UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                  FORM 10Q - QUARTERLY REPORT UNDER SECTION 13
                 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

  [ X ]  Quarterly report pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934

                 For the quarterly period ended March 31, 2002.

  [   ]  Transition report pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934

            For the transition period from ___________ to ___________

                       Commission File Number: (0-26663)


                            IPSWICH BANCSHARES, INC.
                            ------------------------
             (Exact name of Registrant as specified in its charter)


Massachusetts                                                 04-3459169
--------------------------------------------------------------------------------
(State or other jurisdiction of                           (I.R.S. Employer
incorporation or organization)                             Identification No.)


23 Market Street, Ipswich, Massachusetts                          01938
--------------------------------------------------------------------------------
(Address of principal executive offices)                        (Zip Code)

Registrant's telephone number, including area code:  (978) 356-7777
Securities registered pursuant to Section 12(b) of the Act:  None
Securities registered pursuant to Section 12(g) of the Act:


Title of each class:                  Name of each exchange on which registered:
Common Stock, $0.10 par value                   NASDAQ National Market

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
requirement for the past 90 days. Yes [ X ]  No [   ]

Indicate  by check mark  whether  the  registrant  has filed all  documents  and
reports  required  to be filed by  Sections  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by court. Yes [   ]  No [   ]

The number of shares  outstanding of the Registrant's  common stock as of May 6,
2002 was 1,936,286.


<PAGE>


<TABLE>
<CAPTION>
                IPSWICH BANCSHARES, INC. AND SUBSIDIARIES
                       Consolidated Balance Sheets
              (Dollars in thousands, except per share data)


                                                                        March 31,    December 31,
                                                                          2002           2001
                                                                        ---------    ------------
              Assets                                                  (unaudited)     (unaudited)
              ------

<S>                                                                   <C>             <C>
Cash and due from banks                                               $    7,425      $   10,935
Federal funds and other short-term investments                             4,816               1
Securities available for sale, at market value                            74,202          50,405
Securities held to maturity, amortized cost                               33,755          35,343
Loans held for sale                                                          928          14,946

Loans:
     Residential loans                                                   154,083         159,806
     Home equity                                                          30,462          31,733
     Commercial/construction                                              11,865          11,636
     Consumer                                                                504             535
                                                                      ----------      ----------
          Total gross loans                                              196,914         203,710

Allowance for loan losses                                                 -2,144          -2,121
                                                                      ----------      ----------

      Net loans                                                          194,770         201,589
                                                                      ----------      ----------

Stock in FHLB of Boston                                                    3,000           3,000
Banking premises and equipment, net                                        2,949           2,824
Accrued interest receivable                                                1,758           1,251
Other assets                                                                 895             821
                                                                      ----------      ----------

      Total assets                                                    $  324,498      $  321,115
                                                                      ==========      ==========


<CAPTION>

          Liabilities and Stockholders' Equity

<S>                                                                   <C>             <C>
Liabilities:
  Deposits:
     Interest- and non-interest bearing checking accounts             $   62,524      $   64,296
     Savings accounts                                                     47,361          45,931
     Money market accounts                                                86,222          79,806
                                                                      ----------      ----------
          Total core deposits                                            196,107         190,033

     Certificates of deposit                                              56,170          59,480
                                                                      ----------      ----------
          Total deposits                                                 252,277         249,513

  Borrowed funds                                                          48,000          47,859
  Mortgagors' escrow accounts                                              1,030           1,148
  Deferred income tax liability and other liabilities                      4,305           3,976
                                                                      ----------      ----------

      Total liabilities                                                  305,612         302,496
                                                                      ----------      ----------

Company obligated, mandatorily redeemable capital securities               3,500           3,500

Equity capital                                                            20,897          20,564
Treasury stock (604,900 and 604,900 shares, respectively)                 -5,783          -5,783
Unrealized gain on investment securities available for sale, net             272             338
                                                                      ----------      ----------
      Total stockholders' equity                                          15,386          15,119
                                                                      ----------      ----------

      Total liabilities and stockholders' equity                      $  324,498      $  321,115
                                                                      ==========      ==========

Shares outstanding                                                     1,934,474       1,925,628

Selected data (end of period):
------------------------------

  Regulatory tier 1 leverage capital ratio  (in %)                          5.82            5.76
  Book value per share                                                $     7.95      $     7.85

</TABLE>


                                        2


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<TABLE>
<CAPTION>
                    IPSWICH BANCSHARES, INC. AND SUBSIDIARIES
                        Consolidated Statements of Income
                  (Dollars in thousands, except per share data)

                                                               Three Months Ended
                                                                   March 31,
                                                             2002            2001
                                                          ----------      ----------


                                                          (unaudited)    (unaudited)
<S>                                                       <C>             <C>
Interest and dividend income:
   Loans                                                  $    3,299      $    3,820
   Investment securities available for sale                      722             607
   Investment securities held to maturity                        563             526
   Federal funds and interest bearing deposits                    19              60
                                                          ----------      ----------

      Total interest and dividend income                       4,603           5,013

Interest expense:
   Deposits                                                    1,339           2,140
   Borrowed funds                                                561             627
                                                          ----------      ----------

      Total interest expense                                   1,900           2,767
                                                          ----------      ----------

      Net interest and dividend income                         2,703           2,246

Provision for loan losses                                         30              25
                                                          ----------      ----------

      Net interest and dividend income after
        provision for loan losses                              2,673           2,221

Non-interest income:
   Retail banking fees                                           490             418
   Mortgage banking revenues, net                                390             131
   Investment sales income                                        46              18
   Net gain/(loss) on sales of securities                        -27               0
                                                          ----------      ----------

      Total non-interest income                                  899             567
                                                          ----------      ----------

      Net interest, dividend and non-interest income           3,572           2,788

Non-interest expenses:
   Salaries and employee benefits                              1,032             808
   Occupancy and equipment                                       263             271
   Data processing services                                      243             244
   Advertising & marketing                                       148             131
   Professional fees                                             108              75
   Distribution on securities of subsidiary trust                 91              38
   Merger expenses                                               409               0
   Other                                                         234             225
                                                          ----------      ----------

      Total non-interest expenses                              2,528           1,792

Income before income taxes                                     1,044             996
Income tax expense                                               523             349
                                                          ----------      ----------

      Net income                                          $      521      $      647
                                                          ==========      ==========

Basic earnings per share                                  $     0.27      $     0.32
Diluted earnings per share                                $     0.26      $     0.31

Quarterly dividends per share                             $     0.12      $     0.11
                                                          ==========      ==========


Weighted average common shares outstanding (basic)         1,942,641       2,050,496
Weighted average common shares outstanding (diluted)       2,026,531       2,082,190

Selected performance data:
--------------------------
   Return on average equity  (in %)                            13.43           17.02
   Return on average assets  (in %)                             0.65            0.90
   Net interest margin  (in %)                                  3.48            3.21
   Expenses to average assets  (in %)                           3.16            2.49
   Efficiency ratio  (in %)                                    70.25           62.95
   Mortgage and equity loan production                    $   22,179      $   18,884


</TABLE>


                                        3


<PAGE>


<TABLE>
<CAPTION>

                                           IPSWICH BANCSHARES, INC. AND SUBSIDIARIES
                                   Consolidated Statements of Changes in Stockholders' Equity
                                           Three Months Ended March 31, 2002 and 2001
                                          (Dollars in thousands, except for share data)
                                                           (unaudited)


                                                                                                       Accumulated
                                                                  Additional                              other           Total
                                            Shares    Common       paid-in      Retained    Treasury   comprehensive  stockholders'
                                            issued     stock       capital      earnings     stock        income         equity
                                          ---------  ----------  ----------   -----------   --------   -------------  -------------
<S>                                       <C>        <C>         <C>          <C>            <C>        <C>            <C>
Balance at December 31, 2000              2,525,552  $      253  $    2,297   $   16,150    -$4,054     $      473     $   15,119

Stock options exercised                       2,050              $       15                                                    15
Issuance of stock rights                                                  5                                                     5
Cash dividends                                                                      -225                                     -225
Treasury stock purchased
  (34,700 shares at an average
     price of $9.80)                                                                           -340                          -340

Comprehensive income:
  Net income                                                                         647                                      647
  Other comprehensive income:
    Unrealized holding gains on
      securities, net of taxes of $45                                                                                          67
    Reclassification adjustment
      for amounts included in net
      income, net of taxes of $6                                                                                                9
                                                                                                                       ----------
  Other comprehensive income                                                                                    76             76
                                                                                                        ----------     ----------
Total comprehensive income                                                                                                    723
                                         ----------  ----------  ----------   ----------  ---------     ----------     ----------

Balance at March 31, 2001                 2,527,602         253       2,317       16,572     -4,394            549         15,297

Stock options exercised                       2,926                      15                                                    15
Issuance of stock rights                                                 13                                                    13
Cash dividends                                                                      -767                                     -767
Treasury stock purchased
  (116,200 shares at an average
     price of $11.96)                                                                        -1,389                        -1,389

Comprehensive income:
  Net income                                                                       2,161                                    2,161
  Other comprehensive income:
    Unrealized holding gains on
      securities, net of taxes of $95                                                                                        -155
    Reclassification adjustment
      for amounts included in net
      income, net of taxes of $36                                                                                             -56


  Other comprehensive income                                                                                  -211           -211
                                                                                                        ----------

Total comprehensive income                                                                                                  1,950
                                         ----------  ----------  ----------   ----------  ---------     ----------     ----------

Balance at December 31, 2001              2,530,528         253       2,345       17,966     -5,783            338         15,119

Stock options exercised                       8,846           1          48                                                    49
Issuance of stock rights                                                  3                                                     3
Cash dividends                                                                      -240                                     -240

Comprehensive income:
  Net income                                                                         521                                      521
  Other comprehensive income:
    Unrealized holding gains on
      securities, net of taxes of $80                                                                                        -136
    Reclassification adjustment
      for amounts included in net
      income, net of taxes of $49                                                                                              70
                                                                                                                       ----------


  Other comprehensive income                                                                                   -66            -66
                                                                                                        ----------     ----------

Total comprehensive income                                                                                                    455
                                         ----------  ----------  ----------   ----------  ---------     ----------     ----------

Balance at March 31, 2002                 2,539,374  $      254  $    2,396   $   18,247    -$5,783     $      272        $15,386
                                         ----------  ----------  ----------   ----------  ---------     ----------     ----------

</TABLE>

                                        4


<PAGE>




<PAGE>


<TABLE>
<CAPTION>


                    IPSWICH BANCSHARES, INC. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                    Three Months Ended March 31, 2002 and 2001
                              (Dollars in thousands)
                                   (unaudited)

                                                                                          2002            2001
                                                                                         -------        -------

<S>                                                                                      <C>            <C>
Net cash flows from operating activities:
  Net income                                                                             $   521        $   647

  Adjustments to reconcile net income to net cash provided (used)
     by operating activities:
       Provision for loan losses                                                              30             25
       Depreciation expense                                                                   85             88
       Amortization of premiums on investment securities, net                                 92             15
       (Gain) on sale of loans, net                                                         -329           -101
       Loss on sale of investment securities available for sale, net                          27              0
       Origination of loans held for sale                                                -15,472         -9,534
       Proceeds from sale of loans                                                        23,802          7,341
       Proceeds from sale of securitized loans                                             6,016          2,002
       Decrease (increase) in loan origination fees and loan discounts                        94            -52
       (Increase) in deferred premium on loans sold and mortgage servicing rights           -102            -25
       (Increase) decrease in accrued interest receivable                                   -508             44
       Decrease (increase) in other assets, net                                               28            -97
       Increase in accrued expenses and other liabilities                                    360            365
                                                                                         -------        -------

  Net cash provided by operating activities                                               14,644            718

Net cash flows from investing activities:
  Purchase of investment securities available for sale                                   -39,352         -3,136
  Principal paydowns on mortgage-backed investment securities available for sale           4,586          3,849
  Proceeds from the sale of investment securities available for sale                      10,773          2,000
  Purchase of investment securities held to maturity                                           0         -2,372
  Principal paydowns on mortgage-backed investment securities held to maturity             1,569            295
  Principal from the call of investment securities held to maturity                            0          3,500
  Net decrease in loans                                                                    6,695          1,066
  Purchases of equipment, net                                                               -210            -16
                                                                                         -------        -------
  Net cash (used) provided by investing activities                                       -15,939          5,186

Cash flows from financing activities:
  Net proceeds from the issuance of common stock                                              52             20
  Proceeds from issuance of capital securities                                                 0          3,500
  Purchase of treasury stock                                                                   0           -340
  Cash dividends                                                                            -240           -226
  Net increase in deposits                                                                 2,764            405
  Proceeds from Federal Home Loan Bank advances                                              141         11,000
  Repayment of Federal Home Loan Bank advances                                                 0        -11,608
  (Decrease) increase in mortgagors' escrow accounts                                        -118             47
                                                                                         -------        -------

  Net cash provided by financing activities                                                2,599          2,798
                                                                                         -------        -------

Net increase in cash and cash equivalents                                                  1,304          8,702

Cash and cash equivalents at beginning of period                                          10,937          8,836
                                                                                         -------        -------

Cash and cash equivalents at end of period                                               $12,241        $17,538
                                                                                         =======        =======

Supplemental disclosure of cash flow information: Cash paid for:
       Interest on deposit accounts                                                      $   888        $ 1,426
       Interest on borrowed funds                                                            369            450
       Income tax expense, net                                                               375            125
Supplemental schedule of non-cash investing and financing activities:
  Net change required by Statement of Financial Accounting Standards No. 115:
       Investment securities                                                                 -97            129
       Deferred income tax liability                                                         -31             53
       Net unrealized gain (loss) on investment securities available for sale                -66             76


</TABLE>


                                        5


<PAGE>

                    IPSWICH BANCSHARES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                             March 31, 2002 and 2001
BASIS OF PRESENTATION
---------------------

The consolidated financial statements include the accounts of Ipswich
Bancshares, Inc. and its wholly owned subsidiaries, Ipswich Statutory Trust I
and Ipswich Savings Bank (the Bank), and the Bank's subsidiaries, Ipswich
Preferred Capital Corporation, Ipswich Securities Corporation and North Shore
Financial Services, Inc. (collectively herein referred to as the Company). All
significant intercompany accounts and transactions have been eliminated in
consolidation.

Ipswich Statutory Trust I is a Connecticut Trust established in February 2001.
It exists for the exclusive purpose of issuing and selling common securities to
the Company and Preferred Securities to the public.

Ipswich Preferred Capital Corporation (IPCC) was formed in 1999 as a
Massachusetts business corporation which elected to be taxed as a real estate
investment trust for Federal and Massachusetts tax purposes. IPCC is 99% owned
by Ipswich Savings Bank. IPCC holds mortgage loans which were previously
originated by the Bank. Ipswich Securities Corporation was formed to exclusively
transact in securities on its own behalf as a wholly-owned subsidiary of the
Bank. North Shore Financial Services, Inc. was incorporated for the purpose of
holding direct investments in real estate and foreclosed real estate.

The consolidated financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America. In
preparing the financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities as of the
date of the balance sheet and revenues and expenses for the period. Actual
results could differ significantly from those estimates.

Material estimates that are particularly susceptible to significant change in
the near-term relate to the determination of the allowance for possible loan
losses, the valuation of real estate acquired by foreclosure, and the valuation
of originated mortgage servicing rights. Management's approach to establishing
these estimates is discussed in note 1 to the Company's December 31, 2001
financial statements and in Management's Discussion and Analysis of Financial
Condition and Results of Operations included in Form 10K for the year ended
December 31, 2001.

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended March 31, 2002
are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 2002. For further information, refer to the
audited consolidated financial statements and footnotes thereto for the fiscal
year ended December 31, 2001 included in the Company's Annual Report on Form
10-K.

A substantial portion of the Company's loans are secured by real estate in Essex
County in Massachusetts. In addition, other real estate owned is located in that
market. Accordingly, the ultimate collectibility of a substantial portion of the
Company's loan portfolio and the recovery of the carrying amount of other real
estate owned are susceptible to changes in market conditions in its geographic
area.

                                       6

<PAGE>


EARNINGS PER SHARE
The computation of basic earnings per share is based on the weighted average
number of shares of common stock outstanding during each period. The computation
of diluted earnings per share is based on the weighted average number of shares
of common stock outstanding and dilutive potential common stock equivalents
outstanding during each period. Stock option grants are included only in periods
when the results are dilutive.

                                   Three Months Ended March 31,

    2002                       Income        Shares          Per-Share
    ----                     (Numerator)  (Denominator)       Amount
                             -----------  -------------     ----------
Basic EPS                      $  521         1,943         $   0.27
Effect of stock options            --            84             (.01)
                               ------         -----         --------
Diluted EPS                    $  521         2,027         $   0.26
                               ======         =====         ========
    2001
    ----
Basic EPS                      $  647         2,050         $   0.32
Effect of stock options            --            32              (.01)
                               ------         -----         ---------
Diluted EPS                    $  647         2,082         $   0.31
                               ======         =====         ========


TOTAL COMPREHENSIVE INCOME
--------------------------

Accumulated other comprehensive income consists solely of unrealized
appreciation on investment securities available for sale, net of taxes.

ITEM 2
------

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
--------------------------------------------------------------------------

FORWARD-LOOKING STATEMENTS
--------------------------

This Financial Release contains certain statements that are forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Although the Company believes that its expectations are based upon reasonable
assumptions within the bounds of its knowledge of its business operations, there
can be no assurance that actual results will not differ materially from those
projected in the forward-looking statements. Certain factors that might cause
such differences include, but are not limited to, the factors set forth in the
Company's filings with the Securities and Exchange Commission, which include,
among other factors, changes in general economic conditions, changes in asset
quality, changes in interest rates, regulatory issues and changes in the
assumptions used in making such forward-looking statements.

Certain factors that may cause such differences include, but are not limited to
the following: interest rates may increase, unemployment in the Company's market
area may increase, property values may decline, and general economic and market
conditions in the Company's market area may decline, all of which could
adversely affect the ability of borrowers to re-pay loans; general economic and
market conditions in the Company's market area may decline, the value of real
estate securing payment of loans may decline and the Company's ability to make
profitable loans may be impacted; adverse legislation or regulatory requirements
may be adopted; and competitive pressure among depository institutions may
increase. Any of the above may also result in lower interest income, increased
loan losses, additional charge-offs and write-downs and higher operating
expenses. The Company disclaims any intent or obligation to update publicly any
of the forward-looking statements herein, whether in response to new
information, future events or otherwise.


                                       7


<PAGE>


SIGNIFICANT ACCOUNTING POLICIES
-------------------------------

The Notes to the Consolidated Financial Statements contain a summary of the
Company's significant accounting policies. Certain of these policies are
considered to be important to the portrayal of the Company's financial
condition, since they require management to make difficult, complex or
subjective judgments, some of which may relate to matters that are inherently
uncertain. These policies include determining the level of the allowance for
loan losses and the valuation of mortgage servicing rights. The statements below
contain forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. See "Forward-Looking Statements" on page 8.

Allowance for loan losses
-------------------------

The allowance for loan losses represents management's estimate of possible
losses inherent in the loan portfolio. This evaluation process is subject to
numerous estimates and judgments. The frequency of default, risk ratings, and
the loss recovery rates, among other things, are considered in making this
evaluation. Changes in these estimates could have a direct impact on the
provision and could result in a change in the allowance. Each portfolio of
homogeneous loans, primarily residential mortgages, is collectively evaluated
for impairment. The allowance for loan losses is established via a process that
begins with management considering overall portfolio indicators including
historical credit losses, delinquent, non-performing and classified loans, and
trends in loan characteristics. During the first quarter of 2002, there were no
discernible trends in net loan losses nor increases in the level of delinquency.
If such an experience occurred, management would consider the viability of the
level of provisions necessary to maintain an adequate allowance for loan losses.

Mortgage servicing rights
-------------------------

The carrying value of the Company's mortgage servicing represents management's
estimate of the probable market value of rights. This evaluation process is
subject to numerous estimates and judgments including the direction of interest
rates, the prepayment characteristics of the portfolio of loans serviced and the
strength of the secondary market for servicing rights. Changes in these
estimates could have a direct impact on the establishment or size of the
allowance established for market impairment of the rights. During the first
quarter of 2002, a general trend in interest rates was not discernible
necessitating no adjustment in the valuation allowance previously established.

GENERAL
-------

Ipswich Bancshares, Inc. (the Company) is a Massachusetts corporation whose
primary business is serving as the holding company for Ipswich Savings Bank (the
Bank). The Company's operating results for the three months ended March 31, 2002
reflect the operations of the Company and its direct and indirect subsidiaries,
Ipswich Statutory Trust I, Ipswich Savings Bank, Ipswich Preferred Capital
Corporation, Ipswich Securities Corporation and North Shore Financial Services,
Inc.

On February 26, 2002, the Board of Directors of the Company approved an
Agreement and Plan of Merger between Banknorth Group, Inc. (Banknorth) and
Ipswich Bancshares, Inc. whereby Banknorth will acquire the Company for $41.1
million, or $20.50 per share of Company stock, payable in cash or in equivalent
shares of Banknorth stock, at the option of each stockholder, subject to
limitations intended to ensure that 51% of the outstanding common stock of the
Company will be converted into the right to receive Banknorth common stock and
49% of the outstanding common stock of the Company will be converted into the
right to receive cash.

The transaction is subject to the approval of the Company's shareholders and
various state and federal regulatory bodies. If approved, it is anticipated the
transaction will be finalized in July 2002.


                                       8


<PAGE>


The Company's principal business is attracting deposits from the general public
and using these deposits to fund its residential mortgage banking and commercial
banking functions. The Company also performs residential mortgage loan
servicing. The Company operates out of its main office located at 23 Market
Street, Ipswich, Essex County, Massachusetts, and its seven full-service retail
branch offices, located in Beverly, Essex, Marblehead, North Andover, Rowley,
Reading and Salem, Massachusetts. The Company operates automatic teller machines
at its main office and each of its full-service retail branch offices. As a bank
holding company, the Company is subject to regulation, supervision and
examination by the Board of Governors of the Federal Reserve (the Federal
Reserve) and the Bank is subject to regulation, supervision and examination by
the Federal Deposit Insurance Corporation (the FDIC) and the Massachusetts
Commissioner of Banks (the Commissioner).

ASSET / LIABILITY MANAGEMENT
----------------------------

The goal of asset/liability management is the prudent control of market risk,
liquidity and capital. The Company does not use static GAP analysis to manage
its interest rate risk. It believes that simulation modeling more accurately
encompasses the impact of changes in interest rates on the earnings of the
Company over time. However, the Company prepares a GAP schedule to measure its
static position.
Assets and liabilities are classified as interest rate sensitive if they have a
remaining term to maturity of 0-12 months, or are subject to interest rate
adjustment in those time periods. Adjustable rate loans and mortgage backed
securities are shown as if the entire balance comes due on the repricing date.
Estimates of fixed rate loan amortization prepayments are included with rate
sensitive assets. Because regular savings, demand deposits, money market
accounts and NOW accounts may be withdrawn at any time and are subject to
interest rate adjustments at any time, they are presented based upon assumed
maturity structures. As a result of this analysis, the static GAP position in
the 0 to 12 months range is a negative $34.2 million at March 31, 2002.

Interest rate sensitivity statistics are static measures that do not necessarily
take into consideration external factors which may affect the sensitivity of
assets and liabilities, and consequently can not be used alone to predict the
operating results of a financial institution in a changing environment.

LIQUIDITY
---------

The Company seeks to ensure that sufficient liquidity is available to meet cash
requirements while earning a return on liquid assets. The Company continually
monitors and forecasts its liquidity position. The Company uses its liquidity
primarily to fund loans and investment commitments, to supplement deposit
outflows, to fund its share repurchase program and to meet operating expenses.
The primary sources of liquidity are interest and principal amortization from
loans, mortgage backed securities and investments, the sales and maturities of
investments, loan sales, retail deposits, and Federal Home Loan Bank of Boston
(the FHLBB) advances, which includes a $3.2 million overnight line of credit.
The Company also uses longer term borrowed facilities within its total available
credit line with the FHLBB. Advances from the FHLBB were $48 million at March
31, 2002.

During 2002 the primary sources of liquidity were $29.8 million in loan sales,
the sale of $10.8 million of investment securities, principal amortization from
mortgage backed securities of $6.2 million and payoffs and principal
amortization from the loan portfolio of $9.1 million. The primary uses of funds
were $18.1 million in residential first mortgage loan originations and $39.4
million in investment purchases.

CAPITAL RESOURCES
-----------------

Total stockholders' equity at March 31, 2002 was $15.4 million, an increase of
$267,000 from $15.1 million at the end of 2001. Included in stockholders' equity
at March 31, 2002 is an unrealized gain on marketable securities available for
sale, net of taxes, of $272,000, a decrease of $66,000 from

                                       9


<PAGE>


$338,000 at December 31, 2001. Future interest rate increases could reduce the
market value of these securities and reduce stockholders' equity. The Company
paid a $.12 per share dividend on its common stock in the first quarter of 2002,
a 9% increase over the $.11 paid in the first quarter of 2001.

The Federal Reserve's and the FDIC's capital guidelines require the Company and
the Bank, respectively, generally to maintain a minimum Tier 1 leverage capital
ratio of at least 4% (5% to be classified as "well-capitalized"). At March 31,
2002, the Tier 1 leverage capital ratio for the Company was 5.82% compared to
5.76% at December 31, 2001. For the Bank, the Tier 1 leverage capital ratio was
5.54% and 5.55% on March 31, 2002 and December 31, 2001, respectively.

The Federal Reserve and the FDIC have also established risk-based capital
requirements applicable to the Company and the Bank, respectively, which give
different risk weightings to assets and to off balance sheet assets, such as
loan commitments. The Federal Reserve's and the FDIC's risk-based capital
guidelines require the Company and the Bank, respectively, to maintain a minimum
total risk-based capital ratio of 8% (10% to be classified as
"well-capitalized") and a Tier 1 risk-based capital ratio of 4% (6% to be
classified as "well-capitalized"). At March 31, 2002, the Company's total and
Tier 1 risk-based capital ratios were 12.40% and 11.15% (compared to 11.56% and
10.35% at December 31, 2001). At March 31, 2002, the Bank's total and Tier 1
risk based capital ratios were 11.92% and 10.63% (compared to 11.05% and 9.85%
at December 31, 2001).

FINANCIAL CONDITION
-------------------

The Company's total assets at March 31, 2002 were $324 million, an increase of
$3.4 million from December 31, 2001 assets of $321 million. The increase was
largely due to the addition of $23.8 million in investment securities offset by
a decline of $20.8 million in loans. Funding the increase in assets for the
first three months of 2002 was deposit growth of $2.8 million.

Federal Funds Sold
------------------

Interest-bearing deposits and federal funds sold at March 31, 2002 was $4.8,
versus $0 at December 31, 2001. The increase in federal funds sold was primarily
due to accelerated cash flows from assets.

Investment and Mortgage-Backed Securities
-----------------------------------------

Total investments and mortgage backed securities available for sale at March 31,
2002 was $74.2 million, an increase of $23.8 from March 31, 2001. The increase
was primarily the result of the investment of $20.8 million in cash flow from
loans and loans held for sale. Origination volumes declined in the first quarter
of 2002 relative to the fourth quarter of 2001 necessitating investing in
securities rather than the loan portfolio. The unrealized gain on the portfolio
of available for sale securities was $465,000 at March 31, 2002.

Total investments and mortgage-backed securities held to maturity were $33.8
million at March 31, 2002 compared to $35.3 million at December 31, 2001. The
decline is due to principal amortization on the portfolio of mortgage-backed
securities of $1.6 million.

Loans and Loans Held for Sale
-----------------------------

Loans held for sale decreased to $928,000 at March 31, 2002 from $14.9 million
at year-end 2001. The Company's portfolio of mortgages held for sale decreased
due to the delivery of loans previously originated for sale. The level of
refinancing activity declined in the first quarter of 2002 versus the last
quarter of 2001 as a result of a general increase in market rates. This resulted
in lower origination volume and a decline in loans held for sale.

The loan portfolio at March 31, 2002 was $196.9 million, a decrease of $6.8
million from $203.7 million at December 31, 2001. The decrease resulted from
accelerated cash flows from


                                       10


<PAGE>


prepayments of loans and a decline in originate volumes which did not keep pace
with prepayments.

Deposits
--------

Deposits increased by $2.8 million from $249.5 million at December 31, 2001 to
$252.3 million at March 31, 2002. Certificates of deposit decreased by $3.3
million as falling rates made CDs a less attractive investment vehicle for
depositors; money market accounts increased by $6.4 million as depositors
invested in more liquid deposit types.

Borrowings
----------

Federal Home Loan Bank of Boston advances increased by $141,000 in 2002 to $48.0
million at March 31, 2002. Borrowed funds are typically used to manage the
liquidity of the Company and the utilization of borrowings is dependent on cash
flows from other assets and liabilities.

Equity Capital
--------------

Equity capital increased by $267,000 to $15.4 million at March 31, 2002. Equity
was principally impacted by earnings of $521,000 for the first three months of
the year and a decrease in the unrealized gain or loss on investment securities
of $66,000, net of taxes. Offsetting these increases were payments of cash
dividends to shareholders which totaled $240,000 in 2002.

ASSET QUALITY
-------------
Non-Performing Loans
--------------------

Loans on non-performing status at March 31, 2002 totaled $180,000, substantially
unchanged since year-end. Accrual of interest on loans is discontinued either
when a reasonable doubt exists as to the full timely collection of principal and
interest, or when a loan becomes contractually past due by ninety (90) days or
more, unless the loan is adequately secured and is in the process of collection.

When a loan is placed on non-accrual status, all interest previously accrued,
but not collected, is reversed against current period interest income. Income on
such loans is recognized to the extent that cash is received and the ultimate
collection of principal and interest is possible. Following collection
procedures, the Company generally institutes appropriate actions to foreclose
the property.

The Company also had $203,000 in performing loans that it currently is
negotiating with the borrower which may result in a charge-off of $166,000 of
the non-performing loans and the $203,000. The charge-off would be recognized
against the allowance for loan losses.


Allowance for Loan Loss
-----------------------

The allowance for loan losses at March 31, 2002 was $2.1 million, substantially
unchanged since year-end 2001. The entire allowance for loan losses is available
to absorb charge-offs in any category of loans. Loan losses are charged against
the allowance when management believes that the collectibility of the loan
principal is unlikely. The allowance for possible loan losses is established by
management to absorb future charge-offs of loans deemed uncollectible. The
allowance is increased by provisions charged to operating expense and by
recoveries on loans previously charged-off. In evaluating current information
and events regarding borrowers' ability to repay their obligations, management
considers commercial loans over $200,000 to be impaired when it is probable that
the Company will be unable to collect all amounts due according to the
contractual terms of the note agreement; other loans are evaluated collectively
for impairment. When a loan is considered to be impaired, the amount of the
impairment is measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate or the fair value of collateral
if the loan is collateral-dependent. Impairment losses are included in the
allowance for loan losses through a charge to the provision for loan losses.
Management believes that the allowance for possible loan losses is adequate as
of March 31, 2002. While management uses available information to recognize
losses on loans, future additions to the allowance may be necessary.


                                       11


<PAGE>



   RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2002 COMPARED TO
                     THE THREE MONTHS ENDED MARCH 31, 2001

SUMMARY
-------

The Company reported net income of $521,000 or $.26 per fully diluted share for
the first quarter of 2002. This compares with $647,000 or $.31 per fully diluted
share for the first quarter of 2001. The first quarter 2002 earnings were
impacted by a non-tax deductible charge of $409,000 resulting from the
previously announced proposed merger with Banknorth Group, Inc.

Return on equity for the first quarter of 2002 was 13.43%, versus 17.02% for the
same quarter of 2001. The return on assets for the first quarter of 2002 was
..65% versus .90% for the same quarter in 2001.

Net Interest and Dividend Income
--------------------------------

Net interest income for the first quarter of 2002 was $2.7 million, versus $2.2
million for the same time frame in 2001. The net interest margin percentage was
3.48% for the first quarter of 2002 versus 3.21% for the same quarter the
previous year.

Net Interest Income
-------------------

Net interest income was favorably impacted in the first quarter of 2002 from a
continuing repricing of certificates of deposit to lower market interest rates.
The unprecedented reduction in short term rates of 475 basis points in 2001 has
substantially reduced market rates on short term deposits. This has had a
favorable impact on the Company's net interest margin.

Provision for Loan Losses
-------------------------

The Company made a provision of $30,000 in the first quarter of 2002 and $25,000
in the first quarter of 2001. Provisions are made to the allowance for loan
losses in order to maintain the allowance at a level which management believes
is reasonable and reflective of the overall risk of loss inherent in the loan
portfolio.

Non-interest Income
-------------------

Non-interest income for the first quarter of 2002 was $899,000 versus $567,000
in the first quarter of 2001. Non-interest income was substantially higher in
2002 as a result of higher mortgage banking revenues and retail banking fees.
Mortgage banking revenues are principally generated from the sale of fixed rate
loans in the secondary market. As a result of the current interest rate
environment, the Company originated a substantial volume of fixed rate mortgages
for sale in the secondary market in the fourth quarter of 2001 and the first
quarter of 2002. The result is that mortgage banking revenues for the first
quarter of 2002, when the loans were delivered, was $390,000 versus $131,000 for
the first quarter of 2001.

Retail banking fees for the first quarter of 2002 was $490,000 versus $418,000
for the same quarter in 2001. This 17.2% increase is principally the result of
the Company's successful efforts to acquire checking account customers in its
market place, which generates significant fee income.

Non-interest Expense
--------------------

Total non-interest expenses were $2.5 million for the first quarter of 2002
versus $1.8 million for the same time frame in 2001. The increase in
non-interest expenses was partially due to an increase in salaries and employee
benefits resulting from additions to operating staff. Additionally, the Company
incurred a non-tax deductible expense of $409,000 related to its proposed merger
with Banknorth Group, Inc.

Income Tax Expense
------------------

The first quarter of 2002 effective tax rate, excluding merger expenses, was
36%, versus 35% for the first quarter of 2001.


                                       12


<PAGE>


ITEM 3
------
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------

The Company's success is dependent upon its ability to manage interest rate
risk. Interest rate risk can be defined as the exposure of the Company's net
interest income to adverse movements in interest rates. Although the Company
manages other risks, such as credit and liquidity risk, in the normal course of
its business, management considers interest rate risk to be its most significant
market risk and could potentially have the largest material effect on the
Company's financial condition and results of operations. Because the Company
does not maintain a trading portfolio, it is not exposed to significant market
risk from trading activities.

The Company's interest rate risk management is the responsibility of the
Asset/Liability Management Committee (ALCO). The ALCO establishes policies that
monitor and coordinate the Company's sources, uses and pricing of funds.

The Company seeks to reduce the volatility of its net interest income by
managing the relationship of interest-rate sensitive assets to interest-rate
sensitive liabilities. In recent years, the focus has been to originate
adjustable-rate residential loans for portfolio, which reprice more quickly than
fixed-rate residential loans. The Company's adjustable-rate loans are primarily
tied to published indices, such as the one-year Constant Maturity Treasury
(CMT).

The Company utilizes a simulation model to analyze net interest income
sensitivity to movements in interest rates. The simulation model projects net
interest income based on both a rise or fall in interest rates (rate shock) over
twelve, and twenty-four month periods. The model is based on the actual maturity
and repricing characteristics of interest-rate sensitive assets and liabilities.
The model incorporates assumptions regarding the impact of changing interest
rates on the prepayment rate of certain assets and liabilities. The assumptions
are based on nationally published prepayment speeds on assets and liabilities
when interest rates increase or decrease by 200 basis points or greater. The
model factors in projections for anticipated activity levels by product lines
offered by the Company. The simulation model also takes into account the
Company's increased ability to control the rates on deposit products more so
than adjustable-rate loans tied to published indices.

Interest rate risk represents the sensitivity of earnings to changes in market
interest rates. As interest rates change the interest income and expense streams
associated with the Company's financial instruments also change, thereby
impacting net interest income (NII), the primary component of the Company's
earnings. The ALCO utilizes the results of the simulation model to quantify the
estimated exposure of NII to sustained interest rate changes.

The following reflects the Company's NII sensitivity analysis over a twelve
month period:

Rate Change            Estimated NII Sensitivity Over Twelve Months Ended
--------------------------------------------------------------------------------
                      March 31, 2002                             March 31, 2001
                      --------------                             --------------
+200bp                    3.01%                                       0.26%
-200bp                      --                                       -1.91%
-100bp                    0.56%                                         --

The preceding sensitivity analysis does not represent the Company's forecast and
should not be relied upon as being indicative of expected operating results.
These hypothetical estimates are based upon numerous assumptions including: the
nature and timing of interest rate levels including yield curve shape,
prepayments on loans and securities, deposit decay rates, pricing decisions on
loans and deposits and reinvestment/replacement of asset and liability cash
flows. While assumptions are developed based upon current economic and local
market conditions, the Company cannot make any assurances as to the predictive
nature of these assumptions, including how customer preferences or competitor
influences might change.

Also, as market conditions vary from those assumed in the sensitivity analysis,
actual results will also differ due to: prepayment/refinancing levels likely
deviating from those assumed, the varying impact of interest rate change caps or
floors on adjustable-rate assets, the potential effect of changing debt service
levels on customers with adjustable-rate loans, depositor early withdrawals and
product preference changes, and other internal/external variables. Furthermore,
the sensitivity analysis does not reflect actions that ALCO might take in
responding to or anticipating changes in interest rates.


                                       13


<PAGE>




                    IPSWICH BANCSHARES, INC. AND SUBSIDIARIES

PART II - OTHER INFORMATION

Item 1.           Legal Proceedings
-------           -----------------
None

Item 2.           Changes in Securities and Use of Proceeds
-------           -----------------------------------------
None

Item 3.           Defaults Upon Senior Securities
-------           -------------------------------
None

Item 4.           Submission of Matters to a Vote of Security Holders
-------           ---------------------------------------------------
None

Item 5.           Other Information
-------           -----------------
None

Item 6.           Exhibits and Reports on Form 8-K
-------           --------------------------------
a.       Exhibits

b.       Reports on Form 8-K

         A Current Report on Form 8-K to report an Item 5 matter was filed on
         February 28, 2002.

   c.          Exhibits

   2.1         Agreement  and Plan of  Merger,  dated as of  February  26,  2002
               between  Banknorth Group, Inc. and the Company is incorporated be
               reference from Exhibit 2.1 of Banknorth's  Current Report on Form
               8-K filed February 28, 2002 (File No. 0-16947).

   2.2         Plan of  Reorganization  and Acquisition dated as of February 17,
               1999 between the Company and Ipswich Savings Bank incorporated by
               reference to the Company's Form 8-K filed on July 9, 1999.

   3.1         Articles of  Organization  of the Company dated February 12, 1999
               and  incorporated by reference herein from the Company's June 30,
               1999 Form 10-Q.

   3.2         By-laws of the Company is incorporated  by reference  herein from
               the Company's June 30, 1999 Form 10-Q.

   4.1         Specimen  stock  certificate  for the  Company's  Common Stock is
               incorporated by reference herein from the Company's June 30, 1999
               Form 10-Q.

   10.1        Lease dated September 15, 2000 for premises located at Routes 133
               and 1, Rowley,  Massachusetts is incorporated by reference herein
               from the Company's September 30, 2000 Form 10-Q..


                                       14

<PAGE>


   10.2        Lease dated April 25,  1994 for  premises  located at 451 Andover
               Street, North Andover, Massachusetts is incorporated by reference
               herein from the Company's June 30, 1999 Form 10-Q.

   10.3        Lease  dated  March 4,  1996 for  premises  located  at 588 Cabot
               Street,  Beverly,  Massachusetts  is  incorporated  by  reference
               herein from the Company's June 30, 1999 Form 10-Q.

   10.4        Lease  dated  July 27,  1997 for  premises  located at 600 Loring
               Avenue, Salem,  Massachusetts is incorporated by reference herein
               from the Company's June 30, 1999 Form 10-Q.

   10.5        Lease dated February 27, 1998 for premises located at 89 Pleasant
               Street,  Marblehead,  Massachusetts  is incorporated by reference
               herein from the Company's June 30, 1999 Form 10-Q.

   10.6        Lease  dated  June 12,  1998  for  premises  located  at 470 Main
               Street,  Reading,  Massachusetts  is  incorporated  by  reference
               herein from the Company's June 30, 1999 Form 10-Q.

   10.7*       Incentive  Compensation  Plan for Senior  Management  and certain
               other  officers  dated  September  15,  1995 is  incorporated  by
               reference herein from the Company's June 30, 1999 Form 10-Q.

   10.8*       Director  Recognition  and Retirement  Plan adopted as of May 18,
               1999 is incorporated by reference  herein from the Company's June
               30, 1999 Form 10-Q.

   10.9*       Merger and Severance  Benefits Program dated February 18, 1998 is
               incorporated by reference herein from the Company's June 30, 1999
               Form 10-Q.

   10.10*      Amended and Restated Employment and Severance Agreement dated May
               18,  1999  between  Ipswich  Savings  Bank and  David L.  Grey is
               incorporated by reference herein from the Company's June 30, 1999
               Form 10-Q.

   10.11*      Amended and Restated Employment and Severance Agreement dated May
               18, 1999  between  Ipswich  Savings  Bank and  Francis  Kenney is
               incorporated by reference herein from the Company's June 30, 1999
               Form 10-Q.

   10.12*      Severance  Agreement dated August 8, 2000 between Ipswich Savings
               Bank and Mark E. Foley is incorporated  by reference  herein from
               the Company's September 30, 2000 Form 10-Q.

   10.13(a)*   Amended and Restated  Split Dollar  Agreement  dated May 18, 1999
               among  Ipswich  Savings  Bank,  Eastern Bank and David L. Grey is
               incorporated by reference herein from the Company's June 30, 1999
               Form 10-Q.

   10.13(b)*   Amended and Restated Ipswich Irrevocable Insurance Trust dated as
               of May 18, 1999 by and between  Ipswich  Savings Bank and Eastern
               Bank is incorporated by reference  herein from the Company's June
               30, 1999 Form10-Q.

   10.14       Contract  with Bank's  data  processor  dated  August 31, 2001 is
               incorporated by reference herein from the Company's September 30,
               2001 Form 10-Q.

   10.15*      1992 Incentive and  Non-qualified  Stock Option Plan incorporated
               by reference to the Company's  Registration Statement on Form S-8
               filed on July 22, 1999.


                                       15

<PAGE>


   10.16*      1996  Stock  Incentive  Plan  incorporated  by  reference  to the
               Company's  Registration  Statement  on Form S-8 filed on July 22,
               1999.

   10.17*      1998  Stock  Incentive  Plan  incorporated  by  reference  to the
               Company's  Registration  Statement  on Form S-8 filed on July 22,
               1999.

   10.18*      Deferred   Compensation   Plan  for  Directors   incorporated  by
               reference to the Company's Form S-8 filed on July 22, 1999.

   10.19*      Form of Stock Option Agreement  between Banknorth Group, Inc. (as
               grantee) and the Company (as issuer) is incorporated by reference
               from Exhibit 10.1 of Banknorth's Current Report on Form 8-K filed
               February 28, 2002 (File No. 0-16947).

   10.20*      Split Dollar  Agreement and Collateral  Assignment dated July 20,
               2000 and March 30, 2001,  respectively  between  Ipswich  Savings
               Bank and Francis Kenney is incorporated by reference  herein from
               the Company's March 31, 2001 Form 10-Q.

   10.21*      Form  of  Termination  Agreement  by  and  among  Banknorth,  the
               Company,  Ipswich  Savings Bank,  Eastern  Bank, as Trustee,  and
               David L. Grey is  incorporated  by reference from Exhibit 10.3 of
               Banknorth's  Current  Report on Form 8-K filed  February 28, 2002
               (File No. 0-16947).

   10.22*      Form of Employment and Noncompetition Agreement between Banknorth
               Group,  Inc. and David L. Grey is  incorporated by reference from
               Exhibit  10.4 of  Banknorth's  Current  Report  on Form 8-K filed
               February 28, 2002 (File No. 0-16947).

   10.23*      Severance  Agreement  dated  November  6,  2001  between  Ipswich
               Savings  Bank and  Philip Bryan  incorporated by reference to the
               Company's December 31, 2001 Form 10-K.

   10.24*      Severance  Agreement  dated  November  8,  2001  between  Ipswich
               Savings  Bank  and  Kevin  Dean  incorporated by reference to the
               Company's December 31, 2001 Form 10-K.

   10.25       Contract dated April 6, 2000 with U.S. Bancorp for ATM processing
               services  incorporated  by reference to the  Company's  March 31,
               2000 Form 10-Q.

   11.         A statement  regarding the  computation  of earnings per share is
               included in the Notes to Consolidated Financial Statements.

   12.         Not applicable.

   *           Denotes Management Contract or Compensation Plan.


                                       16


<PAGE>


                                   SIGNATURES

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

IPSWICH BANCSHARES, INC.


By:      /s/ David L. Grey                                Date: May 8, 2002
         --------------------------------------
         David L. Grey
         President and Chief Executive Officer


By:      /s/ Francis Kenney                               Date:  May 8, 2002
         --------------------------------------
         Francis Kenney
         Treasurer
         (Principal Financial Officer and Principal Accounting Officer)