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, 2000

                         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
14, 2001, was $98,638,980.  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 14, 2001, the number of shares of the Registrant's common
stock outstanding of record (exclusive of treasury shares) was 5,360,220.

                           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, 2000       "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 2001            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"


                  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                                       25

     d. Financial Information About Foreign and
        Domestic Operations and Export Sales                             25

Item 2. Properties                                                       26

Item 3. Legal Proceedings                                                26

Item 4. Submission of Matters to a Vote of Security Holders              26

Additional Item. Executive Officers                                      27

                                    PART II

                                                                        Page
                                                                        ----
Item 5. Market for Registrant's Common Equity and
        Related Stockholder Matters                                      28
     a. Market Information                                               28
     b. Holders                                                          28
     c. Dividends                                                        28

Item 6. Selected Financial Data                                          28

Item 7. Management's Discussion and Analysis of Financial
        Condition and Results of Operations                              29

Item 7a.Quantitative and Qualitative Disclosures About
        Market Risk                                                      29

Item 8. Financial Statements and Supplementary Data                      29

     a. Financial Statements Required by Regulation S-X                  29
     b. Supplementary Financial Information                              29

             1. Selected Quarterly Financial Data                        29
             2. Information on the Effects of Changing Prices            29
             3. Information About Oil and Gas Producing Activities       29

Item 9. Changes in and Disagreements with Accountants
        on Accounting and Financial Disclosure                           29

                                    PART III


Item 10. Directors and Executive Officers of the Registrant              30

Item 11. Executive Compensation                                          30

Item 12. Security Ownership of Certain Beneficial Owners
         and Management                                                  30

Item 13. Certain Relationships and Related Transactions                  30

                                    PART IV

Item 14. Exhibits, Financial Statement Schedules, and
         Reports on Form 8-K                                             30

      a. List of Documents filed as Part of this Report                  30

             1. Financial Statements                                     30
             2. Financial Statement Schedules                            31

      b. Reports on Form 8-K                                             31
      c. Exhibits                                                        31

Signatures                                                               33

                                    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, 2000, which is incorporated herein by reference.

      (b) Financial Information about Industry Segments

      Not applicable.

      (c) Narrative Description of Business

            (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 44 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.

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, 2000, 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 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,
2000 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 2000, these assessments totaled $13,137.

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.

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 $66,442,000 at December 31,
2000.

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, 2000, the Bank's ratio of core capital to average total assets
equaled 7.44%, 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, 2000, the Bank met its risk based capital requirements with a core
risk-based capital to risk-weighted assets ratio of 10.28% and a total risk-
based capital to risk-weighted assets ratio of 11.50%.

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, 2000, 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, 2000.

      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 2000, the Bank paid annual insurance premiums of $130,000
compared with $95,000 in 1999.

      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. 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 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 2000 on the Bank's deposits was 0.0207%.

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 2000, these regulations required reserves of 3% of total transaction
accounts of up to $44.3 million. Total transaction accounts amounting to over
$44.3 million required a reserve of $1.4 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 $5.0 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, 2000. The Bank also
has the authority to borrow from the Federal Reserve Board "discount window" to
meet its short-term liquidity needs.

      During December, 2000, the amount of reservable liabilities exempt from
reserve requirements was increased to $5.5 million and the level at which
reservable liabilities would be subject to the 10% rate was lowered to $42.8
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, 2000, Granite State had consolidated Tier I and
total risk-based capital ratios of 10.39% and 11.61%, respectively and a
leverage ratio of Tier I capital to average total assets of 7.52%.

      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 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; a percentage of its outstanding
advances from the FHLB of Boston; or 1% of 30% of total assets. As of December
31, 2000, 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 $5,026,000.

            (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, 2000, Granite State and its subsidiary employed 266
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.

                  (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, 2000, on page 22 of the Annual
Report to Stockholders for the year ended December 31, 2000 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, 2000, on page 23 of the
Annual Report to Stockholders for the year ended December 31, 2000 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, 2000, 1999 and 1998.

      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, 2000, 1999 and 1998.

<TABLE>
<CAPTION>

                                                                                  Estimated
                                         Amortized    Unrealized    Unrealized      Market
                                            Cost        Gains         Losses        Value
                                         ---------    ----------    ----------    ----------
<S>                                     <C>          <C>           <C>           <C>
                                                           (In Thousands)
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
                                          =======         =====         =====       =======
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
                                          =======         =====         =====       =======
Securities held to maturity
At December 31, 1998
 US Government agency obligations       $  17,265    $      230                  $   17,495
 Other corporate obligations                5,012            41                       5,053
                                           ------         -----         -----        ------
  Total securities held to maturity     $  22,277    $      271    $        0    $   22,548
                                           ======         =====         =====        ======
Securities available for sale
At December 31, 1998
 US Treasury obligations                $  82,521    $    1,195                  $   83,716
 US Government agency obligations          55,961           112    $       75        55,998
 Other corporate obligations               46,593           150           286        46,457
 Mortgage-backed securities:
  FNMA                                      7,045            35            49         7,031
  FHLMC                                     2,876             2            25         2,853
  GNMA                                      1,190            59             3         1,246
  SBA                                         552            16                         568
                                           ------         -----         -----        ------
   Total mortgage-backed securities        11,663           112            77        11,698
  Mutual Funds                              6,326           105            29         6,402
  Marketable equity securities             14,122         2,785         1,413        15,494
                                          -------         -----         -----       -------
   Total securities available for sale  $ 217,186    $    4,459    $    1,880    $  219,765
                                          =======         =====         =====       =======

</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 1% of 30% of total assets,
or a percentage 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, 2000,
1999 and 1998, the Company had investments in FHLB of Boston stock of $7,201,000
for each of the three years, respectively. At December 31, 2000 the weighted
average yield on FHLB of Boston stock was 8.00%.

      The following table sets forth the maturity distribution of securities
held to maturity and securities available for sale at December 31, 2000 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).

<TABLE>
<CAPTION>

                                       Amortized      Weighted
                                         Cost       Average Yield
                                       ---------    -------------
<S>                                   <C>                <C>
                                    (In Thousands)

US Government Agency obligations
 Due within 1 year                           -             -
 Due after 1 but within 5 years       $  101,512         6.03%
 Due after 5 but within 10 years          11,995         6.73%
                                         -------
  Total                                  113,507         6.10%
                                         -------
Other corporate obligations
 Due within 1 year                        11,026         5.65%
 Due after 1 but within 5 years           58,174         6.56%
 Due after 5 but within 10 years           1,268         6.45%
 Due after 10 years                       18,785         8.31%
                                          ------
  Total                                   89,253         6.82%
                                          ------
Mortgage-backed securities
 Due within 1 year                             8         8.37%
 Due after 1 but within 5 years              942         6.27%
 Due after 5 but within 10 years               -           -
 Due after 10 years                        5,192         7.38%
                                         -------
  Total                                    6,142         7.21%
                                         -------
Total debt securities                    208,902         6.44%
Mutual fund shares*                          900         2.48%
Marketable equity securities*              6,525         3.38%
Net unrealized losses on
 securities available for sale            (1,794)
                                         -------
Total securities held to maturity
 and securities available for sale    $  214,533         6.33%
                                         =======

</TABLE>

      Included in total debt securities above are U.S. Government Agency and
other corporate obligations classified as securities held to maturity, with an
amortized cost of $18,011,000, $16,008,000 of which are due after one year, but
within five years, with a weighted average yield of 6.34% and $2,003,000 of
which are due after five years, but within ten years with a weighted average
yield of 7.00%. 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, 2000.

            (D) Loan Portfolio

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

<TABLE>
<CAPTION>

                                                  2000       1999       1998       1997       1996
                                                --------   --------   --------   --------   --------
<S>                                            <C>        <C>        <C>        <C>        <C>
                                                                   (In Thousands)

Commercial, financial and agricultural         $  50,750  $  41,837  $  48,418  $  68,513  $  63,543
Real estate-residential                          394,286    356,368    328,243    245,577    200,983
Real estate-commercial                           177,453    136,566    146,093    151,474    139,400
Real estate-construction and land development      5,385      3,886      2,281      6,000      5,355
Installment                                        6,547      5,952      7,809     11,588     12,076
Other                                             22,964     24,085     22,855     26,013     20,940
                                                 -------    -------    -------    -------    -------
    Total Loans                                  657,385    568,694    555,699    509,165    442,297
Less:
 Allowance for possible loan losses               (7,854)    (7,032)    (7,122)    (7,651)    (6,253)
 Unearned income                                  (1,177)    (1,248)    (1,506)    (1,432)    (1,860)
                                                 -------    -------    -------    -------    -------
    Net Loans                                  $ 648,354  $ 560,414  $ 547,071  $ 500,082  $ 434,184
                                                 =======    =======    =======    =======    =======

</TABLE>

      Included in real estate - residential loans in the table above are
multi-family real estate loans of $43,140,000, $39,477,000, $36,184,000,
$36,483,000 and $26,156,000, respectively, at December 31, 2000, 1999, 1998,
1997 and 1996.

            (E) Maturity of Loans

      The following table shows the maturity distribution of loans
outstanding, excluding non-accrual loans of $3,201,000 as of December 31, 2000.

<TABLE>
<CAPTION>

                                                One Year     Over One Year       Over
                                                 or Less     to Five Years    Five Years     Total
                                                ---------    -------------    ----------    --------
<S>                                            <C>          <C>              <C>           <C>
                                                                     (In Thousands)

Commercial, financial and agricultural         $   11,306   $     18,329     $   20,808    $  50,443
Real estate-residential                             3,073         12,705        377,688      393,466
Real estate-commercial                              8,067         29,669        137,687      175,423
Real estate-construction and land development       2,969          1,272          1,130        5,371
Installment                                         1,884          4,379            256        6,519
Other                                               1,953          1,949         19,060       22,962
                                                   ------         ------        -------      -------
                                               $   29,252   $     68,303     $  556,629    $ 654,184
                                                   ======         ======        =======      =======
Loans maturing after one year:
 Fixed interest rate                                        $     40,104     $  155,186    $ 195,290
 Variable interest rate                                           28,199        401,443      429,642
                                                                  ------        -------      -------
                                                            $     68,303     $  556,629   $  624,932
                                                                  ======        =======      =======

</TABLE>

      Included in the loan maturity table above, are loans with a variable
interest rate totaling $28,199,000 which are scheduled to mature in one to five
years, of which $23,203,000 are scheduled to reprice within one year or less,
with the remaining $4,996,000 scheduled to reprice within one to five years.
Also included in the loan maturity table, are loans with a variable interest
rate totaling $401,443,000 which are scheduled to mature after five years, of
which $126,037,000 are scheduled to reprice within one year or less;
$218,944,000 which are scheduled to reprice within one to five years, with the
remaining $56,462,000 scheduled to reprice after five years.

            (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>

                                                 2000     1999     1998     1997     1996
                                                ------   ------   ------   ------   ------
<S>                                            <C>      <C>      <C>      <C>      <C>
                                                             ($ In Thousands)
Nonperforming Loans:
Commercial, financial and agricultural         $   307  $   475  $   678  $   956  $   204
Real estate-residential                            820      746    1,347    1,489    2,707
Real estate-commercial                           2,030      294      592    4,261    1,032
Real estate-construction and land development       14        0      378       92      102
Installment and other                               30        1       18      347       41
                                                 -----    -----    -----    -----    -----
    Total nonperforming loans                    3,201    1,516    3,013    7,145    4,086

Other real estate owned                            416    1,288    1,601    1,905    3,492
                                                 -----    -----    -----    -----   ------
Total nonperforming loans and other
 real estate owned                             $ 3,617  $ 2,804  $ 4,614  $ 9,050  $ 7,578
                                                 =====    =====    =====    =====   ======
Percentage of nonperforming loans and
 other real estate owned to total loans
  receivable                                     0.55%    0.49%    0.83%    1.78%    1.71%
                                                 =====    =====    =====    =====    =====
Percentage of nonperforming loans and
 other real estate owned to total assets         0.38%    0.32%    0.53%    1.11%    0.95%
                                                 =====    =====    =====    =====    =====
Loans delinquent 90 days or more still
 accruing, not included in above               $     0  $     4  $   146  $   535  $    93
                                                 =====    =====    =====    =====    =====

</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, 2000, 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 $239,000. The amount of
interest income on those loans included in net earnings for the year ended
December 31, 2000 amounted to $110,000.

        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.

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

<TABLE>
<CAPTION>

                                        2000     1999     1998     1997     1996
                                       ------   ------   ------   ------   ------
<S>                                   <C>      <C>      <C>      <C>      <C>
                                                     (In Thousands)

Condominiums and apartment projects            $    55  $   131  $   371  $   780
Single family housing projects        $   171      794      739      792    1,281
Retail and office                                                              83
Non-retail commercial                     268      691      756      773      798
Residential                               187      235      451      437    1,078
                                        -----    -----    -----    -----    -----
                                          626    1,775    2,077    2,373    4,020

Less: Valuation allowance                 210      487      476      468      528
                                        -----    -----    -----    -----    -----
                                      $   416  $ 1,288  $ 1,601  $ 1,905  $ 3,492
                                        =====    =====    =====    =====    =====

</TABLE>

      As of December 31, 2000, there were no loan concentrations exceeding 10%
of total loans.

      As of December 31, 2000, 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 risks
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; historical loan charge-off experience;
and the results of bank regulatory examinations. At December 31, 1997, the level
of the allowance was higher than the level of the allowance at December 31, 1996
due primarily to increases in nonperforming and impaired loans, and an increase
in the total loan portfolio, including growth in commercial business loans and
commercial real estate loans. 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 59.1% of the total loan
portfolio at December 31, 1998 compared to 48.2% 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 62.7% of
the loan portfolio at December 31, 1999 compared to 59.1% 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 Olde Port Bank branch offices. While management believes that the
allowance for possible loan losses at December 31, 2000 is adequate based on its
current review and estimates, further provisions to the allowance may be
necessary if the market in which the Company operates deteriorates.
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>

                                                2000     1999     1998     1997     1996
                                               ------   ------   ------   ------   ------
<S>                                           <C>      <C>      <C>      <C>      <C>
                                                             (In Thousands)

Balance at beginning of year                  $ 7,032  $ 7,122  $ 7,651  $ 6,253  $ 7,151
 Allowance of loan portfolio related
  to branch acquisition                           606
 Provision for possible loan losses               330       50    1,125    2,425    1,372
 Loans charged off                               (324)    (559)  (2,113)  (1,205)  (3,020)
 Recoveries of loans previously charged off       210      419      459      178      750
Balance at end of year                          -----   ------   ------   ------   ------
                                              $ 7,854  $ 7,032  $ 7,122  $ 7,651  $ 6,253
                                                =====   ======   ======   ======   ======

</TABLE>

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

<TABLE>
<CAPTION>

                                                  2000     1999     1998     1997     1996
                                                 ------   ------   ------   ------   ------
<S>                                             <C>      <C>      <C>      <C>      <C>
                                                               (In Thousands)

Commercial, financial and agricultural          $    91  $    76  $   503  $   356  $   684
Real estate-residential                             118      113      298      613      918
Real estate-commercial                               32      326      903      150      907
Real estate-construction and land development         0        0       15       19       78
Installment and other loans                          83       44      394       67      433
                                                   ----    -----    -----    -----    -----
                                                $   324  $   559  $ 2,113  $ 1,205  $ 3,020
                                                   ====    =====    =====    =====    =====

</TABLE>

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

<TABLE>
<CAPTION>

                                                 2000     1999     1998     1997     1996
                                                ------   ------   ------   ------   ------
<S>                                            <C>      <C>      <C>      <C>      <C>
                                                              (In Thousands)

Commercial, financial and agricultural         $    42  $   258  $    82  $    35  $   460
Real estate-residential                             24       67      199       64       60
Real estate-commercial                              77       67       78       56      105
Real estate-construction and land development       50        0        1        1       57
Installment and other loans                         17       27       99       22       68
                                                  ----     ----     ----     ----     ----
                                               $   210  $   419  $   459  $   178  $   750
                                                  ====     ====     ====     ====     ====

</TABLE>

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

<TABLE>
<CAPTION>

                                 2000      1999      1998      1997      1996
                                -------   -------   -------   -------   -------
<S>                            <C>       <C>       <C>       <C>       <C>
                                                ($ In Thousands)

Net loan charge-offs           $    114  $    140  $  1,654  $  1,027  $  2,270
                                   ====     =====     =====     =====     =====

Average loans outstanding      $586,081  $559,651  $536,596  $474,844  $423,421
                                =======   =======   =======   =======   =======
Ratio of net loan charge-offs
 to average loans outstanding     0.02%     0.03%     0.31%     0.22%     0.54%
                                  =====     =====     =====     =====     =====

</TABLE>

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

<TABLE>
<CAPTION>

                                      2000                        1999                        1998
                            -------------------------   -------------------------   -------------------------
                                     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
                            ------   ----------------   ------   ----------------   ------   ----------------
<S>                         <C>          <C>            <C>          <C>            <C>          <C>
                                                             ($ In Thousands)
Commercial, financial
 and agricultural           $1,335         7.72%        $1,222         7.36%        $1,245         8.71%
Real estate-residential      1,639        59.98%         1,558        62.66%         1,182        59.07%
Real estate-commercial       3,273        26.99%         2,299        24.01%         2,567        26.29%
Real estate-construction
 and land development          122         0.82%            63         0.69%           278         0.41%
Installment and other loans    536         4.49%           511         5.28%           542         5.52%
Unallocated                    949           -           1,379           -           1,308           -
                             -----       -------         -----       -------         -----       -------
                            $7,854       100.00%        $7,032       100.00%        $7,122       100.00%
                             =====       =======         =====       =======         =====       =======

<CAPTION>
                                      1997                        1996
                            -------------------------   -------------------------
                                     Percent of loans            Percent of loans
                                     in each category            in each category
                            Amount   to total loans     Amount   to total loans
                            ------   ----------------   ------   ----------------
<S>                         <C>          <C>            <C>          <C>
                                              ($ In Thousands)
Commercial, financial
 and agricultural           $1,507        13.46%        $1,291        14.37%
Real estate-residential        973        48.23%           968        45.44%
Real estate-commercial       3,229        29.75%         2,415        31.52%
Real estate-construction
 and land development          125         1.18%           120         1.21%
Installment and other          690         7.38%           580         7.46%
Unallocated                  1,127           -             879           -
                             -----       -------         -----       -------
                            $7,651       100.00%        $6,253       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>

                                 2000     1999     1998     1997     1996
                                ------   ------   ------   ------   ------
<S>                              <C>      <C>      <C>      <C>      <C>

Allowance for possible
 loan losses as a percentage
  of total loans outstanding     1.19%    1.24%    1.28%    1.50%    1.41%
                                 =====    =====    =====    =====    =====

</TABLE>

                  (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>

                                         2000                  1999                  1998
                                  ------------------    ------------------    ------------------
                                            Weighted              Weighted              Weighted
                                  Average   Average     Average   Average     Average   Average
                                  Balance    Rate       Balance    Rate       Balance    Rate
                                  -------   --------    -------   --------    -------   --------
<S>                              <C>           <C>     <C>           <C>     <C>           <C>
                                                         ($ In Thousands)
Interest bearing deposits:
  Interest bearing NOW deposits  $204,608      2.68%   $199,598      2.45%   $183,692      2.59%
  Money market deposits            14,178      2.53%     18,947      2.55%     24,474      2.75%
  Savings deposits                 85,475      2.21%     89,014      2.24%     88,473      2.55%
  Time deposits                   256,668      5.54%    256,660      5.26%    267,764      5.55%
                                  -------               -------               -------
Total interest bearing deposits  $560,929      3.91%   $564,219      3.70%   $564,403      4.00%
                                  =======      =====    =======      =====    =======      =====

Noninterest bearing deposits     $ 77,522        N/A   $ 73,145        N/A   $ 69,575        N/A
                                   ======                ======                ======

</TABLE>

                  (J) Maturities of Time Deposits

      The maturity distribution of time certificates of deposit of $100,000 or
more at December 31, 2000 follows:

<TABLE>
<CAPTION>

REMAINING MATURITY                 BALANCE
------------------                 --------
<S>                                <C>
                                (In Thousands)

3 months or less                   $  6,687
Over 3 through 6 months               5,651
Over 6 through 12 months             24,030
Over 12 through 36 months             4,351
Over 36 months                          430
                                    -------
                                   $ 41,149
                                    =======

</TABLE>

                  (K) Return on Equity and Assets

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

<TABLE>
<CAPTION>

                                                  2000     1999     1998
                                                 ------   ------   ------
<S>                                              <C>      <C>      <C>

Net earnings to average assets                    1.15%    1.18%    1.17%

Net earnings to average
 stockholders' equity                            14.25%   13.88%   13.30%

Dividend pay out ratio on common stock -basic    34.97%   32.00%   30.49%
                                       -diluted  35.16%   32.75%   31.25%

Average equity to average total assets            8.07%    8.47%    8.82%

</TABLE>

                  (L) Borrowings

      Information regarding borrowings in Note 14 to the Consolidated
Financial Statements in the Annual Report to Stockholders for the year ended
December 31, 2000 is incorporated herein by reference.

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

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

<TABLE>
<CAPTION>

                                                      2000       1999       1998
                                                     -------    -------    -------
<S>                                                 <C>        <C>        <C>
                                                            (In Thousands)

Securities sold under agreements to repurchase      $ 90,811   $ 75,042   $ 70,905
                                                      ======     ======     ======

Short-term and current portion of other borrowings  $     51   $     48   $     45
                                                        ====       ====     ======

</TABLE>

      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>

                                                      2000       1999       1998
                                                     -------    -------    -------
<S>                                                 <C>        <C>        <C>
                                                            (In Thousands)

Securities sold under agreements to repurchase      $ 90,811   $ 75,042   $ 73,392
                                                      ======     ======     ======

Short-term and current portion of other borrowings  $ 10,923   $  2,919   $ 10,178
                                                      ======     ======     ======

</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>
                                           2000                     1999                     1998
                                  ----------------------   ----------------------   ----------------------
                                  Average     Weighted     Average     Weighted     Average     Weighted
                                  Balance   Average Rate   Balance   Average Rate   Balance   Average Rate
                                  -------   ------------   -------   ------------   -------   ------------
<S>                               <C>           <C>       <C>            <C>       <C>            <C>
                                                              ($ in Thousands)

Securities sold under
 agreements to repurchase        $ 77,723       5.55%     $ 65,078       4.08%     $ 67,562       4.36%
                                   ======       =====       ======       =====       ======       =====
Short-term and current portion
 of other borrowings             $  1,320       6.74%     $    621       5.15%     $  4,681       6.15%
                                    =====       =====        =====       =====       ======       =====

</TABLE>

      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     2000     1999
-----------------------------------------------         -------------    -------   -------
<S>                                                         <C>        <C>        <C>
                                                                           (In Thousands)

April 2003                                                  5.84%      $  20,000  $ 20,000
May 2003                                                    5.92%         10,000    10,000
Amortizing advance, final payment, October 2005             6.13%            267       312
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
October 2010                                                5.84%         10,000
December 2010                                               4.86%         10,000
December 2013                                               4.18%                   20,000
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%             62        65
                                                                         -------    ------
    Total other borrowings                                               100,515    90,563
Less: short-term and current portion of other borrowings                      51        48
                                                                         -------    ------
    Long-term portion of other borrowings                              $ 100,464  $ 90,515
                                                                         =======    ======

</TABLE>

       Principal payments due on long-term borrowings after December 31, 2000
are $51,000 in 2001, $54,000 in 2002, $30,058,000 in 2003, $62,000 in 2004,
$60,000 in 2005 and $70,230,000 in years thereafter. The FHLB of Boston has the
right to call and require the repayment of $60,000,000 of borrowings during
2001, $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 and
$30,000,000 of which is at a weighted average interest rate of 5.60% maturing in
2010.

                  (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.

      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.

Item 2. Properties

      The following table sets forth the location of the Company's offices as
of December 31, 2000. See also Notes 10 and 15 to the Consolidated Financial
Statements in the Annual Report to Stockholders for the year ended December 31,
2000 which are incorporated herein by reference.

<TABLE>
<CAPTION>

 Office Type                Location                 City/Town     Status
--------------  ---------------------------------   ------------   -------
<S>             <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-three 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.

Additional Item. Executive Officers

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

      Charles B. Paquette (age 48) 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 45) 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 49) 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.

                                    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 2000 and 1999. The table does not reflect inter-dealer prices,
potential mark-ups, mark-downs or commissions, and may not necessarily represent
actual transactions.

<TABLE>
<CAPTION>

                                                        2000
                                       -------------------------------------
                                       4th Qtr   3rd Qtr   2nd Qtr   1st Qtr
                                       -------   -------   -------   -------
<S>                                    <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

<CAPTION>                                               1999
                                       -------------------------------------
                                       4th Qtr   3rd Qtr   2nd Qtr   1st Qtr
                                       -------   -------   -------   -------
<S>                                    <C>       <C>       <C>       <C>

      Dividends declared per share    $   0.14  $   0.14  $   0.14  $   0.14
Stock Price
      High.........................      23.50     24.50     23.50     23.31
      Low..........................      19.75     21.38     19.50     18.50

</TABLE>

      (b) Holders

      As of March 14, 2001, Granite State had approximately 1,099 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. Granite State is
permitted by New Hampshire corporate law to pay dividends out of unreserved and
unrestricted earned surplus or from unreserved and unrestricted net earnings of
a current fiscal year and the next preceding fiscal year taken as a single
period, as and when declared by its Board of Directors.

      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 59 of the Annual Report to Stockholders
for the year ended December 31, 2000 is incorporated herein by reference.

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 11 to 29, inclusive, of the Annual Report to Stockholders
for the year ended December 31, 2000 is incorporated herein by reference.

Item 7a. Quantitative and Qualitative Disclosures About Market Risk

      Quantitative and Qualitative Disclosures About Market Risk on pages 16
to 19 inclusive, of the Annual Report to Stockholders for the year ended
December 31, 2000 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 31 to 58,
inclusive, of the Annual Report to Stockholders for the year ended December 31,
2000 is incorporated herein by reference.

      (b) Supplementary Financial Information

            (1) Selected Quarterly Financial Data

      The Selected Quarterly Financial Data on page 58 of the Annual Report to
Stockholders for the year ended December 31, 2000 is incorporated herein by
reference.

            (2) Information on the Effects of Changing Prices

      Management's discussion of the effects of inflation on page 28 of the
Annual Report to Stockholders for the year ended December 31, 2000 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.

                                    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 2001 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 2001 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
2001 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 2001 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, 2000, 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          31

        Consolidated Statements of Financial Condition              32

        Consolidated Statements of Earnings                         33

        Consolidated Statements of Comprehensive Income             34

        Consolidated Statements of Stockholders' Equity             35

        Consolidated Statements of Cash Flows                       36

        Notes to Consolidated Financial Statements                37 - 58

             (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, 2000, 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>
        <S>             <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, 2000

        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>

                                   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 23, 2001              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        3/23/01     Chief Executive Officer
--------------------                    (Principal Executive Officer) and
Charles W. Smith                        Chairman of the Board


/s/ William G. Pike          3/23/01    Executive Vice President
-------------------                     and Chief Financial Officer
William G. Pike                         (Principal Financial and
                                        Accounting Officer)


/s/ Dr. David M.Bartley      3/23/01    Director
-----------------------
Dr.David M.Bartley


/s/ Philip M. Hamblet        3/23/01    Director
---------------------
Philip M. Hamblet


/s/ Joseph S. Hart           3/23/01    Director
------------------
Joseph S. Hart


/s/ David J. Houston         3/23/01    Director
--------------------
David J. Houston


/s/ James L. Koontz          3/23/01    Director
-------------------
James L. Koontz


                             3/23/01    Director
-----------------
Peter C. Read


/s/ William Smedley V        3/23/01    Director
---------------------
William Smedley V


/s/ James C. Wirths III      3/23/01    Director
-----------------------
James C. Wirths III


/s/ E. Story Wright          3/23/01    Director
-------------------
E. Story Wright