises primarily through the Company's normal
business activities of extending loans and taking deposits. Interest rate
risk is the sensitivity of net interest income and the market value of
financial instruments to the timing, magnitude and frequency of changes in
interest rates. Interest rate risk results from various repricing
frequencies and the maturity structure of assets, liabilities and off-
balance-sheet positions. Interest rate risk also results from, among other
factors, changes in the relationship or spread between interest rates. Many
factors, including economic and financial conditions, general movements in
market interest rates and consumer preferences, affect the spread between
interest earned on assets and interest paid on liabilities. Interest rate
caps are used to alter the interest rate characteristics on the net
interest spread. The Company uses a number of measures to monitor and
manage interest rate risk, including financial planning models which
recalculates the estimated net present value of equity and net interest and
dividend income of the Company assuming instantaneous, permanent parallel
shifts in market interest rates.

      For additional information relating to the Company's risk management
processes, see Management's Discussion and Analysis of Financial Condition
and Results of Operations included in the Company's Annual Report to
Stockholders for the year ended December 31, 2001, which is incorporated
herein by reference.

            (2) Regulation and Supervision

General
-------

      Granite State is a registered bank holding company under the Bank
Holding Company Act of 1956 ("BHCA"), and as such, is subject to regulation
by the Federal Reserve Board ("FRB"). Granite Bank is a New Hampshire-
chartered commercial bank, the deposit accounts of which are insured by the
FDIC. As such, it is subject to the regulation, supervision and examination
of the New Hampshire Bank Commissioner ("Commissioner") and the FDIC. See
"New Hampshire Law" and "Insurance of Deposits". It is a member of the
Federal Home Loan Bank ("FHLB") of Boston.

      The federal and state laws and regulations which are applicable to
banks regulate, among other things, the scope of their business, their
investments, the reserves required to be kept against deposits, the timing
of the availability of deposited funds and the nature and amount of
collateral for certain loans. The laws and regulations governing the Bank
generally have been promulgated to protect depositors and not for the
purpose of protecting stockholders. The regulatory structure also gives the
regulatory authorities extensive


<PAGE>  7


discretion in connection with their supervisory and enforcement activities
and examination policies, including policies with respect to classification
of assets and the establishment of adequate loan loss reserves for
regulatory purposes. Any change in such regulation, whether by the
Commissioner, the FRB, the FDIC or the United States Congress, could have a
material adverse impact on the Company, the Bank and their operations.

New Hampshire Law
-----------------

      As a New Hampshire-chartered commercial bank, Granite Bank is subject
to the applicable provisions of state law and the regulations adopted
thereunder by the Commissioner. Granite Bank derives its lending and
investment powers from New Hampshire law and is subject to periodic
examination by and reporting requirements of the Commissioner, who also has
specific statutory jurisdiction over certain banking activities, mergers
and the creation of new powers. The Commissioner has authority to take
various enforcement actions against banks, or bank directors or officers,
that engage in violations of law or unsafe or unsound practices. The
Commissioner also may appoint a receiver or conservator for a bank under
certain circumstances.

      The Bank is required under New Hampshire law to maintain a reserve of
the lesser of not less than 12% of the amount of demand deposits and 5% of
the amount of time and savings deposits in cash or in specified short-term
investments, or the reserve requirements established by the FRB. At
December 31, 2001 this requirement was satisfied.

      Granite State is also subject to the periodic examination and
reporting requirements of the Commissioner. Under New Hampshire law,
Granite State may not acquire ownership or control of more than 12 banking
affiliates, including (i) banking institutions chartered by the state and
actively engaged in business as such in the State and (ii) national banks
authorized to transact business in the State, neither may it acquire
ownership or control of any of the foregoing if, as a result, the Company
and its banking affiliates would hold deposits in New Hampshire in excess
of 30% of the total deposits of all federal and state-chartered banking
institutions, including savings associations, operating in New Hampshire.
At the present time the total of the Bank's deposits are substantially less
than 30% of total New Hampshire deposits.

      The Bank pays assessments to the Commissioner's office to support its
operations. In 2001, these assessments totaled $18,416.

Federal Deposit Insurance Corporation
-------------------------------------

Safety and Soundness Regulations
--------------------------------

      The federal regulatory agencies, including the FDIC, were required to
prescribe standards for depository institutions under their jurisdiction
relating to a variety of operating matters such as internal controls,
information systems and internal audit systems, loan documentation and
credit underwriting, interest rate risk exposure, asset growth and quality
and employee compensation. The federal banking agencies have adopted a
final rule containing Interagency Guidelines Prescribing Standards for
Safety and Soundness ("Guidelines") to implement safety and soundness
standards required under the Federal Deposit Insurance Act. The Guidelines
set forth the safety and soundness standards that the federal banking
agencies use to identify and address problems at insured depository
institutions before capital becomes impaired. The standards set forth in
the Guidelines address internal controls and information systems; internal
audit systems; credit underwriting; loan documentation; interest rate risk
exposure; asset growth; and compensation, fees and benefits. If the
appropriate federal banking agency determines that an institution fails to
meet any standard prescribed by the Guidelines, the agency may require the
institution to submit to the agency an acceptable plan to achieve
compliance with the standard, as required by the Federal Deposit Insurance
Act. The final rule establishes deadlines for the submission and review of
such safety and soundness compliance plans when such plans are required.


<PAGE>  8


Investment Authority
--------------------

      The FDIC regulations restrict investments by and activities of
insured state banks such as the Bank. Effective December 19, 1992, neither
state banks nor their subsidiaries may engage in activities, as principal,
not permissible for national banks or their subsidiaries unless the FDIC
determines that the activity would pose no significant risk to the deposit
insurance fund and the bank is in compliance with and continues to comply
with applicable federal capital standards. Additionally, subject to
exceptions for majority-owned subsidiaries and certain other limited
exceptions, state banks may not acquire or retain any equity investment of
a type or in an amount not permissible for national banks. The Federal
Deposit Insurance Act does contain a partial exception from these
requirements for stock and mutual fund ownership by banks which were
authorized to make such investments by state law and had made such
investments during a specified time period. The Bank believed it qualified
for the exception and applied to the FDIC for approval. During 1993, the
Bank received approval from the FDIC to invest in equity securities listed
on a national exchange and registered shares of mutual funds, which are
otherwise impermissible investments for national banks, in an amount not to
exceed 100 percent of its Tier 1 capital, which amounted to $71,595,000 at
December 31, 2001.

Capital Requirements
--------------------

      The FDIC has issued regulations that require Bank Insurance Fund-
insured banks, such as the Bank, to maintain minimum levels of capital. The
regulations establish a minimum leverage (core) capital requirement of not
less than 3% core capital to total assets for banks in the strongest
financial and managerial condition, with a CAMELS Rating of 1 (the highest
rating of the FDIC for banks). For all other banks, the minimum leverage
capital requirement is 3% plus an additional cushion of at least 1% to 2%.

      Core capital is comprised of the sum of common stockholders' equity,
noncumulative perpetual preferred stock (including any related surplus) and
minority interests in consolidated subsidiaries, minus all intangible
assets (other than qualifying servicing rights and purchased credit card
relationships), identified losses and investments in certain subsidiaries.
At December 31, 2001, the Bank's ratio of core capital to average total
assets equaled 7.00%, which exceeded the minimum leverage requirement.

      The FDIC also requires that banks meet a risk-based capital standard.
The risk-based capital standard requires the maintenance of a ratio of
total capital (which is defined as core capital and supplementary capital)
to risk-weighted assets of 8.00%. In determining the amount of risk-
weighted assets, all assets, including certain off-balance sheet assets,
are multiplied by a risk-weight of 0% to 100%, based on the risks the FDIC
believes are inherent in the type of asset. The components of core capital
are equivalent to those discussed earlier under the leverage capital
requirement. The components of supplementary capital currently include
cumulative perpetual preferred stock, long-term perpetual preferred stock,
mandatory convertible securities, subordinated debt and intermediate
preferred stock and allowance for loan and lease losses. Allowance for loan
and lease losses included in supplementary capital is limited to a maximum
of 1.25% of risk-weighted assets. Overall, the amount of capital counted
toward supplementary capital cannot exceed 100% of core capital. At
December 31, 2001, the Bank met its risk based capital requirements with a
core risk-based capital to risk-weighted assets ratio of 10.38% and a total
risk-based capital to risk-weighted assets ratio of 11.55%.

Prompt Corrective Action Regulations
------------------------------------

      Effective December 19, 1992, the regulatory agencies, including the
FDIC, were authorized to take certain supervisory actions against
undercapitalized banks. The severity of such action depends upon the degree
of undercapitalization. The regulations generally require subject to a
narrow exception, the appointment of a receiver or conservator for banks
whose tangible capital level falls below 2% of assets, which appointment is
to be made within a maximum of 270 days after the threshold is reached. At
December 31, 2001, the subsidiary bank was considered "well capitalized"
for purposes of the FDIC's prompt corrective action regulations. See also
Capital Resources and Liquidity - Capital Resources in the Management's
Discussion and Analysis Section of the Annual Report to Stockholders for
the year ended December 31, 2001.


<PAGE>  9


      The FDIC may institute proceedings against any insured bank or any
director, trustee, officer or employee of such bank who engages in unsafe
and unsound practices, or the violation of applicable laws and regulations.
The FDIC has the authority to terminate or suspend insurance of accounts
pursuant to procedures established for that purpose and may appoint a
receiver or conservator under certain circumstances.

Community Reinvestment Act
--------------------------

      Under the Community Reinvestment Act, as amended ("CRA"), every FDIC-
insured institution has a continuing and affirmative obligation consistent
with safe and sound banking practices to help meet the credit needs of its
entire community, including low and moderate income neighborhoods. The CRA
does not establish specific lending requirements or programs for financial
institutions nor does it limit an institution's discretion to develop the
types of products and services that it believes are best suited to its
particular community, consistent with the CRA. The CRA requires the FDIC to
assess the Bank's record of meeting the credit needs of its community and
to take such record into account in its evaluation of certain applications,
such as a merger or the establishment of a branch, by the Bank. An
unsatisfactory rating may be used as the basis for the denial of an
application by the FDIC. The Bank's latest CRA rating, received from the
FDIC was "satisfactory".

Insurance of Deposits
---------------------

      The deposit accounts of the Bank are insured by the FDIC up to
applicable limits, generally $100,000 per insured depositor. The FDIC
issues regulations, conducts periodic examinations, requires the filing of
reports and generally supervises the operations of its insured banks. The
approval of the FDIC is required prior to a merger or consolidation, or the
establishment or relocation of an office facility. The majority of the
Bank's deposits are insured by the Bank Insurance Fund ("BIF").
Approximately 6.0% of the Bank's deposits are OAKAR deposits, which are
deposits purchased from institutions previously insured by the Savings
Association Insurance Fund ("SAIF"), and which are assessed at the premium
rate applicable to SAIF deposits.

      During 2001, the Bank paid annual insurance premiums of $129,000
compared with $130,000 in 2000.

      The FDIC has established a system for setting deposit insurance
premiums based upon the risks a particular bank or savings association
posed to its deposit insurance funds. Under the risk-based deposit
insurance assessment system, the FDIC assigns an institution to one of
three capital categories based on the institution's financial information,
as of the reporting period ending six months before the assessment period.
The three capital categories are (1) well capitalized, (2) adequately
capitalized and (3) undercapitalized. The FDIC also assigns an institution
to supervisory subgroups within each capital group, based on a supervisory
evaluation provided to the FDIC by the institution's primary federal
regulator and information that the FDIC determines to be relevant to the
institution's financial condition and the risk posed to the deposit
insurance funds, which may include information provided by the
institution's state supervisor.

      An institution's assessment rate depends on the capital category and
supervisory category to which it is assigned. Under the final risk-based
assessment system, there are nine assessment risk classifications or
combinations of capital groups and supervisory subgroups, to which
different assessment rates are applied. Assessment rates for deposit
insurance for both BIF and SAIF currently range from 0 basis points to 27
basis points. The capital and supervisory subgroup to which an institution
is assigned by the FDIC is confidential and may not be disclosed. A bank's
rate of deposit insurance assessments will depend upon the category and
subcategory to which the bank is assigned by the FDIC. The FDIC is required
to maintain a ratio of reserves to insured deposits of 1.25% for each of
the BIF and the SAIF. The FDIC may increase its assessment rates in order
to maintain the required reserve ratio. Any increase in insurance
assessments could have an adverse effect on the Bank's earnings.

      Under the Deposit Insurance Funds Act of 1996, the assessment base
for the payments on the bonds issued in the late 1980's by the Financing
Corporation ("FICO") to recapitalize the now defunct Federal


<PAGE>  10


Savings and Loan Insurance Corporation was expanded to include, beginning
January 1, 1997, the deposits of institutions insured by the BIF, such as
the Bank. Until December 31, 1999, the rate of assessment for BIF-
assessable deposits was one-fifth of the rate imposed on deposits insured
by the SAIF. Effective January 1, 2000, the rate of assessment for BIF and
SAIF deposits is the same. The weighted average annual assessment rate for
2001 on the Bank's deposits was 0.01895%.

Federal Reserve System
----------------------

      Under FRB regulations, the Bank is required to maintain reserves
against its transaction accounts (primarily checking and NOW accounts),
non-personal money market deposit accounts, and non-personal time deposits.
Because reserves must generally be maintained in cash or in non-interest
bearing accounts, the effect of the reserve requirement is to increase the
Bank's cost of funds. For most of 2001, these regulations required reserves
of 3% of total transaction accounts of up to $42.8 million. Total
transaction accounts amounting to over $42.8 million required a reserve of
$1.1 million plus 10% (this rate is set by the FRB and can range from 8% to
14%) of that portion of total transaction accounts in excess of such
amount. Institutions were permitted to designate and exempt $5.5 million of
reservable liabilities from these reserve requirements. These amounts and
percentages are subject to adjustment by the FRB. The Bank was in
compliance with its reserve requirements at December 31, 2001. The Bank
also has the authority to borrow from the Federal Reserve Board "discount
window" to meet its short-term liquidity needs.

      During December, 2001, the amount of reservable liabilities exempt
from reserve requirements was increased to $5.7 million and the level at
which reservable liabilities would be subject to the 10% rate was lowered
to $41.3 million.

Holding Company Regulation
--------------------------

      Under the Federal Change in Bank Control Act ("CIBCA"), a prior
notice must be submitted to the FRB if any person or group acting in
concert seeks to acquire 10% or more of Granite State common stock, unless
(if less than 25% is to be beneficially owned) the FRB finds that the
acquisition will not result in change in control. Under CIBCA, the FRB has
60 days within which to act, taking into consideration factors similar to
those under the Bank Holding Company Act ("BHCA"). Under the BHCA, any
company would be required to obtain prior approval from the FRB before
obtaining control of the Holding Company. Control generally is defined as
beneficial ownership of 25 percent or more of any class of voting
securities of the Company. An existing bank holding company would need to
receive prior FRB approval before acquiring more than 5% of the voting
securities of the Company.

      Granite State and its subsidiary are subject to examination,
regulation and periodic reporting by the FRB under the BHCA. FRB approval
is required for acquisitions of either financial institutions or other
entities, or the commencement of new activities by the Company. Interstate
holding company acquisitions of banks are permitted generally without
regard to state law, except state laws regarding deposit concentration. The
FRB has adopted capital adequacy guidelines for bank holding companies (on
a consolidated basis) substantially similar to those of the FDIC for the
Bank.

      The Federal Reserve Board has issued guidelines for a risk-based
approach to measuring the capital adequacy of bank holding companies and
state-chartered banks which are members of the Federal Reserve System.
These capital requirements generally call for an 8 percent total capital
ratio, of which 4 percent must be comprised of Tier I capital. Risk-based
capital ratios are calculated by weighting assets and off-balance sheet
instruments according to their relative credit risks. In addition to the
risk-based capital standard, bank holding companies such as the Company
must maintain a minimum leverage ratio of Tier I capital to total assets of
at least 4 percent, with Tier I capital for this purpose being defined
consistent with the risk-based capital guidelines. At December 31, 2001,
Granite State had consolidated Tier I and total risk-based capital ratios
of 10.51% and 11.69%, respectively and a leverage ratio of Tier I capital
to average total assets of 7.09%.

      In addition, a bank holding company, which does not qualify as a
"financial holding company" under the recently enacted Gramm-Leach-Bliley
Financial Services Modernization Act, is generally prohibited


<PAGE>  11


from engaging in, or acquiring direct or indirect control of, any company
engaged in non-banking activities. One of the principal exceptions to this
prohibition is for activities found by the FRB to be so closely related to
banking or managing or controlling banks as to be permissible. Some of the
principal activities that the FRB has determined by regulation to be so
closely related to banking as to be permissible are: making or servicing
loans; performing certain data processing services; providing discount
brokerage services; acting as fiduciary, investment or financial advisor;
leasing personal or real property; making investments in corporations or
projects designed primarily to promote community welfare; and acquiring a
savings and loan association.

      Bank holding companies that do qualify as a financial holding company
may engage in activities that are financial in nature or incidental to
activities which are financial in nature. Bank holding companies may
qualify to become a financial holding company if:

  .   each of its depository institution subsidiaries is "well
      capitalized,"

  .   each of its depository institution subsidiaries is "well managed";

  .   each of its depository institution subsidiaries has at least a
      "satisfactory" CRA rating at its most recent examination; and

  .   the bank holding company has filed a certification with the
      FRB that it elects to become a financial holding company.

Federal Home Loan Bank System
-----------------------------

      Granite Bank is a member of the FHLB of Boston, which is one of 12
regional Federal Home Loan Banks. The FHLB serves as a reserve or central
bank for its members. It is funded primarily from proceeds derived from the
sale of consolidated obligations of the Federal Home Loan Bank system. It
makes advances (i.e., loans) to members in accordance with policies and
procedures established by the Board of Directors of the FHLB. The Bank's
membership in the FHLB is voluntary and can be terminated by the Bank at
any time when its advances are paid.

      As a member of the FHLB, the Bank is required to purchase and hold
stock in the FHLB in an amount equal to the greater of 1% of the aggregate
of unpaid residential mortgage loan balances and the carrying value of
mortgage-backed securities outstanding at the end of the year; or 5% of its
outstanding advances from the FHLB of Boston. As of December 31, 2001,
Granite Bank held stock in the FHLB in the amount of $7,201,000 and was
required to maintain an investment in such stock of $6,773,000.

            (3) Monetary Policies

      Granite State and the Bank are affected by the monetary and fiscal
policies of various agencies of the United States Government, including the
Federal Reserve System. In view of changing conditions in the national
economy and in the money markets, it is impossible for the management of
Granite State to accurately predict future changes in monetary policy or
the effect of such changes on the business or financial condition of
Granite State.

            (4) Employees

      As of December 31, 2001, Granite State and its subsidiary employed
302 full time equivalent officers and employees. Granite State considers
relations with its employees to be satisfactory. None of the employees of
the Company or its subsidiary are represented by a collective bargaining
group.

            (5) Statistical Information

      The statistical information on Granite State set forth in the
following sections is furnished pursuant to Industry Guide 3 under the
Securities Exchange Act of 1934.


<PAGE>  12


                  (A) Distribution of Assets, Liabilities, and Stockholders'
                      Equity; Interest Rates and Interest Differential

      Information regarding the distribution of assets, liabilities and
stockholders' equity; interest rates and interest differential for each of
the three years in the period ended December 31, 2001, on page 24 of the
Annual Report to Stockholders for the year ended December 31, 2001 are
incorporated herein by reference.

                  (B) Rate/Volume Analysis

      Information regarding the dollar amount of changes in interest income
and interest expense for interest earning assets and interest bearing
liabilities attributable to changes in interest rates and changes in volume
for each of the two years in the period ended December 31, 2001, on page 25
of the Annual Report to Stockholders for the year ended December 31, 2001
are incorporated herein by reference.

                  (C) Investment Portfolio

      Debt securities that the Company has the positive intent and ability
to hold to maturity are classified as held to maturity and reported at
amortized cost; debt and equity securities that are bought and held
principally for the purpose of selling in the near term are classified as
trading and reported at fair value, with unrealized gains and losses
included in earnings; and debt and equity securities not classified as
either held-to-maturity or trading are classified as available-for-sale and
reported at fair value, with unrealized gains and losses excluded from
earnings and reported in accumulated other comprehensive income (loss) as a
separate component of stockholders' equity, net of estimated income taxes.
The Company classifies its securities into three categories: held-to-
maturity, available-for-sale and held for trading. The Company had no
securities classified as trading securities at or during the years ended
December 31, 2001, 2000 and 1999.

      The following table sets forth the amortized cost, unrealized gains
and losses, and estimated market values of securities held to maturity and
securities available for sale at December 31, 2001, 2000 and 1999.


<PAGE>  13


<TABLE>
<CAPTION>

                                                                                      Estimated
                                             Amortized    Unrealized    Unrealized      Market
                                                Cost         Gains        Losses        Value
                                             ---------    ----------    ----------    ---------
                                                               (In Thousands)


                                          <c>            <c>           <c>         <c>
Securities held to maturity
 At December 31, 2001
  Other corporate obligations                $  5,006       $  220                    $  5,226
                                             -------------------------------------------------
      Total securities held to maturity      $  5,006       $  220        $    0      $  5,226
                                             =================================================

Securities available for sale
 At December 31, 2001
  US Government agency obligations           $144,812       $1,968        $  391      $146,389
  Other corporate obligations                 105,021        2,407         1,715       105,713
  Mortgage-backed securities:
    FNMA                                        1,548           40                       1,588
    FHLMC                                      15,415           19           145        15,289
    GNMA                                          687           47                         734
    SBA                                           198           11                         209
                                             -------------------------------------------------
      Total mortgage-backed securities         17,848          117           145        17,820
  Mutual Funds                                    900          164            17         1,047
  Marketable equity securities                  3,019          309            96         3,232
                                             -------------------------------------------------
      Total securities available for sale    $271,600       $4,965        $2,364      $274,201
                                             =================================================

Securities held to maturity
 At December 31, 2000
  US Government agency obligations           $ 13,003       $    3        $   36      $ 12,970
  Other corporate obligations                   5,008                         56         4,952
                                             -------------------------------------------------
      Total securities held to maturity      $ 18,011       $    3        $   92      $ 17,922
                                             =================================================

Securities available for sale
 At December 31, 2000
  US Government agency obligations           $100,504       $    5        $  459      $100,050
  Other corporate obligations                  84,245          265         1,368        83,142
  Mortgage-backed securities:
    FNMA                                        3,904           44             7         3,941
    FHLMC                                       1,161           12                       1,173
    GNMA                                          767           73                         840
    SBA                                           310            5                         315
                                             -------------------------------------------------
      Total mortgage-backed securities          6,142          134             7         6,269
  Mutual Funds                                    900           98            21           977
  Marketable equity securities                  6,525          318           759         6,084
                                             -------------------------------------------------
      Total securities available for sale    $198,316       $  820        $2,614      $196,522
                                             =================================================


<PAGE>  14


                                                                                      Estimated
                                             Amortized    Unrealized    Unrealized      Market
                                                Cost         Gains        Losses        Value
                                             ---------    ----------    ----------    ---------
                                                               (In Thousands)


                                          <c>            <c>           <c>         <c>
Securities held to maturity
 At December 31, 1999
  US Government agency obligations           $ 13,007                     $  482      $ 12,525
  Other corporate obligations                   5,010                        303         4,707
                                             -------------------------------------------------
      Total securities held to maturity      $ 18,017       $    0        $  785      $ 17,232
                                             =================================================

Securities available for sale
 At December 31, 1999
  US Treasury obligations                    $ 19,988       $   43                    $ 20,031
  US Government agency obligations            105,454                     $3,428       102,026
  Other corporate obligations                  71,824           27         2,427        69,424
  Mortgage-backed securities:
    FNMA                                        4,772           20            44         4,748
    FHLMC                                       1,526            1            22         1,505
    GNMA                                          870           40                         910
    SBA                                           397            2             1           398
                                             -------------------------------------------------
      Total mortgage-backed securities          7,565           63            67         7,561
  Mutual Funds                                  7,149           47           172         7,024
  Marketable equity securities                 10,693          909         2,096         9,506
                                             -------------------------------------------------
      Total securities available for sale    $222,673       $1,089        $8,190      $215,572
                                             =================================================

</TABLE>

      As a member of the FHLB of Boston, the Bank is required to invest in
$100 par value stock of the FHLB of Boston in the amount of 1% of its
outstanding loans secured by residential housing, or 5% of its outstanding
advances from the FHLB of Boston, whichever is higher. When such stock is
redeemed, the Bank would receive from the FHLB of Boston an amount equal to
the par value of the stock. As of December 31, 2001, 2000 and 1999, the
Company had investments in FHLB of Boston stock of $7,201,000 for each of
the three years, respectively. At December 31, 2001 the weighted average
yield on FHLB of Boston stock was 4.50%.

      The following table sets forth the maturity distribution of
securities held to maturity and securities available for sale at December
31, 2001 and the weighted average yields of such securities (calculated on
the basis of the amortized cost and effective yields weighted for the
scheduled maturity of each security).


<PAGE>  15


<TABLE>
<CAPTION>

                                               Amortized          Weighted
                                                  Cost         Average Yield
                                               ---------       -------------
                                             (In Thousands)


                                            <c>                <c>
US Government Agency obligations
  Due within 1 year                                   -               -
  Due after 1 but within 5 years               $ 83,373            5.04%
  Due after 5 but within 10 years                61,439            6.04%
                                               --------
      Total                                     144,812            5.46%
                                               --------

Other corporate obligations
  Due within 1 year                                   -               -
  Due after 1 but within 5 years                 79,438            6.48%
  Due after 5 but within 10 years                 5,137            6.40%
  Due after 10 years (including $19,950,000
   of floating rate securities)                  25,452            4.74%
                                               --------
      Total                                     110,027            6.07%
                                               --------

Mortgage-backed securities
  Due within 1 year                                   5            7.45%
  Due after 1 but within 5 years                      -               -
  Due after 5 but within 10 years                 4,948            5.55%
  Due after 10 years                             12,895            6.20%
                                               --------
      Total                                      17,848            6.02%
                                               --------

Total debt securities                           272,687            5.74%
Mutual fund shares*                                 900            2.38%
Marketable equity securities*                     3,019           10.34%
Net unrealized gains on
 securities available for sale                    2,601               -
                                               --------
Total securities held to maturity
 and securities available for sale             $279,207            5.78%
                                               ========

</TABLE>

      Included in total debt securities above are other corporate
obligations classified as securities held to maturity, with an amortized
cost of $5,006,000 which are due after one year, but within five years,
with a yield of 6.21%. All other debt securities are classified as
securities available for sale.

      *Mutual fund shares and marketable equity securities have no stated
maturity, and are therefore considered to be due after 10 years.

      The Company did not own any securities of an individual issuer, with
a book value in excess of 10% of stockholders' equity, excluding U.S.
Treasury and U.S. Government agency obligations, at December 31, 2001.


<PAGE>  16


                  (D) Loan Portfolio

      The following table shows Granite State's loan distribution as of
December 31:

<TABLE>
<CAPTION>

                                                   2001        2000        1999        1998        1997
                                                 --------    --------    --------    --------    --------
                                                                (In Thousands)


                                              <c>         <c>         <c>         <c>         <c>
Commercial, financial and agricultural           $ 43,823    $ 50,750    $ 41,837    $ 48,418    $ 68,513
Real estate-residential                           335,632     351,146     316,891     292,059     209,094
Real estate-multifamily                            49,579      43,140      39,477      36,184      36,483
Real estate-commercial                            184,502     177,453     136,566     146,093     151,474
Real estate-construction and land development       9,060       5,385       3,886       2,281       6,000
Installment                                         5,932       6,547       5,952       7,809      11,588
Other                                              26,472      22,964      24,085      22,855      26,013
                                                 --------    --------    --------    --------    --------
      Total Loans                                 655,000     657,385     568,694     555,699    $509,165
Less:
  Allowance for possible loan losses               (8,085)     (7,854)     (7,032)     (7,122)     (7,651)
  Unearned income                                  (1,075)     (1,177)     (1,248)     (1,506)     (1,432)
                                                 --------    --------    --------    --------    --------
      Net Loans                                  $645,840    $648,354    $560,414    $547,071    $500,082
                                                 ========    ========    ========    ========    ========

</TABLE>

                  (E) Maturity of Loans

      The following table shows the maturity distribution of loans
outstanding, excluding non-accrual loans
of $3,015,000 as of December 31, 2001.

<TABLE>
<CAPTION>

                                                 One Year    Over One Year       Over
                                                 or Less     to Five Years    Five Years      Total
                                                 --------    -------------    ----------      -----
                                                                   ( In Thousands)


                                              <c>            <c>            <c>          <c>
Commercial, financial and agricultural           $13,250        $16,666        $ 13,203     $ 43,119
Real estate-residential                            2,589          4,852         327,982      335,423
Real estate-multifamily                            1,871          6,314          41,394       49,579
Real estate-commercial                             7,658         30,236         144,804      182,698
Real estate-construction and land development      4,628          2,377           1,805        8,810
Installment                                        1,517          4,127             269        5,913
Other                                              1,965          1,264          23,214       26,443
                                                 -------        -------        --------     --------
                                                 $33,478        $65,836        $552,671     $651,985
                                                 =======        =======        ========     ========


Loans maturing after one year
  Fixed interest rate                                           $39,630        $128,481     $168,111
  Variable interest rate                                         26,206         424,190      450,396
                                                                -------        --------     --------
                                                                $65,836        $552,671     $618,507
                                                                =======        ========     ========

</TABLE>

      Included in the loan maturity table above, are loans with a variable
interest rate totaling $26,206,000 which are scheduled to mature in one to
five years, of which $18,992,000 are scheduled to reprice within one year
or less, with the remaining $7,214,000 scheduled to reprice within one to
five years. Also included in the loan maturity table, are loans with a
variable interest rate totaling $424,190,000 which are scheduled to mature
after five years, of which $122,244,000 are scheduled to reprice within one
year or less; $261,647,000 which are scheduled to reprice within one to
five years, with the remaining $40,299,000 scheduled to reprice after five
years.


<PAGE>  17


                  (F) Nonperforming Loans and Assets

      The following table summarizes Granite State's nonperforming loans
and assets at December 31. Amounts shown reflect principal only.

<TABLE>
<CAPTION>

                                                  2001       2000       1999       1998       1997
                                                 ------     ------     ------     ------     ------
                                                                  ($ In Thousands)


                                              <c>        <c>        <c>        <c>        <c>
Nonperforming Loans:
Commercial, financial and agricultural           $  704     $  307     $  475     $  678     $  956
Real estate-residential                             209        820        746      1,222      1,489
Real estate-multifamily                               0          0          0        125          0
Real estate-commercial                            1,804      2,030        294        592      4,261
Real estate-construction and land development       250         14          0        378         92
Installment and other                                48         30          1         18        347
                                                 ------     ------     ------     ------     ------
      Total nonperforming loans                   3,015      3,201      1,516      3,013      7,145

Other real estate owned                               0        416      1,288      1,601      1,905
                                                 ------     ------     ------     ------     ------
Total nonperforming loans and other
 real estate owned                               $3,015     $3,617     $2,804     $4,614     $9,050
                                                 ======     ======     ======     ======     ======

Percentage of nonperforming loans and
 other real estate owned to total loans
 receivable                                        0.46%      0.55%      0.49%      0.83%      1.78%
                                                 ======     ======     ======     ======     ======

Percentage of nonperforming loans and
 other real estate owned to total assets           0.30%      0.38%      0.32%      0.53%      1.11%
                                                 ======     ======     ======     ======     ======

Loans delinquent 90 days or more still
 accruing, not included in above                 $  165     $    -     $    4     $  146     $  535
                                                 ======     ======     ======     ======     ======

</TABLE>

      Accrual of interest on loans is discontinued either when reasonable
doubt exists as to the full, timely collection of interest or principal, or
when a loan becomes contractually past due by ninety days unless the loan
is well secured and in the process of collection. When a loan is placed on
nonaccrual status, all interest previously accrued and not received is
reversed against current period earnings.

      For the year ended December 31, 2001, the gross interest income on
nonperforming loans that would have been recorded, had such loans been
current in accordance with their original terms amounted to $263,000. The
amount of interest income on those loans included in net earnings for the
year ended December 31, 2001 amounted to $28,000.

      Other real estate owned is comprised of properties acquired through
foreclosure proceedings or acceptance of a deed in lieu of foreclosure.
Real estate formally acquired in settlement of loans is recorded at the
lower of the carrying value of the loan or the fair value of the property
received less an allowance for estimated costs to sell. Loan losses arising
from the acquisition of such properties are charged against the allowance
for possible loan losses. Provisions to reduce the carrying value to net
realizable value are charged to current period earnings as realized and
reflected as an addition to the valuation allowance. Operating expenses and
gains and losses upon disposition are reflected in earnings as realized.


<PAGE>  18


      Other real estate owned at December 31 was comprised as follows:

<TABLE>
<CAPTION>

                                       2001    2000     1999      1998      1997
                                       ----    ----    ------    ------    ------
                                                     (In Thousands)


                                    <c>     <c>     <c>       <c>       <c>
Condominiums and apartment projects                    $   55    $  131    $  371
Single family housing projects                 $171       794       739       792
Non-retail commercial                           268       691       756       773
Residential                                     187       235       451       437
                                       ----    ----    ------    ------    ------
                                                626     1,775     2,077     2,373
Less:  Valuation allowance                      210       487       476       468
                                       ----    ----    ------    ------    ------
                                       $  0    $416    $1,288    $1,601    $1,905
                                       ====    ====    ======    ======    ======

</TABLE>

      As of December 31, 2001, there were no loan concentrations exceeding
10% of total loans.

      As of December 31, 2001, neither Granite State nor its subsidiary,
Granite Bank, had any foreign loans.

                  (G) Summary of Loan Loss Experience and Allocation
                      of the Allowance for Possible Loan Losses

      The allowance for possible loan losses is maintained through
provisions for possible loan losses based upon management's ongoing
evaluation of the losses inherent in the loan portfolio. The methodology
for determining the amount of the allowance for possible loan losses
consists of several elements. Nonperforming, impaired and delinquent loans
are reviewed individually and the value of any underlying collateral is
considered in determining estimates of possible losses associated with
those loans. Another element involves estimating losses inherent in
categories of loans, based primarily on historical experience, industry
trends and trends in the real estate market and the current economic
environment in the Company's primary market areas. The last element is
based on management's evaluation of various conditions, and involves a
higher degree of uncertainty because they are not identified with specific
problem credits or portfolio segments. The conditions evaluated in
connection with this element include the following: industry and regional
conditions and/or concentrations; seasoning of the loan portfolio and
changes in the composition of and growth in the loan portfolio; the
strength and duration of the current business cycle; existing general
economic and business conditions in the lending areas; credit quality
trends, including trends in nonperforming loans expected to result from
existing conditions and historical loan charge-off experience. At December
31, 1998, the level of the allowance was lower than the 1997 level, due to
reductions in the level of nonperforming and impaired loans in 1998
compared with 1997, increased net charge-offs for 1998 compared with 1997,
as well as a change in the mix of loans to primarily residential real
estate loans which accounted for 52.6% of the total loan portfolio at
December 31, 1998 compared to 41.1% at December 31, 1997, while commercial
real estate and commercial, financial and agricultural loans accounted for
35.0% of the total loan portfolio in 1998 compared to 43.2% in 1997. The
amount of the allowance for possible loan losses decreased at December 31,
1999 compared to December 31, 1998, primarily as a result of decreases in
nonperforming and impaired loans, the low level of net charge-offs in 1999
and the continuing change in the composition of the loan portfolio which
was more predominantly residential real estate in 1999, partially offset by
the overall growth of the loan portfolio. Residential real estate loans
comprised 55.7% of the loan portfolio at December 31, 1999 compared to
52.6% at December 31, 1998. Commercial real estate loans and commercial,
financial and agricultural loans comprised 31.4% of the loan portfolio at
December 31, 1999 compared to 35.0% at December 31, 1998. At December 31,
2000 the level of the allowance was higher than at December 31, 1999,
primarily as a result of an increase in nonperforming and impaired loans,
the overall growth of the loan portfolio and the allowance of the loan
portfolio acquired in connection with the year end 2000 acquisition of the two


<PAGE>  19


Olde Port Bank branch offices. At December 31, 2001 the level of the
allowance was higher than at December 31, 2000, primarily as a result of
increases in commercial real estate loans, multifamily real estate loans
and construction and land development real estate loans as well as a
provision to increase the allowance related to one nonperforming commercial
real estate loan. While management believes that the allowance for possible
loan losses at December 31, 2001 is adequate based on its current review
and estimates, further provisions to the allowance may be necessary.
Additionally, regulatory agencies review the Company's allowance for loan
losses as part of their examination process. Such agencies may require the
Company to recognize additions to the allowance based upon judgments which
may be different from those of management.

      Changes in the allowance for possible loan losses for the year ended
December 31 are as follows:

<TABLE>
<CAPTION>

                                                   2001        2000        1999        1998        1997
                                                 -------     -------     -------     -------     -------
                                                                     (In Thousands)


                                              <c>         <c>         <c>         <c>         <c>
Balance at beginning of year                     $ 7,854     $ 7,032     $ 7,122     $ 7,651     $ 6,253
  Allowance of loan portfolio related
   to branch acquisition                                         606
  Provision for possible loan losses                 660         330          50       1,125       2,425
  Loans charged off                                 (550)       (324)       (559)     (2,113)     (1,205)
  Recoveries of loans previously charged off         121         210         419         459         178
                                                 -------     -------     -------     -------     -------
Balance at end of year                           $ 8,085     $ 7,854     $ 7,032     $ 7,122     $ 7,651
                                                 =======     =======     =======     =======     =======

</TABLE>

      A summary of loan charge-offs by loan category for the year ended
December 31, follows:

<TABLE>
<CAPTION>

                                                   2001        2000        1999        1998        1997
                                                 -------     -------     -------     -------     -------
                                                                     (In Thousands)


                                              <c>         <c>         <c>         <c>         <c>
Commercial, financial and agricultural           $   143     $    91     $    76     $   503     $   356
Real estate-residential                               46         109         113         298         339
Real estate-multifamily                                0           9           0           0         274
Real estate-commercial                               302          32         326         903         150
Real estate-construction and land development          0           0           0          15          19
Installment and other loans                           59          83          44         394          67
                                                 -------     -------     -------     -------     -------
                                                 $   550     $   324     $   559     $ 2,113     $ 1,205
                                                 =======     =======     =======     =======     =======

</TABLE>

      A summary of loan recoveries by loan category for the year ended
December 31, follows:

<TABLE>
<CAPTION>

                                                   2001        2000        1999        1998        1997
                                                 -------     -------     -------     -------     -------
                                                                     (In Thousands)


                                              <c>         <c>         <c>         <c>         <c>
Commercial, financial and agricultural           $    52     $    42     $   258     $    82     $    35
Real estate-residential                                9          24          67          61          64
Real estate-multifamily                                0           0           0         138           0
Real estate-commercial                                52          77          67          78          56
Real estate-construction and land development          0          50           0           1           1
Installment and other loans                            8          17          27          99          22
                                                 -------     -------     -------     -------     -------
                                                 $   121     $   210     $   419     $   459     $   178
                                                 =======     =======     =======     =======     =======

</TABLE>


<PAGE>  20


      The ratio of net loan charge-offs to average loans outstanding for
the year ended December 31, is summarized as follows:

<TABLE>
<CAPTION>

                                                   2001        2000        1999        1998        1997
                                                 -------     -------     -------     -------     -------
                                                                    ($ In Thousands)


                                              <c>         <c>         <c>         <c>         <c>
Net loan charge-offs                             $    429    $    114    $    140    $  1,654    $  1,027
                                                 ========    ========    ========    ========    ========

Average loans outstanding                        $667,963    $586,081    $559,651    $536,596    $474,844
                                                 ========    ========    ========    ========    ========
Ratio of net loan charge-offs
 to average loans outstanding                        0.06%       0.02%       0.03%       0.31%       0.22%
                                                 ========    ========    ========    ========    ========

</TABLE>

      An allocation of the allowance for possible loan losses as of
December 31 follows:

<TABLE>
<CAPTION>


                                          2001                          2000                          1999
                               --------------------------    --------------------------    --------------------------
                                         Percent of loans              Percent of loans              Percent of loans
                                         in each category              in each category              in each category
                               Amount     to total loans     Amount     to total loans     Amount     to total loans
                               ------    ----------------    ------    ----------------    ------    ----------------
                                                                  ($ In Thousands)


                            <c>            <c>            <c>            <c>            <c>            <c>
Commercial, financial
 and agricultural              $1,019           6.69%        $1,335           7.72%        $1,222           7.36%
Real estate-residential         1,288          51.24%         1,031          53.42%         1,007          55.72%
Real estate-multifamily           696           7.57%           608           6.56%           551           6.94%
Real estate-commercial          3,510          28.17%         3,273          26.99%         2,299          24.01%
Real estate-construction
 and land development             198           1.38%           122           0.82%            63           0.69%
Installment and other loans       413           4.95%           536           4.49%           511           5.28%
Unallocated                       961              -            949              -          1,379              -
                               ------         ------         ------         ------         ------         ------
                               $8,085         100.00%        $7,854         100.00%        $7,032         100.00%
                               ======         ======         ======         ======         ======         ======

<CAPTION>

                                          1998                          1997
                               --------------------------    --------------------------
                                         Percent of loans              Percent of loans
                                         in each category              in each category
                               Amount     to total loans     Amount     to total loans
                               ------    ----------------    ------    ----------------
                                                   ($ In Thousands)


                            <c>            <c>            <c>            <c>
Commercial, financial
 and agricultural              $1,245           8.71%        $1,507          13.46%
Real estate-residential         1,070          52.56%           892          41.07%
Real estate-multifamily           112           6.51%            81           7.16%
Real estate-commercial          2,567          26.29%         3,229          29.75%
Real estate-construction
 and land development             278           0.41%           125           1.18%
Installment and other loans       542           5.52%           690           7.38%
Unallocated                     1,308              -          1,127              -
                               ------         ------         ------         ------
                               $7,122         100.00%        $7,651         100.00%
                               ======         ======         ======         ======

</TABLE>

      The allowance for possible loan losses as a percentage of loans
outstanding at December 31 of each reported period is as follows:

<TABLE>
<CAPTION>

                                2001     2000     1999     1998     1997
                                ----     ----     ----     ----     ----


                             <c>      <c>      <c>      <c>      <c>
Allowance for possible
 loan losses as a percentage
 of total loans outstanding     1.23%    1.19%    1.24%    1.28%    1.50%
                                ====     ====     ====     ====     ====

</TABLE>


<PAGE>  21


                  (H) Risks Associated with Commercial Real Estate,
                      Commercial and Construction Loans

      Commercial real estate and commercial lending involves significant
additional risks compared with one-to-four family residential mortgage
lending, and therefore typically accounts for a disproportionate share of
delinquent loans and real estate owned through foreclosure or by deed in
lieu of foreclosure. Such lending generally involves larger loan balances
to single borrowers or groups of related borrowers than does residential
lending, and repayment of the loan depends in part on the underlying
business and financial condition of the borrower and is more susceptible to
adverse future developments. If the cash flow from income-producing
property is reduced, for example, because leases are not obtained or
renewed, the borrower's ability to repay the loan may be materially
impaired. These risks can be significantly affected by considerations of
supply and demand in the market for office, manufacturing and retail space
and by general economic conditions. As a result, commercial real estate and
commercial loans are likely to be subject, to a greater extent than
residential real estate loans, to adverse conditions in the general
economy.

      Construction loans are, in general, subject to the same risks as
commercial real estate loans, but involve additional risks as well. Such
additional risks are due to uncertainties inherent in estimating
construction costs, delays arising from labor problems, shortages of
material, uncertain marketability of a complete project and other
unpredictable contingencies that make it relatively difficult to determine
accurately the total loan funds required to complete a project or the value
of the completed project. Construction loan funds are advanced on the
security of the project under construction, which is of uncertain value
prior to the completion of construction. This uncertainty is increased in
depressed real estate markets. When a construction project encounters cost
overruns, marketing or other problems, it may become necessary, in order to
sustain the project and preserve collateral values, for the lender to
advance additional funds and to extend the maturity of its loan. In a
declining market, there is no assurance that this strategy will
successfully enable the lender to recover outstanding loan amounts and
interest due. Moreover, foreclosing on such properties results in
administrative expense and substantial delays in recovery of outstanding
loan amounts and provides no assurance that the lender will recover all
monies due to it, either by developing the property, subject to regulatory
limitations and to the attendant risks of development, or by selling the
property to another developer.

                  (I) Deposits

      The average balance of deposits and the average rates paid thereon
are summarized as follows:

<TABLE>
<CAPTION>

                                           2001                    2000                    1999
                                   --------------------    --------------------    --------------------
                                               Weighted                Weighted                Weighted
                                   Average     Average     Average     Average     Average     Average
                                   Balance       Rate      Balance       Rate      Balance       Rate
                                   -------     --------    -------     --------    -------     --------
                                                             ($ In Thousands)


                                <c>           <c>       <c>           <c>       <c>           <c>
Interest bearing deposits:
  Interest bearing NOW deposits    $229,636      2.20%     $204,608      2.68%     $199,598      2.45%
  Money market deposits              16,757      2.74%       14,178      2.53%       18,947      2.55%
  Savings deposits                   86,783      1.72%       85,475      2.21%       89,014      2.24%
  Time deposits                     275,364      5.48%      256,668      5.54%      256,660      5.26%
                                   --------                --------                --------
Total interest bearing deposits    $608,540      3.63%     $560,929      3.91%     $564,219      3.70%
                                   ========      ====      ========      ====      ========      ====

Noninterest bearing deposits       $ 89,067       N/A      $ 77,522       N/A      $ 73,145       N/A
                                   ========                ========                ========

</TABLE>



<PAGE>  22


                  (J) Maturities of Time Deposits

      The maturity distribution of time certificates of deposit of $100,000
or more at December 31, 2001 follows:

<TABLE>
<CAPTION>

REMAINING MATURITY               BALANCE
------------------               -------
                             (In Thousands)


                              <c>
3 months or less                 $ 7,918
Over 3 through 6 months            6,430
Over 6 through 12 months          20,750
Over 12 through 36 months          8,617
Over 36 months                     3,097
                                 -------
                                 $46,812
                                 =======

</TABLE>

                  (K) Return on Equity and Assets

      Operating and capital ratios for the year ended December 31 follows:

<TABLE>
<CAPTION>

                                                     2001      2000      1999
                                                    ------    ------    ------



                                                 <c>       <c>       <c>
Net earnings to average assets                       1.15%     1.15%     1.18%

Net earnings to average
 stockholders' equity                               14.39%    14.25%    13.88%

Dividend pay out ratio on common stock  -basic      31.48%    34.97%    32.00%
                                        -diluted    32.23%    35.16%    32.75%

Average equity to average total assets               7.97%     8.07%     8.47%

</TABLE>

                  (L) Borrowings

      Information regarding borrowings in Note 13 to the Consolidated
Financial Statements in the Annual Report to Stockholders for the year
ended December 31, 2001 is incorporated herein by reference.

Short-Term Borrowings
---------------------

      Outstanding short-term borrowings at December 31 were as follows:

<TABLE>
<CAPTION>

                                                       2001       2000       1999
                                                      -------    -------    -------
                                                             (In Thousands)


                                                   <c>        <c>        <c>
Securities sold under agreements to repurchase        $85,013    $90,811    $75,042
                                                      =======    =======    =======

Short-term and current portion of other borrowings    $    54    $    51    $    48
                                                      =======    =======    =======

</TABLE>


<PAGE>  23


      The maximum amount of securities sold under agreements to repurchase
and short-term and current portion of other borrowings outstanding at any
month end during the year ended December 31 were as follows:

<TABLE>
<CAPTION>

                                                       2001       2000       1999
                                                      -------    -------    -------
                                                             (In Thousands)


                                                   <c>        <c>        <c>
Securities sold under agreements to repurchase        $96,820    $90,811    $75,042
                                                      =======    =======    =======

Short-term and current portion of other borrowings    $ 6,202    $10,923    $ 2,919
                                                      =======    =======    =======

</TABLE>

      The average balance of securities sold under agreements to repurchase
and short-term and current portion of other borrowings and weighted average
interest rates thereon for the year ended December 31 were as follows:

<TABLE>
<CAPTION>

                                            2001                       2000                       1999
                                  -----------------------    -----------------------    -----------------------
                                  Average      Weighted      Average      Weighted      Average      Weighted
                                  Balance    Average Rate    Balance    Average Rate    Balance    Average Rate
                                  -------    ------------    -------    ------------    -------    ------------
                                                                 ($ in Thousands)


                               <c>            <c>         <c>            <c>         <c>            <c>
Securities sold under
 agreements to repurchase         $88,431        3.50%       $77,723        5.55%       $65,078        4.08%
                                  =======        ====        =======        ====        =======        ====

Short-term and current portion
 of other borrowings              $   495        5.57%       $ 1,320        6.74%       $   621        5.15%
                                  =======        ====        =======        ====        =======        ====

</TABLE>


<PAGE>  24


      Other borrowings, consist of advances from the FHLB of Boston.
Scheduled maturities and interest rates on such advances at December 31,
are as follows:

<TABLE>
<CAPTION>

Maturity                                                    Interest Rate      2001        2000
--------------------------------------------------------    -------------    --------    --------
                                                                                (In Thousands)


                                                             <c>          <c>         <c>
April 2003                                                      5.84%        $ 20,000    $ 20,000
May 2003                                                        5.92%          10,000      10,000
Amortizing advance, final payment, October 2005                 6.13%             220         267
May 2008                                                        6.09%          10,000      10,000
October 2008                                                    4.49%          20,000      20,000
October 2009                                                    5.58%          10,000      10,000
March 2010                                                      6.09%          10,000      10,000
October 2010                                                    5.84%          10,000      10,000
December 2010                                                   4.86%          10,000      10,000
February 2011                                                   4.58%           5,000
February 2011                                                   4.82%           5,000
March 2011                                                      3.99%          10,000
May 2011                                                        4.47%           5,000
August 2011                                                     4.55%          10,000
January 2014                                                    5.00%              48          48
April 2014                                                      5.00%              78          78
June 2014                                                       5.00%              60          60
Amortizing advance, final payment, August 2014                  5.00%              58          62
                                                                             --------    --------
    Total other borrowings                                                    135,464     100,515
Less: short-term and current portion of other borrowings                           54          51
                                                                             --------    --------
    Long-term portion of other borrowings                                    $135,410    $100,464
                                                                             ========    ========

</TABLE>

      Principal payments due on long-term borrowings after December 31,
2001 are $54,000 in 2002, $30,058,000 in 2003, $62,000 in 2004, $60,000 in
2005, $4,000 in 2006 and $105,226,000 in years thereafter. The FHLB of
Boston has the right to call and require the repayment of $70,000,000 of
borrowings during 2002, $20,000,000 of which is at an interest rate of
4.49% maturing in 2008; $10,000,000 of which is at an interest rate of
5.58% maturing in 2009; $30,000,000 of which is at a weighted average
interest rate of 5.60% maturing in 2010 and $10,000,000 of which is at an
interest rate of 3.99% maturing in 2011. Additionally, the FHLBB has the
right to call and require repayment of $10,000,000 of borrowings during
2003, which is at a weighted average interest rate of 4.53% maturing in
2011 and $15,000,000 of borrowings during 2004, which is at a weighted
average interest rate of 4.64% maturing in 2011.

                  (M) Competition

      The Bank continues to experience substantial competition in
attracting and retaining deposit accounts and in making mortgage and other
loans. There are numerous federally-insured banks and thrifts with offices
within Granite Bank's principal market areas, many of which are
headquartered there. In addition, the Bank experiences competition from
credit unions and other financial intermediaries which are not subject to
similar State and Federal regulations.

      The primary factors in competing for deposit accounts are service,
interest rates, convenience and, to a lesser extent, products offered.
Competitors for deposit accounts include other depository institutions and
other investment vehicles such as mutual funds, government and corporation
obligations, and the equity capital markets.


<PAGE>  25


      The primary factors in competing for loans are interest rates, loan
origination fees and the quality and range of lending products and services
offered. Competition for origination of loans comes primarily from savings
institutions, mortgage banking firms, and other commercial banks.

                  (N) Subsidiaries

      Granite State owns 100% of the capital stock of Granite Bank, a New
Hampshire chartered commercial bank, its sole subsidiary.

      (d) Financial Information about Foreign and Domestic Operations
          and Export Sales

      Not applicable.


<PAGE>  26


Item 2.   Properties

      The following table sets forth the location of the Company's offices
as of December 31, 2001. See also Notes 10 and 14 to the Consolidated
Financial Statements in the Annual Report to Stockholders for the year
ended December 31, 2001 which are incorporated herein by reference.

<TABLE>
<CAPTION>

Office Type                   Location                   City/Town     Status
--------------    ---------------------------------    ------------    -------


               <c>                                  <c>             <c>
Full service      122 West Street                      Keene           Owned*
(Headquarters)
Full service      Routes 9 and 63                      Chesterfield    Owned*
Full service      Elm Street at Route 101              Milford         Owned*
Full service      Lorden Plaza                         Milford         Leased*
Full service      Jct Route 101 & 202                  Peterborough    Owned*
Full service      35 Main Street                       Peterborough    Owned*
Full service      70 Main Street                       Durham          Owned*
Full service      Southgate Plaza, Route 1             Portsmouth      Owned*
Full service      93 Middle Street                     Portsmouth      Owned*
Full service      9 Child's Way and Route 9            Hillsborough    Owned*
Full service      Lanctot's Shopping Center Rte 114    Weare           Owned*
Full service      62 Peterborough Street               Jaffrey         Owned*
Full service      167 Main Street                      Antrim          Owned*
Full service      197 Loudon Road                      Concord         Leased*
Full service      66 No. Main Street                   Concord         Leased*
Full service      Pennichuck Square                    Merrimack       Leased*
Full service      146 Main Street                      Nashua          Leased*
Full service      853 Lafayette Road                   Hampton         Owned*
Full service      501 Islington Street                 Portsmouth      Owned*

<FN>
*   Office includes an ATM facility. The headquarters in Keene and the
    Durham branch each have two ATM facilities on site.
</FN>
</TABLE>

      Additionally, the Company operates twenty-four ATMs at other
locations in Keene, Fitzwilliam, Milford, Amherst, Durham, West Swanzey,
North Swanzey, Peterborough, Hillsborough, Concord, Dublin and Greenfield,
New Hampshire. The ATM facilities and their enclosures are owned by the
Company; the property on which they are located is leased. All offices and
ATM facilities are located in New Hampshire. The Company believes that its
current facilities are adequate to meet its present needs.

Item 3.   Legal Proceedings

      The Company is a defendant in various legal actions incident to its
business, none of which is believed by management to be material to the
financial condition of the Company.

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

      None.


<PAGE>  27


Additional Item. Executive Officers

      Information regarding executive officers not listed as directors in
the Proxy Statement is as follows:

      Charles B. Paquette (age 49) is the Executive Vice President,
Secretary and Chief Operations Officer of Granite State and Senior
Executive Vice President, Secretary and Chief Operations Officer of Granite
Bank, positions he assumed in 1986 and 1991, respectively. Mr. Paquette has
been employed in a management position by the Company and Granite Bank
since 1980.

      William C. Henson (age 46) is the Executive Vice President of Granite
State and Senior Executive Vice President and Chief Credit Officer of
Granite Bank, positions he assumed in 1986 and 2000, respectively. Mr.
Henson joined the Bank in 1980, and since 1982 has served in an executive
management capacity.

      William G. Pike (age 50) is the Executive Vice President and Chief
Financial Officer of Granite State and Senior Executive Vice President and
Chief Financial Officer of Granite Bank, positions he assumed in 1991 and
2000, respectively. Mr. Pike has served in an executive management position
in the Bank since 1991.


<PAGE>  28


                                   PART II

Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters

      (a) Market Information

      Granite State's common stock is quoted on the Nasdaq Stock Market
under the symbol GSBI. The following table shows the range of the high and
low closing prices and dividend information on a quarterly basis for
Granite State's common stock for 2001 and 2000. The table does not reflect
inter-dealer prices, potential mark-ups, mark-downs or commissions, and may
not necessarily represent actual transactions.

<TABLE>
<CAPTION>

                                                        2001
                                      ----------------------------------------
                                      4th Qtr    3rd Qtr    2nd Qtr    1st Qtr
                                      -------    -------    -------    -------


                                   <c>        <c>        <c>        <c>
      Dividends declared per share    $ 0.17     $ 0.17     $ 0.17     $ 0.17
Stock Price
      High........................     23.60      24.00      23.60      22.38
      Low.........................     20.75      21.75      20.50      18.75

<CAPTION>

                                                        2000
                                      ----------------------------------------
                                      4th Qtr    3rd Qtr    2nd Qtr    1st Qtr
                                      -------    -------    -------    -------


                                   <c>        <c>        <c>        <c>
      Dividends declared per share    $ 0.16     $ 0.16     $ 0.16     $ 0.16
Stock Price
      High........................     20.88      18.88      17.13      20.38
      Low.........................     17.38      15.00      14.69      14.88

</TABLE

      (b) Holders

      As of March 1, 2002, Granite State had approximately 1,044 common
shareholders of record.

      (c) Dividends

      The holders of common stock of Granite State are entitled to receive
and share pro-rata in such dividends as may be declared by the Board of
Directors of Granite State out of funds legally available therefor. Under
New Hampshire corporate law, Granite State may pay dividends on its common
stock, provided that after giving effect to the dividend, it has the
ability to pay its debts in the ordinary course when due, and its total
assets exceed its total liabilities, plus any amount needed to satisfy the
rights of security holders having a superior claim upon liquidation.

      New Hampshire banking regulations prohibit the payment of a cash
dividend if the effect thereof would cause the net worth of the Bank to be
reduced below its applicable capital requirements. The Federal Deposit
Insurance Act prohibits the Bank from making a capital distribution,
including payment of a cash dividend, if the Bank would not meet applicable
capital requirements after the payment. Furthermore, the Federal Deposit
Insurance Act prohibits the Bank from paying dividends on its capital stock
if it is in default in the payment of any assessment to the FDIC.

Item 6.   Selected Financial Data

      Selected Financial Data on page 61 of the Annual Report to
Stockholders for the year ended December 31, 2001 is incorporated herein by
reference.


<PAGE>  29


Item 7.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations

      Management's Discussion and Analysis of Financial Condition and
Results of Operations on pages 13 to 31, inclusive, of the Annual Report to
Stockholders for the year ended December 31, 2001 is incorporated herein by
reference.

Item 7a.  Quantitative and Qualitative Disclosures About Market Risk

      Quantitative and Qualitative Disclosures About Market Risk on pages
18 to 22 inclusive, of the Annual Report to Stockholders for the year ended
December 31, 2001 is incorporated herein by reference.

Item 8.   Financial Statements and Supplementary Data

      (a) Financial Statements Required by Regulation S-X

      Information relating to financial statements on pages 33 to 60,
inclusive, of the Annual Report to Stockholders for the year ended December
31, 2001 is incorporated herein by reference.

      (b) Supplementary Financial Information

            (1) Selected Quarterly Financial Data

      The Selected Quarterly Financial Data on page 60 of the Annual Report
to Stockholders for the year ended December 31, 2001 is incorporated herein
by reference.

            (2) Information on the Effects of Changing Prices

      Management's discussion of the effects of inflation on page 30 of the
Annual Report to Stockholders for the year ended December 31, 2001 is
incorporated herein by reference.

            (3) Information About Oil and Gas Producing Activities

      Not applicable.

Item 9.   Changes in and Disagreements with Accountants on Accounting and
          Financial Disclosure

      None.


<PAGE>  30


                                  PART III

Item 10.  Directors and Executive Officers of the Registrant

      Information regarding directors and executive officers of Granite
State on pages 3 and 4 of the Proxy Statement for the 2002 Annual Meeting
of Stockholders is incorporated herein by reference.

Item 11.  Executive Compensation

      Information regarding executive compensation on pages 5 to 10 of the
Proxy Statement for the 2002 Annual Meeting of Stockholders is incorporated
herein by reference.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

      Information regarding security ownership of certain beneficial owners
and Granite State's management on pages 2 to 4 of the Proxy Statement for
the 2002 Annual Meeting of Stockholders is incorporated herein by
reference.

Item 13.  Certain Relationships and Related Transactions

      Information regarding certain relationships and related transactions
on page 10 of the Proxy Statement for the 2002 Annual Meeting of
Stockholders is incorporated herein by reference.

                                   PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

      (a) List of Documents Filed as Part of this Report

            (1) Financial Statements

      The financial statements listed below and the report of independent
certified public accountants are incorporated herein by reference to the
Annual Report to Stockholders for the year ended December 31, 2001, in Item
8. Page references are to such Annual Report.

      Financial Statements                                    Page Reference
      --------------------                                    --------------

      Granite State Bankshares, Inc. and Subsidiary

        Report of Independent Certified Public Accountants          33

        Consolidated Statements of Financial Condition              34

        Consolidated Statements of Earnings                         35

        Consolidated Statements of Comprehensive Income             36

        Consolidated Statements of Stockholders' Equity             37

        Consolidated Statements of Cash Flows                       38

        Notes to Consolidated Financial Statements                39 - 60


<PAGE>  31


            (2) Financial Statements Schedules

      Schedules of the Consolidated Financial Statements required by the
applicable accounting regulations of the Securities and Exchange Commission
are not required under the related instructions or are inapplicable, and
therefore have been omitted.

      The remaining information appearing in the Annual Report to
Stockholders for the year ended December 31, 2001, is not deemed to be
filed as part of this report, except as expressly provided herein.

      (b) Reports on Form 8-K

      None

      (c) Exhibits

      The exhibits listed below are filed herewith or are incorporated by
reference to other filings.

                        Exhibit Index to Form 10-K

<TABLE>

      
               <c>
      Exhibit 2         Agreement and Plan of Reorganization by and among
                        Granite State, Granite Bank and Primary Bank, as
                        amended, dated as of April 29, 1997 and the
                        Agreement and Plan of Merger among Granite Bank and
                        Primary Bank and joined in by Granite State*

      Exhibit 3.1       Articles of Incorporation**

      Exhibit 3.2       Bylaws ***

      Exhibit 10.1      Stock Option Plan**

      Exhibit 10.2      Employment Agreement with Charles W. Smith**

      Exhibit 10.3      Amendment No. 1 to Employment Agreement with
                        Charles W. Smith***

      Exhibit 10.4      Form of Special Termination Agreement with Messrs.
                        Charles B. Paquette, William C. Henson, William G. Pike
                        and William D. Elliott***

      Exhibit 10.5      Employee Stock Ownership Plan**

      Exhibit 10.7      1997 Granite State Bankshares, Inc. Long-Term Incentive
                        Stock Benefit Plan****

      Exhibit 10.8      Restated Executive Supplemental Retirement Income
                        Agreement for Charles W. Smith*****

      Exhibit 10.9      Form of Executive Supplemental Retirement Income
                        Agreement with Messrs. Charles B. Paquette,
                        William C. Henson and William G. Pike ******

      Exhibit 11        Calculations of Basic Earnings Per Share and Diluted
                        Earnings Per Share (See Note 3 to Notes to Consolidated
                        Financial Statements)

      Exhibit 13        Portions of the Annual Report to Stockholders for the
                        year ended December 31, 2001


<PAGE>  32


      Exhibit 21        Subsidiary of Granite State Bankshares, Inc. (See
                        Part I, Item 1(a) and Item 1 (c)(5)(N) of Form 10-K.)

      Exhibit 23.1      Consent of Independent Certified Public Accountant-
                        Grant Thornton LLP

<FN>
*         Incorporated by reference from Appendix A to the Granite State
          Bankshares, Inc., and Primary Bank Joint Proxy Statement dated
          August 8, 1997.

**        Incorporated by reference from Granite State Bankshares, Inc.,
          Form S-1, filed on April 18, 1986.

***       Incorporated by reference from Granite State Bankshares, Inc.,
          Form 10-KSB, filed on March 27, 1997.

****      Incorporated by reference from Appendix A to the Proxy Statement
          for the 1998 Annual Meeting of Stockholders.

*****     Incorporated by reference from Granite State Bankshares, Inc.
          Form 10K, Exhibit 10.8 filed on March 27, 1998.

******    Incorporated by reference from Granite State Bankshares, Inc.
          Form 10Q, Exhibit 10.9 filed on August 12, 1999.
</FN>
</TABLE>


<PAGE>  33


                                 SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Granite State Bankshares, Inc., the registrant, has
duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                       GRANITE STATE BANKSHARES, INC.

                                       /s/  Charles W. Smith
                                       ---------------------
Dated :  March 15, 2002                By:  Charles W. Smith
                                            Chairman of the Board

      Pursuant to the requirements of the Securities Exchange Act of 1934
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.


/s/ Charles W. Smith       3/15/02    Chief Executive Officer
--------------------                  (Principal Executive Officer) and
Charles W. Smith                      Chairman of the Board


/s/ William G. Pike        3/15/02    Executive Vice President
-------------------                   and Chief Financial Officer
William G. Pike                       (Principal Financial and
                                      Accounting Officer)


/s/ Dr. David M.Bartley    3/15/02    Director
-----------------------
Dr.David M.Bartley


/s/ Philip M. Hamblet      3/15/02    Director
---------------------
Philip M. Hamblet


/s/ Joseph S. Hart         3/15/02    Director
------------------
Joseph S. Hart


/s/ David J. Houston       3/15/02    Director
--------------------
David J. Houston


<PAGE>  34


/s/ James L. Koontz        3/15/02    Director
-------------------
James L. Koontz


/s/ Peter C. Read          3/15/02    Director
-----------------
Peter C. Read


/s/ William Smedley V      3/15/02    Director
---------------------
William Smedley V


/s/ James C. Wirths III    3/15/02    Director
-----------------------
James C. Wirths III


/s/ E. Story Wright        3/15/02    Director
-------------------
E. Story Wright


<PAGE>  35