##### Table of Contents



FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

|       |  |                                                                                         
|------ |  | ----------------------------------------------------------------------------------------
|(XBOX) |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2002

OR

|      |  |                                                                                           
|----- |  | ------------------------------------------------------------------------------------------
|(BOX) |  | TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 0-16947

BANKNORTH GROUP, INC.




(Exact name of Registrant as specified in its charter)


|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Maine                                                          |  | 01-0437984                          
|                                                               |  |                                     
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer
Identification No.)

|                                         |  |            |       | 
|---------------------------------------- |  | ---------- | ----- | 
|Two Portland Square, Portland, Maine     |  |            | 04112 | 
|                                         |  |            |       | 
|(Address of principal executive offices) |  | (Zip Code)

(207) 761-8500




(Registrants telephone number, including area code)


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  (XBOX)      No  (BOX)

The number of shares outstanding of the Registrants common stock and related
stock purchase rights as of April 30, 2002 is:

|                                       |  |  |               | 
|-------------------------------------- |  |  | ------------- | 
|Common stock, par value $.01 per share |  |  | 147,044,999   | 
|                                       |  |  |               | 
|(Class)                                |  |  | (Outstanding) | 





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TABLE OF CONTENTS



|                              |                                                                                               |                                                            |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | Item 1. Financial Statements                                                                 
|                              |                                                                                               | CONSOLIDATED BALANCE SHEETS                               
|                              |                                                                                               | CONSOLIDATED STATEMENTS OF INCOME                         
|                              |                                                                                               | CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
|                              |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS                     
|                              |                                                                                               | Notes to Consolidated Financial Statements                
|                              | Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                              | Item 3. Quantitative and Qualitative Disclosures about Market Risk                           
|Part II  Other Information  
|                              | Item 1. Legal Proceedings                                                                    
|                              | Item 2. Changes in Securities and Use of Proceeds                                            
|                              | Item 3. Defaults Upon Senior Securities                                                      
|                              | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                              | Item 5. Other Information                                                                    
|                              | Item 6. Exhibits and Reports on Form 8-K.                                                    
|SIGNATURES                   



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##### Table of Contents



INDEX

BANKNORTH GROUP, INC. AND SUBSIDIARIES

|         |  |                            |  |                                                                                                         |  |   
|-------- |  | -------------------------- |  | ------------------------------------------------------------------------------------------------------- |  | --
|PART I.  |  | FINANCIAL INFORMATION PAGE |  | PAGE                                                                                                   
|         |  |                            |  |                                                                                                         |  |   
|         |  | Item 1.                    |  | Financial Statements                                                                                    |  |   
|        
|        
|        
|        
|         |  |                            |  |                                                                                                         |  |   
|        
|        
|        
|        
|         |  |                            |  | Consolidated Balance Sheets
March 31, 2002 and December 31, 2001                                        |  | 3 
|        
|        
|        
|        
|         |  |                            |  |                                                                                                         |  |   
|        
|        
|        
|        
|         |  |                            |  | Consolidated Statements of Income 
Three months ended
March 31, 2002 and 2001                          |  | 4 
|        
|        
|        
|        
|         |  |                            |  |                                                                                                         |  |   
|        
|        
|        
|        
|         |  |                            |  | Consolidated Statements of Changes in Shareholders Equity -
Three months ended March 31, 2002 and 2001 |  | 5 
|        
|        
|        
|        
|         |  |                            |  |                                                                                                         |  |   
|        
|        
|        
|        
|         |  |                            |  | Consolidated Statements of Cash Flows 
Three months ended March 31, 2002 and 2001                      |  | 6 
|        
|        
|        
|        
|         |  |                            |  |                                                                                                         |  |   
|        
|        
|        
|        
|         |  |                            |  | Notes to Consolidated Financial Statements                                                              |  | 7 
|        
|        
|        
|        
|         |  |                            |  |                                                                                                         |  |   
|        
|        
|        
|        
|         |  | Item 2.                    |  | Managements Discussion and Analysis of Financial
Condition and Results of Operations                   |  | 11
|        
|        
|        
|        
|         |  |                            |  |                                                                                                         |  |   
|        
|        
|        
|        
|         |  | Item 3.                    |  | Quantitative and Qualitative Disclosures about Market Risk                                              |  | 32
|        
|        
|        
|        
|         |  |                            |  |                                                                                                         |  |   
|        
|        
|        
|        
|PART II. |  | OTHER INFORMATION          |  |                                                                                                        
|         |  |                            |  |                                                                                                         |  |   
|        
|        
|        
|        
|         |  | Item 1.                    |  | Legal proceedings                                                                                       |  | 32
|        
|        
|        
|        
|         |  |                            |  |                                                                                                         |  |   
|        
|        
|        
|        
|         |  | Item 2.                    |  | Changes in securities and use of proceeds                                                               |  | 32
|        
|        
|        
|        
|         |  |                            |  |                                                                                                         |  |   
|        
|        
|        
|        
|         |  | Item 3.                    |  | Defaults upon senior securities                                                                         |  | 32
|        
|        
|        
|        
|         |  |                            |  |                                                                                                         |  |   
|        
|        
|        
|        
|         |  | Item 4.                    |  | Submission of matters to a vote of security holders                                                     |  | 32
|        
|        
|        
|        
|         |  |                            |  |                                                                                                         |  |   
|        
|        
|        
|        
|         |  | Item 5                     |  | Other information                                                                                       |  | 32
|        
|        
|        
|        
|         |  |                            |  |                                                                                                         |  |   
|        
|        
|        
|        
|         |  | Item 6                     |  | Exhibits and reports on Form 8-K                                                                        |  | 32
|        
|        
|        
|        
|         |  |                            |  |                                                                                                         |  |   
|        
|        
|        
|        
|         |  | Signatures                 |  | 32                                                                                                     

2



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##### Table of Contents












BANKNORTH GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

|                                                                                                                                                                 |                                           |                                            |                |                      |            |                |            |                   |            |            |            | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------- | ------------------------------------------ | -------------- | -------------------- | ---------- | -------------- | ---------- | ----------------- | ---------- | ---------- | ---------- | 
|                                                                                                                                                                 |                                           |                                            |                |                      |            | March 31, 2002 |            | December 31, 2001
|                                                                                                                                                                 |                                           |                                            |                |                      |            |                |            |                  
|Assets                                                                                                                                                           |                                           | (Unaudited)                                |                |                      |            |               
|Cash and due from banks                                                                                                                                          |                                           | $                                          | 479,151        |                      |            | $              | 650,588    |                  
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|Federal funds sold and other short term investments                                                                                                              |                                           |                                            | 20,061         |                      |            |                | 270,623    |                  
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|Securities available for sale, at market value                                                                                                                   |                                           |                                            | 5,979,155      |                      |            |                | 5,817,238  |                  
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|Securities held to maturity (fair value of $314,110 and $340,737 at March 31, 2002
and December 31, 2001, respectively)                                          |                                           |                                            | 310,724        |                      |            |                | 339,623    |                  
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|Loans held for sale                                                                                                                                              |                                           |                                            | 62,471         |                      |            |                | 117,674    |                  
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|Loans and leases:                                                                                                                                                |                                           |                                            |                |                      |            |                |            |                  
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                 | Residential real estate mortgages         |                                            |                | 2,561,552            |            |                |            | 2,627,125         |           
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                 | Commercial real estate mortgages          |                                            |                | 4,134,095            |            |                |            | 4,094,039         |           
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                 | Commercial business loans and leases      |                                            |                | 2,502,967            |            |                |            | 2,462,653         |           
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                 | Consumer loans and leases                 |                                            |                | 3,569,126            |            |                |            | 3,531,513         |           
|                                                                                                                                                                 |                                           |                                            |                |                      |            |                |            |                  
|                                                                                                                                                                 |                                           | Total loans and leases                     |                |                      | 12,767,740 |                |            |                   | 12,715,330 |           
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                 | Less: Allowance for loan and lease losses |                                            |                | 190,890              |            |                |            | 189,837           |           
|                                                                                                                                                                 |                                           |                                            |                |                      |            |                |            |                  
|                                                                                                                                                                 |                                           |                                            |                | Net loans and leases |            |                | 12,576,850 |                   |            |            | 12,525,493 | 
|                                                                                                                                                                 |                                           |                                            |                |                      |            |                |            |                  
|Premises
and equipment, net                                                                                                                                      |                                           |                                            | 238,691        |                      |            |                | 237,440    |                  
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|Goodwill                                                                                                                                                         |                                           |                                            | 407,579        |                      |            |                | 409,340    |                  
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|Identifiable intangible assets                                                                                                                                   |                                           |                                            | 53,958         |                      |            |                | 57,293     |                  
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|Mortgage servicing rights                                                                                                                                        |                                           |                                            | 8,503          |                      |            |                | 8,484      |                  
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|Bank-owned life insurance                                                                                                                                        |                                           |                                            | 364,779        |                      |            |                | 321,113    |                  
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|Other assets                                                                                                                                                     |                                           |                                            | 353,216        |                      |            |                | 321,677    |                  
|                                                                                                                                                                 |                                           |                                            |                |                      |            |                |            |                  
|                                                                                                                                                                 | Total assets                              |                                            | $              | 20,855,138           |            |                | $          | 21,076,586        |           
|                                                                                                                                                                 |                                           |                                            |                |                      |            |                |            |                  
|Liabilities and Shareholders Equity                                                                                                                             |                                           |                                            |                |                      |            |                |            |                  
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|Deposits:                                                                                                                                                        |                                           |                                            |                |                      |            |                |            |                  
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                 | Savings accounts                          |                                            | $              | 1,705,517            |            |                | $          | 1,604,556         |           
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                 | Money market access and NOW accounts      |                                            |                | 5,170,005            |            |                |            | 5,129,626         |           
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                 | Certificates of deposit                   |                                            |                | 4,726,465            |            |                |            | 4,811,357         |           
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                 | Brokered deposits                         |                                            |                | 60,596               |            |                |            | 72,171            |           
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                 | Demand deposits                           |                                            |                | 2,468,844            |            |                |            | 2,603,339         |           
|                                                                                                                                                                 |                                           |                                            |                |                      |            |                |            |                  
|                                                                                                                                                                 |                                           |                                            | Total deposits |                      |            | 14,131,427     |            |                   |            | 14,221,049 |           
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|Federal funds purchased and securities sold under repurchase agreements                                                                                          |                                           |                                            | 1,576,127      |                      |            |                | 1,620,555  |                  
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|Borrowings from the Federal Home Loan Bank                                                                                                                       |                                           |                                            | 2,529,520      |                      |            |                | 2,644,105  |                  
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|Other borrowings                                                                                                                                                 |                                           |                                            | 8,739          |                      |            |                | 43,972     |                  
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|Subordinated long-term debt                                                                                                                                      |                                           |                                            | 200,000        |                      |            |                | 200,000    |                  
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|Company obligated, mandatorily redeemable securities of subsidiary trusts
holding solely parent junior subordinated debentures                                   |                                           |                                            | 293,756        |                      |            |                | 93,756     |                  
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|Other liabilities                                                                                                                                                |                                           |                                            | 418,680        |                      |            |                | 464,034    |                  
|                                                                                                                                                                 |                                           |                                            |                |                      |            |                |            |                  
|                                                                                                                                                                 | Total liabilities                         |                                            |                | 19,158,249           |            |                |            | 19,287,471        |           
|                                                                                                                                                                 |                                           |                                            |                |                      |            |                |            |                  
|Shareholders Equity:                                                                                                                                            |                                           |                                            |                |                      |            |                |            |                  
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|Preferred stock (par value $0.01 per share, 5,000,000 shares authorized,
none issued)                                                                            |                                           |                                            |               |                      |            |                |           |                  
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|Common stock (par value $0.01 per share, 400,000,000 and 200,000,000 shares authorized,
165,122,722 shares issued in 2002 and 165,123,674 shares issued in 2001) |                                           |                                            | 1,651          |                      |            |                | 1,651      |                  
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|Paid-in capital                                                                                                                                                  |                                           |                                            | 956,239        |                      |            |                | 958,764    |                  
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|Retained earnings                                                                                                                                                |                                           |                                            | 1,103,748      |                      |            |                | 1,056,678  |                  
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|Unearned compensation                                                                                                                                            |                                           |                                            | (455           | )                    |            |                | (1,017     | )                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|Treasury stock, at cost (18,206,450 shares in 2002 and 13,903,074 shares in 2001)                                                                                |                                           |                                            | (376,455       | )                    |            |                | (267,529   | )                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|Accumulated other comprehensive income                                                                                                                           |                                           |                                            | 12,161         |                      |            |                | 40,568     |                  
|                                                                                                                                                                 |                                           |                                            |                |                      |            |                |            |                  
|                                                                                                                                                                 | Total shareholders equity                |                                            |                | 1,696,889            |            |                |            | 1,789,115         |           
|                                                                                                                                                                 |                                           |                                            |                |                      |            |                |            |                  
|                                                                                                                                                                 |                                           | Total liabilities and shareholders equity |                | $                    | 20,855,138 |                |            | $                 | 21,076,586 |           
|                                                                                                                                                                 |                                           |                                            |                |                      |            |                |            |                  

See accompanying Notes to Consolidated Financial Statements.

3



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##### Table of Contents






BANKNORTH GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data) (Unaudited)

|                                                                |                                                                 |                                                                       |         |                    |         |      |         |         |         | 
|--------------------------------------------------------------- | --------------------------------------------------------------- | --------------------------------------------------------------------- | ------- | ------------------ | ------- | ---- | ------- | ------- | ------- | 
|                                                                |                                                                 |                                                                       |         | Three Months Ended
|                                                                |                                                                 |                                                                       |         | March 31,         
|                                                                |                                                                 |                                                                       |         |                   
|                                                                |                                                                 |                                                                       |         | 2002               |         | 2001
|                                                                |                                                                 |                                                                       |         |                    |         |     
|Interest and dividend income:                                   |                                                                 |                                                                       |         |                    |         |      |         |        
|                                                                | Interest and fees on loans and leases                           |                                                                       | $       | 221,784            |         |      | $       | 228,824 |        
|                                                                | Interest and dividends on securities                            |                                                                       |         | 84,222             |         |      |         | 97,721  |        
|                                                                |                                                                 |                                                                       |         |                    |         |      |         |        
|                                                                |                                                                 | Total interest and dividend income                                    |         |                    | 306,006 |      |         |         | 326,545 | 
|                                                                |                                                                 |                                                                       |         |                    |         |      |         |        
|Interest expense:                                               |                                                                 |                                                                       |         |                    |         |      |         |        
|                                                                | Interest on deposits                                            |                                                                       |         | 64,841             |         |      |         | 104,239 |        
|                                                                | Interest on borrowed funds                                      |                                                                       |         | 44,642             |         |      |         | 66,339  |        
|                                                                |                                                                 |                                                                       |         |                    |         |      |         |        
|                                                                |                                                                 | Total interest expense                                                |         |                    | 109,483 |      |         |         | 170,578 | 
|                                                                |                                                                 |                                                                       |         |                    |         |      |         |        
|                                                                |                                                                 | Net interest income                                                   |         |                    | 196,523 |      |         |         | 155,967 | 
|Provision for loan and lease losses                             |                                                                 |                                                                       | 11,828  |                    |         |      | 7,138   |        
|                                                                |                                                                 |                                                                       |         |                    |         |      |         |        
|                                                                |                                                                 | Net interest income after provision
for loan and lease losses         |         |                    | 184,695 |      |         |         | 148,829 | 
|                                                                |                                                                 |                                                                       |         |                    |         |      |         |        
|Noninterest income:                                             |                                                                 |                                                                       |         |                    |         |      |         |        
|                                                                | Deposit services                                                |                                                                       |         | 18,960             |         |      |         | 17,546  |        
|                                                                | Mortgage banking services                                       |                                                                       |         | 1,676              |         |      |         | 3,234   |        
|                                                                | Trust and investment management services                        |                                                                       |         | 8,277              |         |      |         | 8,787   |        
|                                                                | Investment planning services                                    |                                                                       |         | 2,718              |         |      |         | 1,698   |        
|                                                                | Insurance brokerage commissions                                 |                                                                       |         | 10,155             |         |      |         | 9,968   |        
|                                                                | Bank-owned life insurance                                       |                                                                       |         | 4,376              |         |      |         | 4,306   |        
|                                                                | Merchant and electronic banking income, net                     |                                                                       |         | 7,749              |         |      |         | 6,491   |        
|                                                                | Loan fee income                                                 |                                                                       |         | 5,433              |         |      |         | 2,703   |        
|                                                                | Net securities gains                                            |                                                                       |         | 19                 |         |      |         | 759     |        
|                                                                | Other noninterest income                                        |                                                                       |         | 2,213              |         |      |         | 3,264   |        
|                                                                |                                                                 |                                                                       |         |                    |         |      |         |        
|                                                                |                                                                 |                                                                       | 61,576  |                    |         |      | 58,756  |        
|                                                                |                                                                 |                                                                       |         |                    |         |      |         |        
|Noninterest expenses:                                           |                                                                 |                                                                       |         |                    |         |      |         |        
|                                                                | Salaries and employee benefits                                  |                                                                       |         | 75,298             |         |      |         | 61,694  |        
|                                                                | Data processing                                                 |                                                                       |         | 10,582             |         |      |         | 8,961   |        
|                                                                | Occupancy                                                       |                                                                       |         | 12,498             |         |      |         | 11,812  |        
|                                                                | Equipment                                                       |                                                                       |         | 9,730              |         |      |         | 8,161   |        
|                                                                | Amortization of goodwill                                        |                                                                       |         |                   |         |      |         | 2,793   |        
|                                                                | Amortization of identifiable intangible assets                  |                                                                       |         | 3,335              |         |      |         | 2,631   |        
|                                                                | Special charges                                                 |                                                                       |         | 8,204              |         |      |         | 5,608   |        
|                                                                | Other noninterest expenses                                      |                                                                       |         | 25,039             |         |      |         | 23,199  |        
|                                                                |                                                                 |                                                                       |         |                    |         |      |         |        
|                                                                |                                                                 |                                                                       | 144,686 |                    |         |      | 124,859 |        
|                                                                |                                                                 |                                                                       |         |                    |         |      |         |        
|Income before income tax expense                                |                                                                 |                                                                       | 101,585 |                    |         |      | 82,726  |        
|Applicable income tax expense                                   |                                                                 |                                                                       | 34,256  |                    |         |      | 27,343  |        
|                                                                |                                                                 |                                                                       |         |                    |         |      |         |        
|                                                                |                                                                 | Net income before cumulative effect of
change in accounting principle |         |                    | 67,329  |      |         |         | 55,383  | 
|Cumulative effect of change in accounting principle, net of tax |                                                                 |                                                                       |        |                    |         |      | (290    | )      
|                                                                |                                                                 |                                                                       |         |                    |         |      |         |        
|                                                                |                                                                 | Net income                                                            |         | $                  | 67,329  |      |         | $       | 55,093  | 
|                                                                |                                                                 |                                                                       |         |                    |         |      |         |        
|Basic earnings per share:                                       |                                                                 |                                                                       |         |                    |         |      |         |        
|                                                                | Net income before cumulative effect of accounting change        |                                                                       | $       | 0.45               |         |      | $       | 0.39    |        
|                                                                | Cumulative effect of change in accounting principle, net of tax |                                                                       |         |                   |         |      |         |        |        
|                                                                |                                                                 |                                                                       |         |                    |         |      |         |        
|                                                                | Net income                                                      |                                                                       | $       | 0.45               |         |      | $       | 0.39    |        
|                                                                |                                                                 |                                                                       |         |                    |         |      |         |        
|Diluted earnings per share:                                     |                                                                 |                                                                       |         |                    |         |      |         |        
|                                                                | Net income before cumulative effect of accounting change        |                                                                       | $       | 0.45               |         |      | $       | 0.39    |        
|                                                                | Cumulative effect of change in accounting principle, net of tax |                                                                       |         |                   |         |      |         |        |        
|                                                                |                                                                 |                                                                       |         |                    |         |      |         |        
|                                                                | Net income                                                      |                                                                       | $       | 0.45               |         |      | $       | 0.39    |        
|                                                                |                                                                 |                                                                       |         |                    |         |      |         |        
|Weighted average shares outstanding:                            |                                                                 |                                                                       |         |                    |         |      |         |        
|                                                                |                                                                 | Basic                                                                 |         |                    | 149,347 |      |         |         | 140,800 | 
|                                                                |                                                                 | Diluted                                                               |         |                    | 151,116 |      |         |         | 142,007 | 

See accompanying Notes to Consolidated Financial Statements.

4



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##### Table of Contents






BANKNORTH GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(In thousands) (Unaudited)

|                                                                        |                      |   |        |  |         |        |          |   |         |        |           |   |               |   |          |   |  |        |           |   |       |   |             |   |  |        |           |         |  |  |  |  | 
|----------------------------------------------------------------------- | -------------------- | - | ------ |  | ------- | ------ | -------- | - | ------- | ------ | --------- | - | ------------- | - | -------- | - |  | ------ | --------- | - | ----- | - | ----------- | - |  | ------ | --------- | ------- |  |  |  |  | 
|                                                                        |                      |   |        |  |         |        |          |   |         |        |           |   |               |   |          |   |  |        |           |   |       |   | Accumulated |   |  |        |           |         |  |  | 
|                                                                        |                      |   |        |  |         |        |          |   |         |        |           |   |               |   | Unearned |   |  |        |           |   | Other |   |             |   |  |        |           |         | 
|                                                                        |                      |   | Common |  | Paid-in |        | Retained |   | Compen- |        | Treasury  |   | Comprehensive |   |          |   |  |        |           |   |      
|                                                                        |                      |   | Stock  |  | Capital |        | Earnings |   | sation  |        | Stock     |   | Income (Loss) |   | Total    |   |  |        |          
|                                                                        |                      |  
|Balances at December 31, 2001                                           |                      | $ | 1,651  |  |         | $      | 958,764  |   |         | $      | 1,056,678 |   |               |   | ($1,017  | ) |  |        | ($267,529 | ) |       | $ | 40,568      |   |  | $      | 1,789,115 |         |  |  |  | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Net income                                                              |                      |   |       |  |         |        |         |   |         |        | 67,329    |   |               |   |         |   |  |        |          |   |       |   |            |   |  |        | 67,329    |         |  |  |  | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Unrealized loss on securities, net of
reclassification adjustment       |                      |   |       |  |         |        |         |   |         |        |          |   |               |   |         |   |  |        |          |   |       |   | (28,393     | ) |  |        | (28,393   | )       |  |  |  | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Unrealized loss on cash flow hedges,
net of reclassification adjustment |                      |   |       |  |         |        |         |   |         |        |          |   |               |   |         |   |  |        |          |   |       |   | (14         | ) |  |        | (14       | )       |  |  |  | 
|                                                                        |                      |   |        |  |         |        |          |   |         |        |           |   |               |   |          |   |  |        |           |   |       |   |             |   |  |        |           |         |  |  |  | 
|                                                                        | Comprehensive income |   |        |  |         |        |          |   |         |        |           |   |               |   |          |   |  |        |           |   |       |   |             |   |  |        |           | 38,922  |  |  |  |  | 
|                                                                        |                      |   |        |  |         |        |          |   |         |        |           |   |               |   |          |   |  |        |           |   |       |   |             |   |  |        |           |         |  |  |  | 
|Treasury stock issued for employee benefit plans                        |                      |  |        |  |         | (5,508 | )        |   |         |       |           |   |               |  |          |   |  | 23,118 |           |   |       |  |             |   |  | 17,610 |           |         |  |  | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Treasury stock purchased                                                |                      |   |       |  |         |        |         |   |         |        |          |   |               |   |         |   |  |        | (132,815  | ) |       |   |            |   |  |        | (132,815  | )       |  |  |  | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Issuance and distribution of restricted stock                           |                      |   |       |  |         |        | (421     | ) |         |        |          |   |               |   |         |   |  |        | 771       |   |       |   |            |   |  |        | 350       |         |  |  |  | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Decrease in unearned compensation-ESOP                                  |                      |   |       |  |         |        | 3,421    |   |         |        |          |   |               |   | 562      |   |  |        |          |   |       |   |            |   |  |        | 3,983     |         |  |  |  | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Payment of fractional shares                                            |                      |   |       |  |         |        | (17      | ) |         |        |          |   |               |   |         |   |  |        |          |   |       |   |            |   |  |        | (17       | )       |  |  |  | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Cash dividends                                                          |                      |   |       |  |         |        |         |   |         |        | (20,259   | ) |               |   |         |   |  |        |          |   |       |   |            |   |  |        | (20,259   | )       |  |  |  | 
|                                                                        |                      |  
|Balances at March 31, 2002                                              |                      | $ | 1,651  |  |         | $      | 956,239  |   |         | $      | 1,103,748 |   |               |   | ($455    | ) |  |        | ($376,455 | ) |       | $ | 12,161      |   |  | $      | 1,696,889 |         |  |  |  | 
|                                                                        |                      |  
|Balances at December 31, 2000                                           |                      | $ | 1,496  |  |         | $      | 617,234  |   |         | $      | 897,214   |   |               |   | ($1,354  | ) |  |        | ($149,246 | ) |       |   | ($34,487    | ) |  | $      | 1,330,857 |         |  |  |  | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Net income                                                              |                      |   |       |  |         |        |         |   |         |        | 55,093    |   |               |   |         |   |  |        |          |   |       |   |            |   |  |        | 55,093    |         |  |  |  | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Unrealized gain on securities, net of
reclassification adjustment       |                      |   |       |  |         |        |         |   |         |        |          |   |               |   |         |   |  |        |          |   |       |   | 47,250      |   |  |        | 47,250    |         |  |  |  | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Unrealized loss on cash flow hedges                                     |                      |   |        |  |         |        |          |   |         |        |           |   |               |   |          |   |  |        |           |   |       |   | (341        | ) |  |        | (341      | )       |  |  |  | 
|                                                                        |                      |   |        |  |         |        |          |   |         |        |           |   |               |   |          |   |  |        |           |   |       |   |             |   |  |        |           |         |  |  |  | 
|                                                                        | Comprehensive income |   |        |  |         |        |          |   |         |        |           |   |               |   |          |   |  |        |           |   |       |   |             |   |  |        |           | 102,002 |  |  |  |  | 
|                                                                        |                      |   |        |  |         |        |          |   |         |        |           |   |               |   |          |   |  |        |           |   |       |   |             |   |  |        |           |         |  |  |  | 
|Treasury stock issued for employee benefit plans                        |                      |  |        |  |         | 297    |          |   |         | (1,181 | )         |   |               |  |          |   |  | 5,257  |           |   |       |  |             |   |  | 4,373  |           |         |  |  | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Treasury stock purchased                                                |                      |   |       |  |         |        |         |   |         |        |          |   |               |   |         |   |  |        | (58,660   | ) |       |   |            |   |  |        | (58,660   | )       |  |  |  | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Issuance and distribution of restricted stock                           |                      |   |       |  |         |        | (29      | ) |         |        | (33       | ) |               |   |         |   |  |        | 113       |   |       |   |            |   |  |        | 51        |         |  |  |  | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Decrease in unearned compensation-ESOP                                  |                      |   |       |  |         |        | 387      |   |         |        |          |   |               |   | 84       |   |  |        |          |   |       |   |            |   |  |        | 471       |         |  |  |  | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Payment of fractional shares                                            |                      |   |       |  |         |        | (1       | ) |         |        |          |   |               |   |         |   |  |        |          |   |       |   |            |   |  |        | (1        | )       |  |  |  | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Cash dividends                                                          |                      |   |       |  |         |        |         |   |         |        | (18,230   | ) |               |   |         |   |  |        |          |   |       |   |            |   |  |        | (18,230   | )       |  |  |  | 
|                                                                        |                      |  
|Balances at March 31, 2001                                              |                      | $ | 1,496  |  |         | $      | 617,888  |   |         | $      | 932,863   |   |               |   | ($1,270  | ) |  |        | ($202,536 | ) |       | $ | 12,422      |   |  | $      | 1,360,863 |         |  |  |  | 
|                                                                        |                      |  

See accompanying Notes to Consolidated Financial Statements.

5



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##### Table of Contents






BANKNORTH GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Unaudited)

|                                                                                                                                                     |                                                                                    |                                                                                                         |          |            |                              |   |         |            |          |   | 
|---------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------- | -------- | ---------- | ---------------------------- | - | ------- | ---------- | -------- | - | 
|                                                                                                                                                     |                                                                                    |                                                                                                         |          |            | Three Months Ended March 31,
|                                                                                                                                                     |                                                                                    |                                                                                                         |          |            |                             
|                                                                                                                                                     |                                                                                    |                                                                                                         |          |            | 2002                         |   | 2001   
|                                                                                                                                                     |                                                                                    |                                                                                                         |          |            |                              |   |        
|Cash flows from operating activities:                                                                                                                |                                                                                    |                                                                                                         |          |            |                              |   |         |           
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                     | Net income                                                                         |                                                                                                         | $        | 67,329     |                              |   | $       | 55,093     |         
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                     | Adjustments to reconcile net income to net cash provided by operating activities:  |                                                                                                         |          |            |                              |   |         |            |         
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                     |                                                                                    | Provision for loan and lease losses                                                                     |          |            | 11,828                       |   |         |            | 7,138    |  
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                     |                                                                                    | Depreciation                                                                                            |          |            | 8,680                        |   |         |            | 7,131    |  
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                     |                                                                                    | Amortization of goodwill and other intangibles                                                          |          |            | 3,335                        |   |         |            | 5,424    |  
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                     |                                                                                    | Provision for deferred tax expense                                                                      |          |            | 3,676                        |   |         |            | 46       |  
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                     |                                                                                    | ESOP and restricted stock expense                                                                       |          |            | 3,983                        |   |         |            | 471      |  
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                     |                                                                                    | Issuance of restricted stock units                                                                      |          |            | 350                          |   |         |            | 51       |  
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                     |                                                                                    | Net (gains) realized from sales of securities and consumer loans                                        |          |            | (19                          | ) |         |            | (1,527   | )
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                     |                                                                                    | Net (gains) losses realized from sales of loans held for sale (a component ofmortgage banking services) |          |            | (2,179                       | ) |         |            | 1,271    |  
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                     |                                                                                    | Earnings from bank owned life insurance                                                                 |          |            | (4,376                       | ) |         |            | (4,306   | )
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                     |                                                                                    | Net (increase) decrease in mortgage servicing rights                                                    |          |            | (19                          | ) |         |            | 22,734   |  
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                     |                                                                                    | Proceeds from sales of loans held for sale                                                              |          |            | 216,023                      |   |         |            | 136,151  |  
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                     |                                                                                    | Residential loans originated for sale                                                                   |          |            | (158,641                     | ) |         |            | (198,976 | )
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                     |                                                                                    | Net (increase) decrease in interest and dividends receivable and other assets                           |          |            | (10,617                      | ) |         |            | 14,811   |  
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                     |                                                                                    | Net (decrease) increase in other liabilities                                                            |          |            | (45,354                      | ) |         |            | 9,906    |  
|                                                                                                                                                     |                                                                                    |                                                                                                         |          |            |                              |   |         |           
|Net cash provided by operating activities                                                                                                            |                                                                                    |                                                                                                         | 93,999   |            |                              |   | 55,418  |           
|                                                                                                                                                     |                                                                                    |                                                                                                         |          |            |                              |   |         |           
|Cash flows from investing activities:                                                                                                                |                                                                                    |                                                                                                         |          |            |                              |   |         |           
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                     | Proceeds from sales of securities available for sale                               |                                                                                                         |          | 220,150    |                              |   |         | 186,542    |         
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                     | Proceeds from maturities and principal repayments of securities available for sale |                                                                                                         |          | 617,563    |                              |   |         | 428,384    |         
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                     | Purchases of securities available for sale                                         |                                                                                                         |          | (1,043,295 | )                            |   |         | (676,919   | )       
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                     | Proceeds from maturities and principal repayments of securities held to maturity   |                                                                                                         |          | 28,899     |                              |   |         | 23,209     |         
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                     | Net (increase) decrease in loans and leases                                        |                                                                                                         |          | (63,185    | )                            |   |         | 41,697     |         
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                     | Proceeds from sale of loans                                                        |                                                                                                         |          |           |                              |   |         | 39,303     |         
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                     | Net additions to premises and equipment                                            |                                                                                                         |          | (9,931     | )                            |   |         | (10,027    | )       
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                     | Purchases of bank owned life insurance                                             |                                                                                                         |          | (40,000    | )                            |   |         |           |         
|                                                                                                                                                     |                                                                                    |                                                                                                         |          |            |                              |   |         |           
|Net cash (used) provided by investing activities                                                                                                     |                                                                                    |                                                                                                         | (289,799 | )          |                              |   | 32,189  |           
|                                                                                                                                                     |                                                                                    |                                                                                                         |          |            |                              |   |         |           
|Cash flows from financing activities:                                                                                                                |                                                                                    |                                                                                                         |          |            |                              |   |         |           
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                     | Net (decrease) increase in deposits                                                |                                                                                                         |          | (89,622    | )                            |   |         | 74,217     |         
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                     | Net (decrease) in securities sold under repurchase agreements                      |                                                                                                         |          | (23,428    | )                            |   |         | (20,683    | )       
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                     | Proceeds from Federal Home Loan Bank borrowings                                    |                                                                                                         |          | 3,280      |                              |   |         | 3,260,065  |         
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                     | Payments on Federal Home Loan Bank borrowings                                      |                                                                                                         |          | (117,865   | )                            |   |         | (3,311,018 | )       
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                     | Net (decrease) increase in other borrowings                                        |                                                                                                         |          | (35,233    | )                            |   |         | 127,831    |         
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                     | Issuance of securities of subsidiaries trusts                                      |                                                                                                         |          | 193,150    |                              |   |         |           |         
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                     | Issuance of stock                                                                  |                                                                                                         |          | 17,593     |                              |   |         | 4,372      |         
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                     | Purchase of treasury stock                                                         |                                                                                                         |          | (132,815   | )                            |   |         | (58,660    | )       
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                     | Dividends paid                                                                     |                                                                                                         |          | (20,259    | )                            |   |         | (18,230    | )       
|                                                                                                                                                     |                                                                                    |                                                                                                         |          |            |                              |   |         |           
|Net cash (used) provided by financing activities                                                                                                     |                                                                                    |                                                                                                         | (205,199 | )          |                              |   | 57,894  |           
|                                                                                                                                                     |                                                                                    |                                                                                                         |          |            |                              |   |         |           
|Increase (decrease) in cash and cash equivalents                                                                                                     |                                                                                    |                                                                                                         | (400,999 | )          |                              |   | 145,501 |           
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                    
|                                                                                                                                                     | Cash and cash equivalents at beginning of period                                   |                                                                                                         |          | 871,211    |                              |   |         | 392,989    |         
|                                                                                                                                                     |                                                                                    |                                                                                                         |          |            |                              |   |         |           
|                                                                                                                                                     | Cash and cash equivalents at end of period                                         |                                                                                                         | $        | 470,212    |                              |   | $       | 538,490    |         
|                                                                                                                                                     |                                                                                    |                                                                                                         |          |            |                              |   |         |           
|For the three months ended March 31, 2002 and 2001, interest of $106,425 and
$172,817 and income taxes of $1,055 and $7,478 were paid,
respectively. |                                                                                    |                                                                                                         |          |            |                              |   |         |           

See accompanying Notes to Consolidated Financial Statements.

6



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##### Table of Contents






BANKNORTH GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2002
(In thousands, except per share data)
(Unaudited)

Note 1  Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United
States of America and predominant practices within the banking industry.
Banknorth Group, Inc. (Banknorth) has not changed its accounting and reporting policies from those
disclosed in its 2001 Annual Report, except for the adoption of Statement of
Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets as
discussed in Note 2 and No. 144 , Accounting for the Impairment or Disposal of
Long-lived Assets as discussed in Note 7.

Effective January 1, 2002, Banknorth completed the consolidation of eight of
its banking subsidiaries and its subsidiary trust company into its Maine-based
banking subsidiary, Peoples Heritage Bank NA, which was renamed Bankorth, NA in
connection with these transactions.

In the opinion of management, all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation of the consolidated financial
statements have been included. The results of operations and other data for
the three months ended March 31, 2002 are not necessarily indicative of the
results that may be expected for any other interim period or the entire year
ending December 31, 2002. Certain amounts in the prior periods have been
reclassified to conform to the current presentation.

Note 2  Goodwill and Other Intangible Assets

Banknorth adopted the provisions of SFAS No. 142 effective January 1, 2002. As
of the date of adoption, we had unamortized goodwill in the amount of $409.3
million, and unamortized identifiable intangible assets in the amount of $57.3
million, all of which were subject to the transition provisions of SFAS No.
141, Business Combinations and No. 142. Banknorth has not yet completed a
transitional impairment test on goodwill assets, however based on evaluation
results to date, impairment losses, if any, are not expected to be material.
Banknorth does not currently have any other indefinite-lived intangible assets
recorded in the consolidated balance sheet. In addition, no material
reclassifications or adjustments to the useful lives of finite-lived intangible
assets were made as a result of adopting the new standard. The full impact of
adopting SFAS No. 142 is expected to result in an increase in net income of
approximately $10.2 million, or approximately $.07 per diluted share in 2002,
as a result of no longer having to amortize goodwill. At
March 31, 2002, Banknorth
had $54.0 million in unamortized identifiable intangible assets consisting of
core deposit intangibles, SFAS 72 intangibles and other intangibles. Total
amortization expense associated with these intangible assets in the first
quarter of 2002 and 2001 was $3.3 million and $2.6 million, respectively.
Assuming retroactive adoption of SFAS No. 142, net income for the quarter ended
March 31, 2001 would have been $57.6 million and diluted earnings per share
would have been $0.41 for the same period.

The changes in the carrying amount of goodwill and identifiable intangible
assets for the three months ended March 31, 2002 follows:

|                                                                                                            |      |   |          |   |             |   |              |       |              |   |              |       |       |   |        |        |  |  |  |  |  |  |  |  | 
|----------------------------------------------------------------------------------------------------------- | ---- | - | -------- | - | ----------- | - | ------------ | ----- | ------------ | - | ------------ | ----- | ----- | - | ------ | ------ |  |  |  |  |  |  |  |  | 
|                                                                                                            |      |   |          |   |             |   |              |       |              |   | Other        |       | Total |   |        |        |  |  |  |  |  | 
|                                                                                                            |      |   |          |   |             |   | Core Deposit |       | Identifiable |   | Identifiable |       |       |   |        |        |  |  |  | 
|                                                                                                            |      |   | Goodwill |   | Intangibles |   | Intangibles  |       | Intangibles  |   |              |       |       |   |        |        | 
|                                                                                                            |      |   |          |   |             |  
|Balance, December 31, 2001                                                                                  |      | $ | 409,340  |   |             | $ | 21,321       |       |              | $ | 35,972       |       |       | $ | 57,293 |        |  |  |  |  |  |  |  | 
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|Recorded
during the quarter                                                                                 |      |   |         |   |             |   |             |       |              |   |             |       |       |   |       |        |  |  |  |  |  |  |  | 
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|Amortization expense                                                                                        |      |   |         |   |             |   | (1,470       | )     |              |   | (1,865       | )     |       |   | (3,335 | )      |  |  |  |  |  |  |  | 
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|Impairment recognized                                                                                       |      |   |         |   |             |   |             |       |              |   |             |       |       |   |       |        |  |  |  |  |  |  |  | 
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|Adjustment of purchase accounting estimates                                                                 |      |   | (533     | ) |             |   |             |       |              |   |             |       |       |   |       |        |  |  |  |  |  |  |  | 
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|Change in deferred taxes related to remaining
book/tax basis differences of purchase
accounting adjustments |      |   | (1,228   | ) |             |   |             |       |              |   |             |       |       |   |       |        |  |  |  |  |  |  |  | 
|                                                                                                            |      |   |          |   |             |  
|Balance, March 31, 2002                                                                                     |      | $ | 407,579  |   |             | $ | 19,851       |       |              | $ | 34,107       |       |       | $ | 53,958 |        |  |  |  |  |  |  |  | 
|                                                                                                            |      |   |          |   |             |  
|                                                                                                            |      |   |          |   |             |   |              |       |              |   |              |       |       |   |        |        |  |  |  |  |  |  |  | 
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|Estimated Amortization Expense:                                                                             |      |   |          |   |             |   |              |       |              |   |              |       |       |   |        |        |  |  |  |  |  |  |  | 
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                            | 2002 |   |          |  |             |   | $            | 6,033 |              |   | $            | 7,455 |       |   | $      | 13,488 |  |  |  |  |  |  |  |  | 
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                            | 2003 |   |          |  |             |   |              | 2,691 |              |   |              | 3,690 |       |   |        | 6,380  |  |  |  |  |  |  |  |  | 
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                            | 2004 |   |          |  |             |   |              | 2,063 |              |   |              | 2,861 |       |   |        | 4,924  |  |  |  |  |  |  |  |  | 
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                            | 2005 |   |          |  |             |   |              | 1,548 |              |   |              | 2,486 |       |   |        | 4,034  |  |  |  |  |  |  |  |  | 
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                            | 2006 |   |          |  |             |   |              | 1,548 |              |   |              | 2,486 |       |   |        | 4,034  |  |  |  |  |  |  |  |  | 

7



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##### Table of Contents



The components of identifiable intangible assets follows:

|                                |       |   |                |        |              |   |              |        |  |   |        |        | 
|------------------------------- | ----- | - | -------------- | ------ | ------------ | - | ------------ | ------ |  | - | ------ | ------ | 
|                                |       |   | March 31, 2002
|                                |       |   |               
|                                |       |   | Gross Carrying |        | Accumulated  |   | Net Carrying
|                                |       |   | Amount         |        | Amortization |   | Amount      
|                                |       |   |                |        |              |   |             
|Identifiable intangible assets: |       |   |                |        |              |   |              |        |  |   |        |       
|                               
|                               
|                               
|                               
|Core deposit intangibles        |       | $ | 42,270         |        |              | $ | 22,419       |        |  | $ | 19,851 |       
|                               
|                               
|                               
|                               
|SFAS 72 intangibles           |       |   | 45,787         |        |              |   | 12,842       |        |  |   | 32,945 |       
|                               
|                               
|                               
|                               
|Other identifiable intangibles  |       |   | 1,350          |        |              |   | 188          |        |  |   | 1,162  |       
|                                |       |   |                |        |              |   |              |        |  |   |        |       
|                                | Total |   | $              | 89,407 |              |   | $            | 35,449 |  |   | $      | 53,958 | 
|                                |       |   |                |        |              |   |              |        |  |   |        |       

The following table sets forth the reconcilement of net income and earnings per
share excluding goodwill amortization for the quarters ended March 31, 2002 and
2001.

|                            |                           |   |                    |   |      |   |        |       |  |  |  |  | 
|--------------------------- | ------------------------- | - | ------------------ | - | ---- | - | ------ | ----- |  |  |  |  | 
|                            |                           |   | Three months ended |   |      |   |       
|                            |                           |   | March 31,          |   |      |   |       
|                            |                           |  
|                            |                           |   | 2002               |   | 2001 |   |        |       | 
|                            |                           |  
|Reported net income         |                           | $ | 67,329             |   |      | $ | 55,093 |       |  |  |  | 
|                           
|                           
|                           
|                           
|Add back:                   |                           |   |                    |   |      |   |        |       |  |  |  | 
|                           
|                           
|                           
|                           
|                            | Goodwill amortization (1) |   |                    |  |      |   |        | 2,519 |  |  |  |  | 
|                            |                           |  
|Adjusted net income         |                           | $ | 67,329             |   |      | $ | 57,612 |       |  |  |  | 
|                            |                           |  
|Basic earnings per share:   |                           |   |                    |   |      |   |        |       |  |  |  | 
|                           
|                           
|                           
|                           
|Reported net income         |                           | $ | 0.45               |   |      | $ | 0.39   |       |  |  |  | 
|                           
|                           
|                           
|                           
|Add back:                   |                           |   |                    |   |      |   |        |       |  |  |  | 
|                           
|                           
|                           
|                           
|                            | Goodwill amortization (1) |   |                    |  |      |   |        | 0.02  |  |  |  |  | 
|                            |                           |  
|Adjusted net income         |                           | $ | 0.45               |   |      | $ | 0.41   |       |  |  |  | 
|                            |                           |  
|Diluted earnings per share: |                           |   |                    |   |      |   |        |       |  |  |  | 
|                           
|                           
|                           
|                           
|Reported net income         |                           | $ | 0.45               |   |      | $ | 0.39   |       |  |  |  | 
|                           
|                           
|                           
|                           
|Add back:                   |                           |   |                    |   |      |   |        |       |  |  |  | 
|                           
|                           
|                           
|                           
|                            | Goodwill amortization (1) |   |                    |  |      |   |        | 0.02  |  |  |  |  | 
|                            |                           |  
|Adjusted net income         |                           | $ | 0.45               |   |      | $ | 0.41   |       |  |  |  | 
|                            |                           |  
|                            |                           |   |                    |   |      |   |        |       |  |  |  | 
|                           
|                           
|                           
|                           
|                            |                           |   |                    |   |      |   |        |       |  |  |  | 
|                           
|                           
|                           
|                           
|(1) After-tax effect        |                           |   |                    |   |      |   |        |       |  |  |  | 

Note 3  Capital Trust Securities

On February 22, 2002, a subsidiary of Banknorth, Banknorth Capital Trust II,
issued $200 million of 8% trust preferred securities (Securities) to the
public and invested the proceeds from this offering in an equivalent amount of
junior subordinated debentures issued by Banknorth. The proceeds from the
offering to Banknorth, which were net of $6.8 million of issuance
costs, will be used for general corporate purposes, including
working capital, capital expenditures, investments in or advances to existing
or future indebtedness, repayment of maturing obligations, replacement of
outstanding indebtedness and repurchase of outstanding
stock. The Securities pay interest quarterly, are mandatorily redeemable on
April 1, 2032 and may be redeemed by the Trust at par any time on or after
April 1, 2007.

Note 4  Capital

On February 26, 2002, Banknorth announced that the Board of Directors had
authorized it to repurchase up to 8 million shares, or approximately 5% of its
outstanding common stock, from time to time in the open market. This is in
addition to the 13 million share buyback program authorized in 2001, of which
Banknorth had purchased 12.8 million shares through March 31, 2002 at an average price
of $22.15.

8



---



##### Table of Contents



Note 5  Comprehensive Income

The components of comprehensive income for Banknorth are net income,
unrealized gains (losses) on securities available for sale and unrealized gains
(losses) on cash flow hedges, net of tax. The following is a reconciliation of
comprehensive income for the three months ended March 31, 2002 and 2001.

|                                                            |                                                                     |                                                             |         |                    |         |      |         |      |        |  
|----------------------------------------------------------- | ------------------------------------------------------------------- | ----------------------------------------------------------- | ------- | ------------------ | ------- | ---- | ------- | ---- | ------ | -
|                                                            |                                                                     |                                                             |         | Three Months Ended
|                                                            |                                                                     |                                                             |         | March 31,         
|                                                            |                                                                     |                                                             |         |                   
|                                                            |                                                                     |                                                             |         | 2002               |         | 2001
|                                                            |                                                                     |                                                             |         |                    |         |     
|Net income                                                  |                                                                     | $                                                           | 67,329  |                    |         | $    | 55,093  |     
|                                                           
|                                                           
|                                                           
|                                                           
|Other comprehensive income (loss), net of tax:              |                                                                     |                                                             |         |                    |         |      |         |     
|                                                           
|                                                           
|                                                           
|                                                           
|Unrealized gains (losses) on available for sale securities: |                                                                     |                                                             |         |                    |         |      |         |     
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            |                                                                     | Unrealized holding gains (losses) arising during the period |         |                    | (28,381 | )    |         |      | 47,743 |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Less: reclassification adjustment for gains included in net income  |                                                             |         | 12                 |         |      |         | 493  |       
|                                                            |                                                                     |                                                             |         |                    |         |      |         |     
|                                                            |                                                                     |                                                             | (28,393 | )                  |         |      | 47,250  |     
|                                                            |                                                                     |                                                             |         |                    |         |      |         |     
|Unrealized gains (losses) on cash flow hedges:              |                                                                     |                                                             |         |                    |         |      |         |     
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            |                                                                     | Unrealized holding losses arising during the period         |         |                    | (227    | )    |         |      | (586   | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Less: reclassification adjustment for losses included in net income |                                                             |         | (213               | )       |      |         | (245 | )     
|                                                            |                                                                     |                                                             |         |                    |         |      |         |     
|                                                            |                                                                     |                                                             | (14     | )                  |         |      | (341    | )   
|                                                            |                                                                     |                                                             |         |                    |         |      |         |     
|Other comprehensive income (loss), net                      |                                                                     |                                                             | (28,407 | )                  |         |      | 46,909  |     
|                                                            |                                                                     |                                                             |         |                    |         |      |         |     
|Comprehensive income                                        |                                                                     | $                                                           | 38,922  |                    |         | $    | 102,002 |     
|                                                            |                                                                     |                                                             |         |                    |         |      |         |     

Note 6  Earnings Per Share

The computations of basic and diluted net income per share and weighted average
shares outstanding follow:

|                                                                |                                                                 |   |                    |      |      |   |         |      | 
|--------------------------------------------------------------- | --------------------------------------------------------------- | - | ------------------ | ---- | ---- | - | ------- | ---- | 
|                                                                |                                                                 |   | Three Months Ended
|                                                                |                                                                 |   | March 31,         
|                                                                |                                                                 |   |                   
|                                                                |                                                                 |   | 2002               |      | 2001
|                                                                |                                                                 |   |                    |      |     
|Net income before cumulative effect of accounting change        |                                                                 | $ | 67,329             |      |      | $ | 55,383  |     
|                                                               
|                                                               
|                                                               
|                                                               
|Cumulative effect of change in accounting principle, net of tax |                                                                 |   |                   |      |      |   | (290    | )   
|                                                                |                                                                 |   |                    |      |      |   |         |     
|Net income                                                      |                                                                 | $ | 67,329             |      |      | $ | 55,093  |     
|                                                                |                                                                 |   |                    |      |      |   |         |     
|Weighted average basic common shares outstanding                |                                                                 |   | 149,347            |      |      |   | 140,800 |     
|                                                               
|                                                               
|                                                               
|                                                               
|Effect of dilutive stock options                                |                                                                 |   | 1,769              |      |      |   | 1,207   |     
|                                                                |                                                                 |   |                    |      |      |   |         |     
|Weighted average diluted common shares outstanding              |                                                                 |   | 151,116            |      |      |   | 142,007 |     
|                                                                |                                                                 |   |                    |      |      |   |         |     
|Basic earnings per share:                                       |                                                                 |   |                    |      |      |   |         |     
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Net income before cumulative effect of accounting change        |   | $                  | 0.45 |      |   | $       | 0.39 | 
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Cumulative effect of change in accounting principle, net of
tax |   |                    |     |      |   |         |     | 
|                                                                |                                                                 |   |                    |      |      |   |         |     
|                                                                | Net income                                                      |   | $                  | 0.45 |      |   | $       | 0.39 | 
|                                                                |                                                                 |   |                    |      |      |   |         |     
|Diluted earnings per share:                                     |                                                                 |   |                    |      |      |   |         |     
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Net income before cumulative effect of accounting change        |   | $                  | 0.45 |      |   | $       | 0.39 | 
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Cumulative effect of change in accounting principle, net of
tax |   |                    |     |      |   |         |     | 
|                                                                |                                                                 |   |                    |      |      |   |         |     
|                                                                | Net income                                                      |   | $                  | 0.45 |      |   | $       | 0.39 | 
|                                                                |                                                                 |   |                    |      |      |   |         |     

Note 7   Adoption of New Accounting Standards

In August, 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-lived Assets. SFAS No. 144 provides additional
implementation guidance and supersedes SFAS No. 121, Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to be Disposed Of.
It is effective for financial statements issued for fiscal years beginning
after December 15, 2001. SFAS No. 144 was adopted on January 1, 2002 with no
material impact on our financial condition or results of operations.

9



---



##### Table of Contents



Note 8  Pending Acquisitions

On April 11, 2002, Banknorth announced that it had entered into an
agreement to acquire Connecticut-based Bancorp Connecticut, Inc. (Bancorp)
for $28.00 per share in cash. At March 31, 2002, Bancorp had total assets of
$676 million and shareholders equity of $58 million. Bancorp is the parent
company of Southington Savings Bank. The definitive agreement has been
approved by the Board of Directors of Banknorth and Bancorp. The consummation
of the merger is subject to the receipt of the approval of the shareholders of
Bancorp and all required regulatory approvals and other customary closing
conditions. The acquisition is expected to be completed in the third quarter
of 2002.

On February 26, 2002, the Company announced that it had entered into an
agreement to acquire Massachusetts-based Ipswich Bancshares, Inc. (Ipswich).
Ipswich had $324 million in assets and $15.4 million in shareholders equity
at March 31, 2002. Under terms of the agreement, each outstanding share of
common stock of Ipswich will be converted into the right to receive $20.50 in
cash or a number of whole shares of Banknorth common stock determined by
dividing $20.50 by the average closing prices of Banknorth common stock
during a specified period preceding the merger, plus cash in lieu of any
fractional share interest, subject to election and allocation procedures which
are intended to ensure that 51% of the outstanding shares of Ipswich common
stock will be converted into the right to receive Banknorth common stock and
49% of the outstanding Ipswich common stock will be converted into cash. The
agreement has been approved by Banknorth and Ipswich Boards of Directors. The
consummation of the merger is subject to the receipt of the approval of the
shareholders of Ipswich and all required regulatory approvals and other
customary closing conditions. The acquisition is expected to be completed in
mid-2002.

10



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##### Table of Contents



BANKNORTH GROUP, INC. AND SUBSIDIARIES




MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

SUMMARY

We reported consolidated net income of $67.3 million, or $0.45 per diluted
share, for the first quarter of 2002 as compared with $55.1 million, or $0.39
per diluted share, for the first quarter of 2001, an increase of 15% on a
diluted per share basis.
Results in each period were diminished by the effect of special charges, which
consist of merger-related charges, charter consolidation costs, certain asset
write-downs and branch closing costs. Special charges totaled
$5.3 million (after-tax), or
$.03 per diluted share, and $3.7 million (after-tax), or $.03 per diluted share for the
three months ended March 31, 2002 and 2001, respectively.

Cash return on average equity (Cash
ROE) and cash return on average assets ( Cash
ROA) were 21.83% and 1.42%, respectively, for the quarter ended March 31,
2002. Cash ROE and Cash ROA were 20.77% and 1.35%, respectively, for the quarter ended
March 31, 2001. The increases were primarily due to higher net income.

Results for the first quarter of 2002 improved over the first quarter of 2001
due to a 26% increase in net interest income, which was partially offset by
expense growth of 16% and a 66% increase in the provision for loan and lease
losses. Net interest income increased $40.6 million and the net interest
margin increased by 46 basis points. This was due largely to the acquisition
of Andover Bancorp and MetroWest Bank in the fourth quarter of 2001, as well
as a decrease in the cost of funds due to a decline in short-term interest rates resulting from Federal Reserve Board
rate cuts during 2001 and an improved asset-liability mix. The $4.7 million
increase in the provision for loan and lease losses over the first quarter of
2001 was reflective of higher net charge-offs and higher loan levels.
Noninterest income increased by $2.8 million, primarily due to a $2.7 million
increase in loan fee income. Noninterest expenses for the first quarter of
2002 increased by $19.8 million, or 16%, over the first quarter of 2001 largely
due to the acquisitions of Andover and MetroWest. This includes increases in
salaries and employee benefits expense of $13.6 million, or 22%, data
processing expense of $1.6 million, or 18%, and equipment expense of $1.6
million, or 19%, which were partially offset by a decrease of $2.8 million in
goodwill amortization expense in accordance with new accounting rules which
became effective January 1, 2002. The increase in noninterest expense during
the first quarter of 2002 reflects our acquisitions of Andover Bancorp, Inc.
and MetroWest Bank in the fourth quarter of 2001 and other increases in the
ordinary course of business. The cash efficiency ratio was 54.77% in the first
quarter of 2002 compared to 55.82% in the comparable period last year. For a
description of the methodology we use to calculate the cash efficiency ratio, see
Note 5 to Table 1. Selected quarterly data, ratios and per share data are
provided in Table 1.

11



---



##### Table of Contents



TABLE 1  Selected Quarterly Data(Dollars in thousands, except per share data)

|                                                                                             |                                                                                              |                                                                 |                                                                 |        |       |   |         |        |       |       |         |        |       |   |         |        |   |   |         |        |       |     | 
|-------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------- | --------------------------------------------------------------- | --------------------------------------------------------------- | ------ | ----- | - | ------- | ------ | ----- | ----- | ------- | ------ | ----- | - | ------- | ------ | - | - | ------- | ------ | ----- | --- | 
|                                                                                             |                                                                                              |                                                                 |                                                                 |        | 2002  |   | 2001    |        | 2001  |       | 2001    |        | 2001 
|                                                                                             |                                                                                              |                                                                 |                                                                 |        | First |   | Fourth  |        | Third |       | Second  |        | First
|                                                                                             |                                                                                              |                                                                 |                                                                 |        |       |   |         |        |       |       |         |        |      
|Net interest income                                                                          |                                                                                              | $                                                               | 196,523                                                         |        |       | $ | 188,476 |        |       | $     | 169,802 |        |       | $ | 165,718 |        |   | $ | 155,967 |       
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Provision for loan and lease losses                                                          |                                                                                              |                                                                 | 11,828                                                          |        |       |   | 13,378  |        |       |       | 12,061  |        |       |   | 9,311   |        |   |   | 7,138   |       
|                                                                                             |                                                                                              |                                                                 |                                                                 |        |       |   |         |        |       |       |         |        |       |   |         |        |   |   |         |       
|Net interest income after loan and lease loss provision                                      |                                                                                              |                                                                 | 184,695                                                         |        |       |   | 175,098 |        |       |       | 157,741 |        |       |   | 156,407 |        |   |   | 148,829 |       
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Noninterest income (1)                                                                       |                                                                                              |                                                                 | 61,557                                                          |        |       |   | 63,560  |        |       |       | 60,065  |        |       |   | 57,552  |        |   |   | 57,997  |       
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Net securities gains                                                                         |                                                                                              |                                                                 | 19                                                              |        |       |   | 39      |        |       |       | 486     |        |       |   | 45      |        |   |   | 759     |       
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Noninterest expenses (excluding special charges) (2)                                         |                                                                                              |                                                                 | 136,482                                                         |        |       |   | 136,034 |        |       |       | 124,650 |        |       |   | 121,845 |        |   |   | 119,251 |       
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Special charges (2)                                                                          |                                                                                              |                                                                 | 8,204                                                           |        |       |   | 2,007   |        |       |       |        |        |       |   |        |        |   |   | 5,608   |       
|                                                                                             |                                                                                              |                                                                 |                                                                 |        |       |   |         |        |       |       |         |        |       |   |         |        |   |   |         |       
|Income before income taxes                                                                   |                                                                                              |                                                                 | 101,585                                                         |        |       |   | 100,656 |        |       |       | 93,642  |        |       |   | 92,159  |        |   |   | 82,726  |       
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Income tax expense                                                                           |                                                                                              |                                                                 | 34,256                                                          |        |       |   | 35,152  |        |       |       | 31,440  |        |       |   | 32,266  |        |   |   | 27,343  |       
|                                                                                             |                                                                                              |                                                                 |                                                                 |        |       |   |         |        |       |       |         |        |       |   |         |        |   |   |         |       
|Net income before extraordinary item and cumulative effect of
change in accounting principle |                                                                                              |                                                                 | 67,329                                                          |        |       |   | 65,504  |        |       |       | 62,202  |        |       |   | 59,893  |        |   |   | 55,383  |       
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Extraordinary item-early extinguishment of debt, net of tax                                  |                                                                                              |                                                                 |                                                                |        |       |   | (3,897  | )      |       |       |        |        |       |   |        |        |   |   |        |       
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Cumulative effect of change in accounting principle, net of tax                              |                                                                                              |                                                                 |                                                                |        |       |   |        |        |       |       |        |        |       |   |        |        |   |   | (290    | )     
|                                                                                             |                                                                                              |                                                                 |                                                                 |        |       |   |         |        |       |       |         |        |       |   |         |        |   |   |         |       
|Net income                                                                                   |                                                                                              | $                                                               | 67,329                                                          |        |       | $ | 61,607  |        |       | $     | 62,202  |        |       | $ | 59,893  |        |   | $ | 55,093  |       
|                                                                                             |                                                                                              |                                                                 |                                                                 |        |       |   |         |        |       |       |         |        |       |   |         |        |   |   |         |       
|Basic earnings per share:                                                                    |                                                                                              |                                                                 |                                                                 |        |       |   |         |        |       |       |         |        |       |   |         |        |   |   |         |       
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                             | Net income before extraordinary item and cumulative effect of
change in accounting principle |                                                                 | $                                                               | 0.45   |       |   | $       | 0.45   |       |       | $       | 0.45   |       |   | $       | 0.44   |   |   | $       | 0.39   |      
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                             |                                                                                              | Extraordinary item-early extinguishment of debt, net of tax     |                                                                 |        |      |   |         |        | (0.03 | )     |         |        |      |   |         |        |  |   |         |        |      |    
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                             |                                                                                              | Cumulative effect of change in accounting principle, net of tax |                                                                 |        |      |   |         |        |      |       |         |        |      |   |         |        |  |   |         |        |      |    
|                                                                                             |                                                                                              |                                                                 |                                                                 |        |       |   |         |        |       |       |         |        |       |   |         |        |   |   |         |       
|                                                                                             |                                                                                              | $                                                               | 0.45                                                            |        |       | $ | 0.42    |        |       | $     | 0.45    |        |       | $ | 0.44    |        |   | $ | 0.39    |       
|                                                                                             |                                                                                              |                                                                 |                                                                 |        |       |   |         |        |       |       |         |        |       |   |         |        |   |   |         |       
|Diluted earnings per share:                                                                  |                                                                                              |                                                                 |                                                                 |        |       |   |         |        |       |       |         |        |       |   |         |        |   |   |         |       
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                             | Net income before extraordinary item and cumulative effect of
change in accounting principle |                                                                 | $                                                               | 0.45   |       |   | $       | 0.44   |       |       | $       | 0.45   |       |   | $       | 0.43   |   |   | $       | 0.39   |      
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                             |                                                                                              | Extraordinary item-early extinguishment of debt, net of tax     |                                                                 |        |      |   |         |        | (0.03 | )     |         |        |      |   |         |        |  |   |         |        |      |    
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                             |                                                                                              | Cumulative effect of change in accounting principle, net of tax |                                                                 |        |      |   |         |        |      |       |         |        |      |   |         |        |  |   |         |        |      |    
|                                                                                             |                                                                                              |                                                                 |                                                                 |        |       |   |         |        |       |       |         |        |       |   |         |        |   |   |         |       
|                                                                                             |                                                                                              | $                                                               | 0.45                                                            |        |       | $ | 0.41    |        |       | $     | 0.45    |        |       | $ | 0.43    |        |   | $ | 0.39    |       
|                                                                                             |                                                                                              |                                                                 |                                                                 |        |       |   |         |        |       |       |         |        |       |   |         |        |   |   |         |       
|
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Cash return on average assets (4)                                                            |                                                                                              |                                                                 | 1.42                                                            | %      |       |   | 1.35    | %      |       |       | 1.48    | %      |       |   | 1.44    | %      |   |   | 1.35    | %     
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Cash return on average equity (4)                                                            |                                                                                              |                                                                 | 21.83                                                           | %      |       |   | 19.81   | %      |       |       | 21.57   | %      |       |   | 22.11   | %      |   |   | 20.77   | %     
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Net interest margin                                                                          |                                                                                              |                                                                 | 4.24                                                            | %      |       |   | 4.13    | %      |       |       | 4.09    | %      |       |   | 3.98    | %      |   |   | 3.78    | %     
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Noninterest income as a percent of total income (1)                                          |                                                                                              |                                                                 | 23.85                                                           | %      |       |   | 25.22   | %      |       |       | 26.13   | %      |       |   | 25.78   | %      |   |   | 27.11   | %     
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Cash efficiency ratio (5)                                                                    |                                                                                              |                                                                 | 54.77                                                           | %      |       |   | 52.44   | %      |       |       | 51.88   | %      |       |   | 52.16   | %      |   |   | 55.82   | %     
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Operating data (6):                                                                          |                                                                                              |                                                                 |                                                                 |        |       |   |         |        |       |       |         |        |       |   |         |        |   |   |         |       
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                             | Net income                                                                                   |                                                                 | $                                                               | 67,329 |       |   | $       | 61,607 |       |       | $       | 62,202 |       |   | $       | 59,893 |   |   | $       | 55,093 |      
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                             |                                                                                              | Add: Special charges, net of tax                                |                                                                 |        | 5,342 |   |         |        | 1,294 |       |         |        |      |   |         |        |  |   |         |        | 3,651 |    
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                             |                                                                                              |                                                                 | Extraordinary item  early extinguishment of debt, net of tax   |        |       |  |         |        |       | 3,897 |         |        |       |  |         |        |   |  |         |        |       |    | 
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                             |                                                                                              |                                                                 | Cumulative effect of change in accounting principle, net of
tax |        |       |  |         |        |       |      |         |        |       |  |         |        |   |  |         |        |       | 290 | 
|                                                                                             |                                                                                              |                                                                 |                                                                 |        |       |   |         |        |       |       |         |        |       |   |         |        |   |   |         |       
|                                                                                             | Operating income                                                                             |                                                                 | $                                                               | 72,671 |       |   | $       | 66,798 |       |       | $       | 62,202 |       |   | $       | 59,893 |   |   | $       | 59,034 |      
|                                                                                             |                                                                                              |                                                                 |                                                                 |        |       |   |         |        |       |       |         |        |       |   |         |        |   |   |         |       
|Operating ratios (6):                                                                        |                                                                                              |                                                                 |                                                                 |        |       |   |         |        |       |       |         |        |       |   |         |        |   |   |         |       
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Return on average assets (excluding special items) (2) (3)                                   |                                                                                              |                                                                 | 1.44                                                            | %      |       |   | 1.33    | %      |       |       | 1.37    | %      |       |   | 1.32    | %      |   |   | 1.32    | %     
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Return on average equity (excluding special items) (2) (3)                                   |                                                                                              |                                                                 | 16.69                                                           | %      |       |   | 15.67   | %      |       |       | 17.63   | %      |       |   | 17.85   | %      |   |   | 17.78   | %     



---

|(1) |  | Excludes securities transactions.                                                                                                                                                                                                                                                                                                                                                                                                  
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Special charges consist of
merger charges, charter consolidation costs, asset write-downs and
branch closing costs. See Table 5.
Special items consists of (i) special charges, (ii) extraordinary item for the early extinguishment of debt in the fourth quarter of 2001 and
(iii) cumulative effect of change in accounting principle in the first quarter 2001.                                                                
|   
|   
|   
|   
|(3) |  | Annualized.                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|   
|   
|   
|(4) |  | Excludes the after-tax effect of amortization of intangible assets.                                                                                                                                                                                                                                                                                                                                                                
|   
|   
|   
|   
|(5) |  | Represents noninterest expenses, excluding amortization of intangible assets, as a percentage of net interest income and noninterest income,
excluding net securities gains and losses.                                                                                                                                                                                                                                            
|   
|   
|   
|   
|(6) |  | Operating data and ratios set forth above are not presented in accordance with accounting principles generally accepted in the United States
of America or any other standardized requirements and, accordingly, there can be no assurance that it is comparable with similar financial
data of other issuers. However, management believes that the data
provides meaningful supplemental information regarding operating
results.

12



---



##### Table of Contents



RESULTS OF OPERATIONS

Net Interest Income

Fully-taxable equivalent net interest income for the first quarter of 2002
increased $40.4 million compared to the first quarter of 2001 while the net
interest margin increased from 3.78% to 4.24% during the respective periods.
These increases were primarily due to decreases in the rate paid on
interest-bearing liabilities exceeding decreases in the rate received
on interest-earning assets and, to a lesser extent, an increase in the
average amount of loans outstanding. The rate decreases were reflective of the
Federal Reserve rate cuts during 2001. Average loans as a percent of average
earning assets was 68% and 65% for the quarters ended March 31, 2002 and 2001,
respectively. Average loans and leases increased by $1.9 billion, or 17%,
compared to the first quarter of 2001, mostly due to the acquisition of Andover
and MetroWest in the fourth quarter of 2001.

Table 2 shows quarterly average balances, net interest income by category and
rates for the first quarter of 2002 and for each of the quarters in 2001.
Table 3 shows the changes in fully-taxable equivalent net interest income by
category due to changes in rate and volume. See also Asset-Liability
Management below.

The following table sets forth, for the periods indicated, information
regarding (i) the total dollar amount of interest income from interest-earning
assets and the resultant average yields; (ii) the total dollar amount of
interest expense on interest-bearing liabilities and the resultant average
cost; (iii) net interest income; (iv) interest rate spread; and (v) net
interest margin (net interest income divided by average interest-earning
assets). For purposes of the tables and the following discussion, (i) income
from interest-earning assets and net interest income is presented on a
fully-taxable equivalent basis primarily by adjusting income and yields earned
on tax-exempt interest received on loans to qualifying borrowers and on certain
of our securities to make them equivalent to income and yields earned on
fully-taxable investments, assuming a federal income tax rate of 35%, and (ii)
nonaccrual loans have been included in the appropriate average balance loan
category, but unpaid interest on nonaccrual loans has not been included for
purposes of determining interest income. Average balances are based on average
daily balances during the indicated periods.

13



---



##### Table of Contents



TABLE 2  Average Balances, Yields and Rates(Dollars in thousands)

|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |        |      |      |      | 
|--------------------------------------------------- | ------------------------------------ | ------------------------------------------ | ---------------------------------- | ---------------------- | ---------- | ------------------ | ---------- | ------------------- | ------- | -------- | ------- | --------------- | ---- | -------- | --------- | --------- | ---------- | ---------- | ---------- | ------ | ------- | ------- | ------- | ------ | ---- | ---- | ---- | 
|                                                    |                                      |                                            |                                    |                        |            | 2002 First Quarter |            | 2001 Fourth Quarter
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                    
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      | Yield/   |           |           |            |            |            |        |         |         |         | Yield/
|                                                    |                                      |                                            |                                    |                        |            | Average Balance    |            | Interest            |         | Rate (1) |         | Average Balance |      | Interest |           | Rate (1) 
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |          
|Loans and leases (2):                               |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Residential real estate mortgages    |                                            | $                                  | 2,675,415              |            |                    | $          | 47,265              |         |          |         | 7.07            | %    |          | $         | 2,568,103 |            |            | $          | 47,262 |         |         |         | 7.36   | %   
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Commercial real estate mortgages     |                                            |                                    | 4,101,873              |            |                    |            | 72,724              |         |          |         | 7.19            |      |          |           | 3,737,282 |            |            |            | 70,871 |         |         |         | 7.52   |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Commercial business loans and leases |                                            |                                    | 2,464,378              |            |                    |            | 38,661              |         |          |         | 6.36            |      |          |           | 2,379,623 |            |            |            | 40,275 |         |         |         | 6.72   |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Consumer loans and leases            |                                            |                                    | 3,539,213              |            |                    |            | 63,952              |         |          |         | 7.33            |      |          |           | 3,508,370 |            |            |            | 68,384 |         |         |         | 7.73   |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            |                                    | Total loans and leases |            |                    | 12,780,879 |                     |         |          | 222,602 |                 |      |          | 7.04      |           |            |            | 12,193,378 |        |         |         | 226,792 |        |      |      | 7.39 | 
|                                                   
|                                                   
|                                                   
|                                                   
|Investment securities                               |                                      |                                            | 5,943,057                          |                        |            |                    | 84,296     |                     |         |          | 5.68    |                 |      |          | 6,127,076 |           |            |            | 88,950     |        |         |         | 5.80    |       
|                                                   
|                                                   
|                                                   
|                                                   
|Federal funds sold and other short-term investments |                                      |                                            | 72,107                             |                        |            |                    | 415        |                     |         |          | 2.33    |                 |      |          | 52,108    |           |            |            | 263        |        |         |         | 1.99    |       
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      | Total earning assets                       |                                    |                        | 18,796,043 |                    |            |                     | 307,313 |          |         |                 | 6.59 |          |           |           | 18,372,562 |            |            |        | 316,005 |         |         |        | 6.85 |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Noninterest-earning assets                          |                                      |                                            | 1,671,783                          |                        |            |                    |            |                     |         |          |         |                 |      |          | 1,516,800 |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      | Total assets                               |                                    | $                      | 20,467,826 |                    |            |                     |         |          |         |                 |      |          |           | $         | 19,889,362 |            |            |        |         |         |         |        |      |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Interest-bearing deposits:                          |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Regular savings                      |                                            | $                                  | 1,646,822              |            |                    | $          | 3,964               |         |          |         | 0.98            |      |          | $         | 1,543,616 |            |            | $          | 4,070  |         |         |         | 1.05   |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | NOW and money market accounts        |                                            |                                    | 5,099,310              |            |                    |            | 18,895              |         |          |         | 1.50            |      |          |           | 4,826,227 |            |            |            | 22,820 |         |         |         | 1.88   |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Certificates of deposit              |                                            |                                    | 4,762,399              |            |                    |            | 41,694              |         |          |         | 3.55            |      |          |           | 4,664,683 |            |            |            | 49,158 |         |         |         | 4.18   |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Brokered deposits                    |                                            |                                    | 63,594                 |            |                    |            | 288                 |         |          |         | 1.84            |      |          |           | 110,772   |            |            |            | 1,175  |         |         |         | 4.21   |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            | Total interest-bearing deposits    |                        |            | 11,572,125         |            |                     |         | 64,841   |         |                 |      | 2.27     |           |           |            | 11,145,298 |            |        |         | 77,223  |         |        |      | 2.75 |     
|                                                   
|                                                   
|                                                   
|                                                   
|Borrowed funds                                      |                                      |                                            | 4,511,945                          |                        |            |                    | 44,642     |                     |         |          | 3.97    |                 |      |          | 4,495,463 |           |            |            | 48,785     |        |         |         | 4.27    |       
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            | Total interest-bearing liabilities |                        |            | 16,084,070         |            |                     |         | 109,483  |         |                 |      | 2.75     |           |           |            | 15,640,761 |            |        |         | 126,008 |         |        |      | 3.19 |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Non-interest bearing deposits                       |                                      |                                            | 2,446,539                          |                        |            |                    |            |                     |         |          |         |                 |      |          | 2,387,677 |           |            |            |            |        |         |         |         |       
|                                                   
|                                                   
|                                                   
|                                                   
|Other liabilities                                   |                                      |                                            | 171,449                            |                        |            |                    |            |                     |         |          |         |                 |      |          | 169,235   |           |            |            |            |        |         |         |         |       
|                                                   
|                                                   
|                                                   
|                                                   
|Shareholders equity                                |                                      |                                            | 1,765,768                          |                        |            |                    |            |                     |         |          |         |                 |      |          | 1,691,689 |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      | Total liabilities and shareholders equity |                                    | $                      | 20,467,826 |                    |            |                     |         |          |         |                 |      |          |           | $         | 19,889,362 |            |            |        |         |         |         |        |      |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Net earning assets                                  |                                      | $                                          | 2,711,973                          |                        |            |                    |            |                     |         |          |         |                 |      | $        | 2,731,801 |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Net interest income (fully-taxable equivalent)      |                                      |                                            |                                    |                        |            |                    | 197,830    |                     |         |          |         |                 |      |          |           |           |            |            | 189,997    |        |         |         |         |       
|                                                   
|                                                   
|                                                   
|                                                   
|Less: fully-taxable equivalent adjustments          |                                      |                                            |                                    |                        |            |                    | (1,307     | )                   |         |          |         |                 |      |          |           |           |            |            | (1,521     | )      |         |         |         |       
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      | Net interest income                        |                                    |                        |            |                    |            | $                   | 196,523 |          |         |                 |      |          |           |           |            |            |            | $      | 188,476 |         |         |        |      |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Net interest rate spread (fully-taxable equivalent) |                                      |                                            |                                    |                        |            |                    |            |                     |         |          | 3.84    | %               |      |          |           |           |            |            |            |        |         |         | 3.66    | %     
|                                                   
|                                                   
|                                                   
|                                                   
|Net interest margin (fully-taxable equivalent)      |                                      |                                            |                                    |                        |            |                    |            |                     |         |          | 4.24    | %               |      |          |           |           |            |            |            |        |         |         | 4.13    | %     



---

|(1) |  | Annualized.                                  
|--- |  | ---------------------------------------------
|   
|   
|   
|   
|(2) |  | Loans and leases include loans held for sale.

14



---



##### Table of Contents



TABLE 2  Average Balances, Yields and Rates(Dollars in thousands)

|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |        |      |      |      | 
|--------------------------------------------------- | ------------------------------------ | ------------------------------------------ | ---------------------------------- | ---------------------- | ---------- | ------------------ | ---------- | ------------------- | ------- | -------- | ------- | --------------- | ---- | -------- | --------- | --------- | ---------- | ---------- | ---------- | ------ | ------- | ------- | ------- | ------ | ---- | ---- | ---- | 
|                                                    |                                      |                                            |                                    |                        |            | 2001 Third Quarter |            | 2001 Second Quarter
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                    
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      | Yield/   |           |           |            |            |            |        |         |         |         | Yield/
|                                                    |                                      |                                            |                                    |                        |            | Average Balance    |            | Interest            |         | Rate (1) |         | Average Balance |      | Interest |           | Rate (1) 
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |          
|Loans and leases (2):                               |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Residential real estate mortgages    |                                            | $                                  | 2,102,988              |            |                    | $          | 38,716              |         |          |         | 7.36            | %    |          | $         | 2,206,518 |            |            | $          | 40,866 |         |         |         | 7.41   | %   
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Commercial real estate mortgages     |                                            |                                    | 3,121,928              |            |                    |            | 64,802              |         |          |         | 8.24            |      |          |           | 3,036,744 |            |            |            | 64,949 |         |         |         | 8.58   |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Commercial business loans and leases |                                            |                                    | 2,360,191              |            |                    |            | 44,482              |         |          |         | 7.48            |      |          |           | 2,322,572 |            |            |            | 46,509 |         |         |         | 8.03   |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Consumer loans and leases            |                                            |                                    | 3,359,036              |            |                    |            | 69,027              |         |          |         | 8.15            |      |          |           | 3,342,216 |            |            |            | 70,166 |         |         |         | 8.42   |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            |                                    | Total loans and leases |            |                    | 10,944,143 |                     |         |          | 217,027 |                 |      |          | 7.88      |           |            |            | 10,908,050 |        |         |         | 222,490 |        |      |      | 8.18 | 
|                                                   
|                                                   
|                                                   
|                                                   
|Investment securities                               |                                      |                                            | 5,815,678                          |                        |            |                    | 90,657     |                     |         |          | 6.23    |                 |      |          | 5,931,974 |           |            |            | 95,241     |        |         |         | 6.42    |       
|                                                   
|                                                   
|                                                   
|                                                   
|Federal funds sold and other short-term investments |                                      |                                            | 17,125                             |                        |            |                    | 131        |                     |         |          | 3.02    |                 |      |          | 48,148    |           |            |            | 476        |        |         |         | 3.93    |       
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      | Total earning assets                       |                                    |                        | 16,776,946 |                    |            |                     | 307,815 |          |         |                 | 7.30 |          |           |           | 16,888,172 |            |            |        | 318,207 |         |         |        | 7.55 |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Noninterest-earning assets                          |                                      |                                            | 1,273,973                          |                        |            |                    |            |                     |         |          |         |                 |      |          | 1,264,302 |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      | Total assets                               |                                    | $                      | 18,050,919 |                    |            |                     |         |          |         |                 |      |          |           | $         | 18,152,474 |            |            |        |         |         |         |        |      |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Interest-bearing deposits:                          |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Regular savings                      |                                            | $                                  | 1,416,784              |            |                    | $          | 4,391               |         |          |         | 1.23            |      |          | $         | 1,405,540 |            |            | $          | 4,898  |         |         |         | 1.40   |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | NOW and money market accounts        |                                            |                                    | 4,166,281              |            |                    |            | 26,114              |         |          |         | 2.49            |      |          |           | 4,059,390 |            |            |            | 28,525 |         |         |         | 2.82   |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Certificates of deposit              |                                            |                                    | 4,386,194              |            |                    |            | 53,692              |         |          |         | 4.86            |      |          |           | 4,484,684 |            |            |            | 60,086 |         |         |         | 5.37   |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Brokered deposits                    |                                            |                                    | 165,115                |            |                    |            | 2,327               |         |          |         | 5.59            |      |          |           | 167,419   |            |            |            | 2,480  |         |         |         | 5.94   |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            | Total interest-bearing deposits    |                        |            | 10,134,374         |            |                     |         | 86,524   |         |                 |      | 3.39     |           |           |            | 10,117,033 |            |        |         | 95,989  |         |        |      | 3.81 |     
|                                                   
|                                                   
|                                                   
|                                                   
|Borrowed funds                                      |                                      |                                            | 4,133,666                          |                        |            |                    | 49,799     |                     |         |          | 4.74    |                 |      |          | 4,428,380 |           |            |            | 54,928     |        |         |         | 4.93    |       
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            | Total interest-bearing liabilities |                        |            | 14,268,040         |            |                     |         | 136,323  |         |                 |      | 3.78     |           |           |            | 14,545,413 |            |        |         | 150,917 |         |        |      | 4.15 |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Non-interest bearing deposits                       |                                      |                                            | 2,212,517                          |                        |            |                    |            |                     |         |          |         |                 |      |          | 2,101,326 |           |            |            |            |        |         |         |         |       
|                                                   
|                                                   
|                                                   
|                                                   
|Other liabilities                                   |                                      |                                            | 170,672                            |                        |            |                    |            |                     |         |          |         |                 |      |          | 159,955   |           |            |            |            |        |         |         |         |       
|                                                   
|                                                   
|                                                   
|                                                   
|Shareholders equity                                |                                      |                                            | 1,399,690                          |                        |            |                    |            |                     |         |          |         |                 |      |          | 1,345,780 |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      | Total liabilities and shareholders equity |                                    | $                      | 18,050,919 |                    |            |                     |         |          |         |                 |      |          |           | $         | 18,152,474 |            |            |        |         |         |         |        |      |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Net earning assets                                  |                                      | $                                          | 2,508,906                          |                        |            |                    |            |                     |         |          |         |                 |      | $        | 2,342,759 |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Net interest income (fully-taxable equivalent)      |                                      |                                            |                                    |                        |            |                    | 171,492    |                     |         |          |         |                 |      |          |           |           |            |            | 167,290    |        |         |         |         |       
|                                                   
|                                                   
|                                                   
|                                                   
|Less: fully-taxable equivalent adjustments          |                                      |                                            |                                    |                        |            |                    | (1,690     | )                   |         |          |         |                 |      |          |           |           |            |            | (1,572     | )      |         |         |         |       
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      | Net interest income                        |                                    |                        |            |                    |            | $                   | 169,802 |          |         |                 |      |          |           |           |            |            |            | $      | 165,718 |         |         |        |      |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Net interest rate spread (fully-taxable equivalent) |                                      |                                            |                                    |                        |            |                    |            |                     |         |          | 3.52    | %               |      |          |           |           |            |            |            |        |         |         | 3.40    | %     
|                                                   
|                                                   
|                                                   
|                                                   
|Net interest margin (fully-taxable equivalent)      |                                      |                                            |                                    |                        |            |                    |            |                     |         |          | 4.09    | %               |      |          |           |           |            |            |            |        |         |         | 3.98    | %     



---

|(1) |  | Annualized.                                  
|--- |  | ---------------------------------------------
|   
|   
|   
|   
|(2) |  | Loans and leases include loans held for sale.

15



---



##### Table of Contents



TABLE 2  Average Balances, Yields and Rates(Dollars in thousands)

|                                                    |                                      |                                            |                                    |                        |            |                    |            |          |         |          |         |      |      |        |      | 
|--------------------------------------------------- | ------------------------------------ | ------------------------------------------ | ---------------------------------- | ---------------------- | ---------- | ------------------ | ---------- | -------- | ------- | -------- | ------- | ---- | ---- | ------ | ---- | 
|                                                    |                                      |                                            |                                    |                        |            | 2001 First Quarter
|                                                    |                                      |                                            |                                    |                        |            |                   
|                                                    |                                      |                                            |                                    |                        |            |                    |            |          |         |          |         |      |      | Yield/
|                                                    |                                      |                                            |                                    |                        |            | Average Balance    |            | Interest |         | Rate (1)
|                                                    |                                      |                                            |                                    |                        |            |                    |            |          |         |         
|Loans and leases (2):                               |                                      |                                            |                                    |                        |            |                    |            |          |         |          |         |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Residential real estate mortgages    |                                            | $                                  | 2,285,219              |            |                    | $          | 43,118   |         |          |         | 7.55 | %   
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Commercial real estate mortgages     |                                            |                                    | 2,964,053              |            |                    |            | 64,658   |         |          |         | 8.85 |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Commercial business loans and leases |                                            |                                    | 2,304,625              |            |                    |            | 49,439   |         |          |         | 8.70 |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Consumer loans and leases            |                                            |                                    | 3,373,971              |            |                    |            | 72,604   |         |          |         | 8.73 |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |          |         |          |         |     
|                                                    |                                      |                                            |                                    | Total loans and leases |            |                    | 10,927,868 |          |         |          | 229,819 |      |      |        | 8.51 | 
|                                                   
|                                                   
|                                                   
|                                                   
|Investment securities                               |                                      |                                            | 5,819,082                          |                        |            |                    | 97,939     |          |         |          | 6.74    |     
|                                                   
|                                                   
|                                                   
|                                                   
|Federal funds sold and other short-term investments |                                      |                                            | 20,946                             |                        |            |                    | 296        |          |         |          | 5.68    |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |          |         |          |         |     
|                                                    |                                      | Total earning assets                       |                                    |                        | 16,767,896 |                    |            |          | 328,054 |          |         |      | 7.89 |       
|                                                    |                                      |                                            |                                    |                        |            |                    |            |          |         |          |         |     
|Noninterest-earning assets                          |                                      |                                            | 1,307,350                          |                        |            |                    |            |          |         |          |         |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |          |         |          |         |     
|                                                    |                                      | Total assets                               |                                    | $                      | 18,075,246 |                    |            |          |         |          |         |      |      |       
|                                                    |                                      |                                            |                                    |                        |            |                    |            |          |         |          |         |     
|Interest-bearing deposits:                          |                                      |                                            |                                    |                        |            |                    |            |          |         |          |         |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Regular savings                      |                                            | $                                  | 1,390,834              |            |                    | $          | 5,561    |         |          |         | 1.62 |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | NOW and money market accounts        |                                            |                                    | 3,969,403              |            |                    |            | 32,539   |         |          |         | 3.32 |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Certificates of deposit              |                                            |                                    | 4,513,295              |            |                    |            | 63,502   |         |          |         | 5.71 |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Brokered deposits                    |                                            |                                    | 165,065                |            |                    |            | 2,637    |         |          |         | 6.48 |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |          |         |          |         |     
|                                                    |                                      |                                            | Total interest-bearing deposits    |                        |            | 10,038,597         |            |          |         | 104,239  |         |      |      | 4.21   |     
|                                                   
|                                                   
|                                                   
|                                                   
|Borrowed funds                                      |                                      |                                            | 4,572,935                          |                        |            |                    | 66,339     |          |         |          | 5.82    |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |          |         |          |         |     
|                                                    |                                      |                                            | Total interest-bearing liabilities |                        |            | 14,611,532         |            |          |         | 170,578  |         |      |      | 4.72   |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |          |         |          |         |     
|Non-interest bearing deposits                       |                                      |                                            | 1,966,919                          |                        |            |                    |            |          |         |          |         |     
|                                                   
|                                                   
|                                                   
|                                                   
|Other liabilities                                   |                                      |                                            | 150,037                            |                        |            |                    |            |          |         |          |         |     
|                                                   
|                                                   
|                                                   
|                                                   
|Shareholders equity                                |                                      |                                            | 1,346,758                          |                        |            |                    |            |          |         |          |         |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |          |         |          |         |     
|                                                    |                                      | Total liabilities and shareholders equity |                                    | $                      | 18,075,246 |                    |            |          |         |          |         |      |      |       
|                                                    |                                      |                                            |                                    |                        |            |                    |            |          |         |          |         |     
|Net earning assets                                  |                                      | $                                          | 2,156,364                          |                        |            |                    |            |          |         |          |         |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |          |         |          |         |     
|Net interest income (fully-taxable equivalent)      |                                      |                                            |                                    |                        |            |                    | 157,476    |          |         |          |         |     
|                                                   
|                                                   
|                                                   
|                                                   
|Less: fully-taxable equivalent adjustments          |                                      |                                            |                                    |                        |            |                    | (1,509     | )        |         |          |         |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |          |         |          |         |     
|                                                    |                                      | Net interest income                        |                                    |                        |            |                    |            | $        | 155,967 |          |         |      |      |       
|                                                    |                                      |                                            |                                    |                        |            |                    |            |          |         |          |         |     
|Net interest rate spread (fully-taxable equivalent) |                                      |                                            |                                    |                        |            |                    |            |          |         |          | 3.17    | %   
|                                                   
|                                                   
|                                                   
|                                                   
|Net interest margin (fully-taxable equivalent)      |                                      |                                            |                                    |                        |            |                    |            |          |         |          | 3.78    | %   



---

|(1) |  | Annualized.                                  
|--- |  | ---------------------------------------------
|   
|   
|   
|   
|(2) |  | Loans and leases include loans held for sale.

16



---



##### Table of Contents



The following table presents certain information on a fully-taxable equivalent
basis regarding changes in our interest income and interest expense for the
periods indicated. For each category of interest-earning assets and
interest-bearing liabilities, information is provided with respect to changes
attributable to (1) changes in rate (change in rate multiplied by old volume),
(2) changes in volume (change in volume multiplied by old rate) and (3) changes
in rate/volume (change in rate multiplied by change in volume).

TABLE 3   Rate /Volume Analysis(Dollars in thousands)

|                                                     |                               |   |                                            |        |      |   |            |         |        |  |          |        |       |   |         |         |   |  |  |  | 
|---------------------------------------------------- | ----------------------------- | - | ------------------------------------------ | ------ | ---- | - | ---------- | ------- | ------ |  | -------- | ------ | ----- | - | ------- | ------- | - |  |  |  | 
|                                                     |                               |   | Three Months Ended March 31, 2002 vs. 2001 |        |      |   |           
|                                                     |                               |   | Increase (decrease) due to                 |        |      |   |           
|                                                     |                               |  
|                                                     |                               |   |                                            |        |      |   |            |         |        |  | Rate and |        | Total |   |         |         |  
|                                                     |                               |   | Volume                                     |        | Rate |   | Volume (1) |         | Change |  |          |        |      
|                                                     |                               |  
|Interest income:                                     |                               |   |                                            |        |      |   |            |         |        |  |          |        |       |   |         |         |   |  |  | 
|                                                    
|                                                    
|                                                    
|                                                    
|Loans and leases                                     |                               | $ | 38,883                                     |        |      |   | ($39,610   | )       |        |  | ($6,490  | )      |       |   | ($7,217 | )       |   |  |  | 
|                                                    
|                                                    
|                                                    
|                                                    
|Securities                                           |                               |   | 2,060                                      |        |      |   | (15,209    | )       |        |  | (494     | )      |       |   | (13,643 | )       |   |  |  | 
|                                                    
|                                                    
|                                                    
|                                                    
|Federal funds sold and other short-term
investements |                               |   | 717                                        |        |      |   | (173       | )       |        |  | (425     | )      |       |   | 119     |         |   |  |  | 
|                                                     |                               |   |                                            |        |      |   |            |         |        |  |          |        |       |   |         |         |   |  |  | 
|Total interest income                                |                               |   | 41,660                                     |        |      |   | (54,992    | )       |        |  | (7,409   | )      |       |   | (20,741 | )       |   |  |  | 
|                                                     |                               |   |                                            |        |      |   |            |         |        |  |          |        |       |   |         |         |   |  |  | 
|Interest expense:                                    |                               |   |                                            |        |      |   |            |         |        |  |          |        |       |   |         |         |   |  |  | 
|                                                    
|                                                    
|                                                    
|                                                    
|Interest-bearing
deposits
Regular savings            |                               |   | 1,023                                      |        |      |   | (2,195     | )       |        |  | (425     | )      |       |   | (1,597  | )       |   |  |  | 
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | NOW and money market accounts |   |                                            | 9,250  |      |   |            | (17,813 | )      |  |          | (5,081 | )     |   |         | (13,644 | ) |  |  |  | 
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Certificates of deposit       |   |                                            | 3,507  |      |   |            | (24,038 | )      |  |          | (1,277 | )     |   |         | (21,808 | ) |  |  |  | 
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Brokered deposits             |   |                                            | (1,621 | )    |   |            | (1,889  | )      |  |          | 1,161  |       |   |         | (2,349  | ) |  |  |  | 
|                                                     |                               |   |                                            |        |      |   |            |         |        |  |          |        |       |   |         |         |   |  |  | 
|Total interest-bearing deposits                      |                               |   | 12,159                                     |        |      |   | (45,935    | )       |        |  | (5,622   | )      |       |   | (39,398 | )       |   |  |  | 
|                                                    
|                                                    
|                                                    
|                                                    
|Borrowed funds                                       |                               |   | (875                                       | )      |      |   | (20,860    | )       |        |  | 38       |        |       |   | (21,697 | )       |   |  |  | 
|                                                     |                               |   |                                            |        |      |   |            |         |        |  |          |        |       |   |         |         |   |  |  | 
|Total interest expense                               |                               |   | 11,284                                     |        |      |   | (66,795    | )       |        |  | (5,584   | )      |       |   | (61,095 | )       |   |  |  | 
|                                                     |                               |   |                                            |        |      |   |            |         |        |  |          |        |       |   |         |         |   |  |  | 
|Net interest income (fully taxable equivalent)       |                               | $ | 30,376                                     |        |      | $ | 11,803     |         |        |  | ($1,825  | )      |       | $ | 40,354  |         |   |  |  | 
|                                                     |                               |   |                                            |        |      |   |            |         |        |  |          |        |       |   |         |         |   |  |  | 



---

|(1) |  | Includes changes in interest income and expense not due solely to volume or rate changes.
|--- |  | -----------------------------------------------------------------------------------------

17



---



##### Table of Contents



Noninterest Income

First quarter noninterest income totaled $61.6 million, an increase of $2.8
million from the first quarter of 2001. This increase was primarily due to
loan fee income which increased $2.7 million or 101% due primarily to an
increase in loan prepayment penalties, deposit services income which increased
$1.4 million or 8% due to higher volumes, and merchant and electronic banking
income which increased $1.3 million or 19% due to higher volumes. These
increases were partially offset by a $1.6 million decrease in mortgage banking
services income (see Table 4 below). Noninterest income, excluding securities
gains and losses, as a percent of total income was 24% and 27% for the quarters
ended March 31, 2002 and 2001, respectively. The decline was attributable in
large part to the acquisition of Andover and MetroWest which had a combined
ratio of 8% of noninterest income, excluding securities gains and losses, as a
percent of total income.

Deposit services income increased by $1.4 million or 8% during the three months
ended March 31, 2002 as compared to the same period in the prior year. This
increase was primarily attributable to volume-driven increases in checking
account income, ATM income and overdraft fees as well as the acquisitions of
Andover and MetroWest.

Mortgage banking services income was $1.7 million and $3.2 million for the
quarters ended March 31, 2002 and 2001, respectively. Excluding a $1.1 million
gain on the sale of portfolio loans and a $706 thousand gain on the sale of
mortgage servicing rights in the quarter ended March 31, 2001, mortgage banking
services income increased $208 thousand due to increased servicing income. The
amount of loans serviced for others was $866.7 million and $294.9 million at
March 31, 2002 and 2001, respectively. The increase in mortgage servicing
rights was due to the servicing rights acquired in connection with the
acquisition of Andover in the fourth quarter of 2001. See Table 4 for a
summary of mortgage banking services income by quarter for 2002 and 2001.

Capitalized mortgage servicing rights amounted to $8.5 million at March 31,
2002 and at December 31, 2001. See Table 4 for an analysis of mortgage
servicing rights.

TABLE 4  Mortgage Banking Services(In thousands)

|                                             |                                                                  |   |                                  |       |          |   |         |       |         |   |         |       |   |   |         |       |  |   |         |         |   |  |  |  | 
|-------------------------------------------- | ---------------------------------------------------------------- | - | -------------------------------- | ----- | -------- | - | ------- | ----- | ------- | - | ------- | ----- | - | - | ------- | ----- |  | - | ------- | ------- | - |  |  |  | 
|                                             |                                                                  |   | At or for the Three Months Ended |       |          |   |        
|                                             |                                                                  |  
|                                             |                                                                  |   | 3/31/02                          |       | 12/31/01 |   | 9/30/01 |       | 6/30/01 |   | 3/31/01 |       |   |   |        
|                                             |                                                                  |  
|Residential mortgages serviced for investors |                                                                  | $ | 866,689                          |       |          | $ | 964,027 |       |         | $ | 285,400 |       |   | $ | 303,590 |       |  | $ | 294,898 |         |   |  |  | 
|                                             |                                                                  |  
|Mortgage servicing rights:                   |                                                                  |   |                                  |       |          |   |         |       |         |   |         |       |   |   |         |       |  |   |         |         |   |  |  | 
|                                            
|                                            
|                                            
|                                            
|                                             | Balance at beginning of period                                   |   | $                                | 8,484 |          |   | $       | 440   |         |   | $       | 495   |   |   | $       | 491   |  |   | $       | 23,225  |   |  |  |  | 
|                                            
|                                            
|                                            
|                                            
|                                             | Mortgage servicing rights capitalized                            |   |                                  | 349   |          |   |         | 177   |         |   |         |      |   |   |         |      |  |   |         | 382     |   |  |  |  | 
|                                            
|                                            
|                                            
|                                            
|                                             | Mortgage servicing rights acquired through
purchase acquisitions |   |                                  |      |          |   |         | 8,804 |         |   |         |      |   |   |         |      |  |   |         |        |   |  |  |  | 
|                                            
|                                            
|                                            
|                                            
|                                             | Amortization charged against
mortgage servicing fee income       |   |                                  | (330  | )        |   |         | (589  | )       |   |         | (55   | ) |   |         | 4     |  |   |         | (500    | ) |  |  |  | 
|                                            
|                                            
|                                            
|                                            
|                                             | Mortgage servicing rights sold                                   |   |                                  |      |          |   |         | (348  | )       |   |         |      |   |   |         |      |  |   |         | (22,616 | ) |  |  |  | 
|                                             |                                                                  |  
|                                             | Balance at end of period                                         |   | $                                | 8,503 |          |   | $       | 8,484 |         |   | $       | 440   |   |   | $       | 495   |  |   | $       | 491     |   |  |  |  | 
|                                             |                                                                  |  
|Mortgage banking services income:            |                                                                  |   |                                  |       |          |   |         |       |         |   |         |       |   |   |         |       |  |   |         |         |   |  |  | 
|                                            
|                                            
|                                            
|                                            
|                                             | Residential mortgage sales income                                |   | $                                | 1,068 |          |   | $       | 3,642 |         |   | $       | 1,734 |   |   | $       | 1,562 |  |   | $       | 2,184   |   |  |  |  | 
|                                            
|                                            
|                                            
|                                            
|                                             | Residential mortgage servicing income, net                       |   |                                  | 608   |          |   |         | 358   |         |   |         | 448   |   |   |         | 214   |  |   |         | 344     |   |  |  |  | 
|                                            
|                                            
|                                            
|                                            
|                                             | Valuation adjustment interest rate floor                         |   |                                  |      |          |   |         | (62   | )       |   |         |      |   |   |         |      |  |   |         |        |   |  |  |  | 
|                                            
|                                            
|                                            
|                                            
|                                             | Gain on sale of capitalized mortgage
servicing rights            |   |                                  |      |          |   |         |      |         |   |         |      |   |   |         |      |  |   |         | 706     |   |  |  |  | 
|                                             |                                                                  |  
|                                             | Total                                                            |   | $                                | 1,676 |          |   | $       | 3,938 |         |   | $       | 2,182 |   |   | $       | 1,776 |  |   | $       | 3,234   |   |  |  |  | 
|                                             |                                                                  |  

Trust and investment management services income amounted to $8.3 million for
the quarter ended March 31, 2002 compared to $8.8 million for the first quarter
of 2001, a decrease of 6%. Assets under management decreased to $8.3 billion
at March 31, 2002 from $8.6 billion at March 31, 2001 as a result of
broad-based declines in the stock markets.

18



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##### Table of Contents



Investment planning services income increased $1.0 million, or 60%, in the
first quarter of 2002 compared to the first quarter of 2001 primarily due to
higher sales of fixed annuities.

Insurance brokerage commissions income was $10.2 million for the first quarter
of 2002 compared to $10.0 million for the same period in 2001, an increase of
2%.

Bank-owned life insurance (BOLI) income represents life insurance on the
lives of certain employees of Banknorth and its subsidiaries. Most of the BOLI
is invested in the general account of quality insurance companies. Standard
and Poors rated all such companies AA- or better at March 31, 2002. We
purchased $40 million of BOLI in the first quarter of 2002 to provide coverage
on substantially all officers of Banknorth. The BOLI investment provides a
means to finance increasing employee benefit costs. BOLI income was $4.4
million for the first quarter of 2002, compared to $4.3 million for the same
period in 2001, an increase of 2%. For the first quarter of 2002, the average
carrying value of BOLI was $324 million compared to $306 million for the first
quarter of 2001. BOLI represented 21.28% of capital and reserves at March 31,
2002.

Merchant and electronic banking income was $7.7 million for the first quarter
of 2002 compared to $6.5 million for the first quarter of 2001, an increase of
19%. This income represents fees and interchange income generated by the use
of debit cards issued by us and charges to merchants for credit card
transactions processed, net of third-party costs directly attributable to
handling these transactions.

Loan fee income was $5.4 million for the first quarter of 2002 compared to $2.7
million for the first quarter of 2001, an increase of 101%. Loan fee income
includes early payoff charges, letter of credit fees, late charges and other loan
related fees. The $2.7 million increase in fee income in 2002 was primarily
due to increased volumes and refinancing activities.

Net securities gains amounted to $19 thousand and $759 thousand during the
quarters ended March 31, 2002 and 2001, respectively. Gains from the sale of
securities are subject to market and economic conditions and, as a result,
there can be no assurance that gains reported in prior periods will be achieved
in the future.

Other noninterest income decreased $1.1 million, or 32%, for the quarter ended
March 31, 2002 compared to the same quarter last year. The decline was
primarily due to lower returns on investments in venture capital limited
partnerships.

Noninterest Expense

Noninterest expense was $144.7 million and $124.9 million for the quarters
ended March 31, 2002 and 2001, respectively, representing an increase of $19.8
million, or 16%. The increase was primarily due to salaries and employee
benefits expense ($13.6 million), special charges ($2.6 million) and other noninterest expense ($1.8 million.)
The cash efficiency ratio was 54.77% and 55.82% for the quarters ended March 31,
2002 and 2001, respectively. For a description of the methodology we used to
calculate the cash efficiency ratio, see Note 5 to Table 1.

Salaries and benefits expense of $75.3 million for the quarter ended March 31,
2002 increased $13.6 million, or 22%, from the same quarter of last year. The
increase was primarily due to additional
employees from two acquisitions in the fourth quarter of 2001 and increased incentive compensation. The total
number of full-time equivalent employees was approximately 6,000 at March 31,
2002 compared to 5,000 at March 31, 2001.

Data processing expense of $10.6 million for the quarter ended March 31, 2002
increased $1.6 million, or 18%, from the same quarter a year ago due to
continued investments in information technology and an increased volume of
transactions.

Occupancy expense of $12.5 million during the three months ended March 31, 2002
increased $686 thousand, or 6%, from the same quarter in 2001 due to the cost
of additional facilities from two acquisitions in the fourth quarter of 2001.

Equipment expense of $9.7 million during the three months ended March 31, 2002
increased $1.6 million, or 19%, from the first quarter of last year. This
increase was primarily due to depreciation relating to new technology equipment
and software.

Amortization of goodwill was $0 and $2.8 million for the quarters ended March
31, 2002 and 2001, respectively. In accordance with SFAS No. 142, we
discontinued the amortization of goodwill effective January 1, 2002. The
amortization of other intangible assets (principally core deposit intangibles
and FAS 72 intangibles) increased by $0.7 million due largely to the
amortization of core deposit intangibles recorded in connection with the two
acquisitions consummated during the fourth quarter of 2001.

19



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##### Table of Contents



During the three months ended March 31, 2002 and 2001, special charges amounted
to $8.2 million ($5.3 million after tax) and $5.6 million ($3.7 million after
tax), respectively. The special charges recorded in the first quarter of 2002
include
merger-related expenses for the two acquisitions effected in the fourth quarter
of 2001 and costs related to consolidating the charters of its nine national
bank subsidiaries to a single national bank charter effective January 1, 2002.
The special charges recorded in the first quarter of 2001 included
merger-related expenses and branch closing costs. The following table
summarizes the detail of special charges for the three months ended March 31,
2002 and 2001.

TABLE  5 Special Charges(In thousands)

|                                     |  |                    |       |      |  |   |       | 
|------------------------------------ |  | ------------------ | ----- | ---- |  | - | ----- | 
|                                     |  | Three Months Ended
|                                     |  | March 31,         
|                                     |  |                   
|                                     |  | 2002               |       | 2001
|                                     |  |                    |       |     
|Andover/MetroWest Charges            |  |                    |       |      |  |   |       | 
|                                    
|                                    
|                                    
|                                    
|Severance costs                      |  | $                  | 1,058 |      |  | $ | 0     | 
|                                    
|                                    
|                                    
|                                    
|Data processing/systems integration  |  |                    | 2,716 |      |  |   |      | 
|                                    
|                                    
|                                    
|                                    
|Other costs                          |  |                    | 2,032 |      |  |   |      | 
|                                     |  |                    |       |      |  |   |       | 
|                                     |  |                    | 5,806 |      |  |   |      | 
|                                     |  |                    |       |      |  |   |       | 
|Banknorth Merger Charges             |  |                    |       |      |  |   |       | 
|                                    
|                                    
|                                    
|                                    
|Severance costs                      |  |                    |      |      |  |   | 2,329 | 
|                                     |  |                    |       |      |  |   |       | 
|                                     |  |                    |      |      |  |   | 2,329 | 
|                                     |  |                    |       |      |  |   |       | 
|Charter Consolidation Costs          |  |                    |       |      |  |   |       | 
|                                    
|                                    
|                                    
|                                    
|Branch signage                       |  |                    | 729   |      |  |   |      | 
|                                    
|                                    
|                                    
|                                    
|Customer notices                     |  |                    | 567   |      |  |   |      | 
|                                    
|                                    
|                                    
|                                    
|Forms and documents                  |  |                    | 384   |      |  |   |      | 
|                                    
|                                    
|                                    
|                                    
|Other costs                          |  |                    | 649   |      |  |   |      | 
|                                     |  |                    |       |      |  |   |       | 
|                                     |  |                    | 2,329 |      |  |   |      | 
|                                     |  |                    |       |      |  |   |       | 
|Branch closings                      |  |                    |       |      |  |   |       | 
|                                    
|                                    
|                                    
|                                    
|Severance costs                      |  |                    |      |      |  |   | 47    | 
|                                    
|                                    
|                                    
|                                    
|Asset write-downs/lease terminations |  |                    |      |      |  |   | 1,585 | 
|                                    
|                                    
|                                    
|                                    
|Branch decommissioning costs         |  |                    | 66    |      |  |   | 755   | 
|                                     |  |                    |       |      |  |   |       | 
|                                     |  |                    | 66    |      |  |   | 2,387 | 
|                                     |  |                    |       |      |  |   |       | 
|Other Special Charges                |  |                    |       |      |  |   |       | 
|                                    
|                                    
|                                    
|                                    
|Write-down of auto lease residuals   |  |                    |      |      |  |   | 892   | 
|                                    
|                                    
|                                    
|                                    
|Other costs                          |  |                    | 3     |      |  |   |      | 
|                                     |  |                    |       |      |  |   |       | 
|                                     |  |                    | 3     |      |  |   | 892   | 
|                                     |  |                    |       |      |  |   |       | 
|Total Special Charges                |  | $                  | 8,204 |      |  | $ | 5,608 | 
|                                     |  |                    |       |      |  |   |       | 

The following table summarizes activity in the
Accrual Account for special charges from
December 31, 2001 through March 31, 2002.

TABLE  6 Special Charges -
Activity in the Accrual Account(In thousands)

|                                           |  |           |         |             |  |               |     |          |  |       |        |       |  |   |      |   |  |   |      |   |  |   |         |   |  |  |  | 
|------------------------------------------ |  | --------- | ------- | ----------- |  | ------------- | --- | -------- |  | ----- | ------ | ----- |  | - | ---- | - |  | - | ---- | - |  | - | ------- | - |  |  |  | 
|                                           |  |           |         |             |  | Banknorth     |     |          |  |       |        |       |  |   |      |   |  |   |      |   |  |   |         |   |  | 
|                                           |  | Andover/  |         | Group, Inc. |  |               |     |          |  |       |        |       |  |   |      |   |  |   |      |   |  |   |         |  
|                                           |  | MetroWest |         | (Vermont)   |  | Charter       |     | Branch   |  |       |        |       |  |   |      |   |  |   |      |  
|                                           |  | Mergers   |         | Merger      |  | Consolidation |     | Closings |  | Other |        | Total |  |   |      |  
|                                           |  |           |         |             |  |               |     |          |  |       |        |       |  |   |      |  
|Balance, December 31, 2001                 |  | $         | 11,207  |             |  | $             | 330 |          |  | $     | 0      |       |  | $ | 296  |   |  | $ | 0    |   |  | $ | 11,833  |   |  |  |  | 
|                                          
|                                          
|                                          
|                                          
|Special charges                            |  |           | 5,806   |             |  |               |    |          |  |       | 2,329  |       |  |   | 66   |   |  |   | 3    |   |  |   | 8,204   |   |  |  |  | 
|                                          
|                                          
|                                          
|                                          
|Cash payments                              |  |           | (13,533 | )           |  |               | (49 | )        |  |       | (1,655 | )     |  |   | (166 | ) |  |   | (37  | ) |  |   | (15,440 | ) |  |  |  | 
|                                          
|                                          
|                                          
|                                          
|Non-cash write-downs and other adjustments |  |           | (36     | )           |  |               |    |          |  |       | (674   | )     |  |   |     |   |  |   |     |   |  |   | (710    | ) |  |  |  | 
|                                           |  |          
|Balance, March 31, 2002                    |  | $         | 3,444   |             |  | $             | 281 |          |  | $     | 0      |       |  | $ | 196  |   |  |   | ($34 | ) |  | $ | 3,887   |   |  |  |  | 
|                                           |  |          

20



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##### Table of Contents



Other non-interest expenses increased by $1.8 million, or 8%, during the three
months ended March 31, 2002 as compared to the comparable period in the prior
year. The following table summarizes the principal components of other
noninterest expenses for the periods indicated.

TABLE 7  Other Noninterest Expenses(In thousands)

|                                                       |  |         |        |         |  |         |        |         |  |         |        |  |  |   |        |  |  |   |        | 
|------------------------------------------------------ |  | ------- | ------ | ------- |  | ------- | ------ | ------- |  | ------- | ------ |  |  | - | ------ |  |  | - | ------ | 
|                                                       |  | 2002    |        | 2001    |  | 2001    |        | 2001    |  | 2001   
|                                                       |  | First   |        | Fourth  |  | Third   |        | Second  |  | First  
|                                                       |  | Quarter |        | Quarter |  | Quarter |        | Quarter |  | Quarter
|                                                       |  |         |        |         |  |         |        |         |  |        
|Advertising and marketing                              |  | $       | 3,977  |         |  | $       | 3,615  |         |  | $       | 2,582  |  |  | $ | 3,324  |  |  | $ | 2,387  | 
|                                                      
|                                                      
|                                                      
|                                                      
|Telephone                                              |  |         | 3,189  |         |  |         | 2,796  |         |  |         | 2,918  |  |  |   | 2,853  |  |  |   | 3,007  | 
|                                                      
|                                                      
|                                                      
|                                                      
|Office supplies                                        |  |         | 2,819  |         |  |         | 2,183  |         |  |         | 2,097  |  |  |   | 2,506  |  |  |   | 2,320  | 
|                                                      
|                                                      
|                                                      
|                                                      
|Postage and freight                                    |  |         | 2,609  |         |  |         | 2,400  |         |  |         | 2,039  |  |  |   | 2,448  |  |  |   | 2,478  | 
|                                                      
|                                                      
|                                                      
|                                                      
|Miscellaneous loan costs                               |  |         | 1,167  |         |  |         | 2,041  |         |  |         | 1,902  |  |  |   | 1,699  |  |  |   | 1,737  | 
|                                                      
|                                                      
|                                                      
|                                                      
|Deposits and other assessments                         |  |         | 799    |         |  |         | 963    |         |  |         | 825    |  |  |   | 837    |  |  |   | 835    | 
|                                                      
|                                                      
|                                                      
|                                                      
|Collection and carrying costs
of non-performing assets |  |         | 649    |         |  |         | 1,714  |         |  |         | 705    |  |  |   | 482    |  |  |   | 610    | 
|                                                      
|                                                      
|                                                      
|                                                      
|Other                                                  |  |         | 9,830  |         |  |         | 12,696 |         |  |         | 9,679  |  |  |   | 10,715 |  |  |   | 9,825  | 
|                                                       |  |         |        |         |  |         |        |         |  |         |        |  |  |   |        |  |  |   |        | 
|Total                                                  |  | $       | 25,039 |         |  | $       | 28,408 |         |  | $       | 22,747 |  |  | $ | 24,864 |  |  | $ | 23,199 | 
|                                                       |  |         |        |         |  |         |        |         |  |         |        |  |  |   |        |  |  |   |        | 

Taxes

The effective tax rate was 34% and 33% for the quarters ended March 31, 2002
and 2001, respectively.

Cumulative Effect of Accounting Change

On January 1, 2001, we adopted SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which sets accounting and reporting
standards for derivative instruments and hedging activities. SFAS No. 133, as
amended by SFAS No. 138, requires us to recognize all derivatives on the
balance sheet at fair value. We recognized an after-tax loss of $290 thousand
from the cumulative effect of adoption of SFAS No. 133. This was recorded as
an unrealized loss on forward sale commitments which hedged residential
mortgage loans held for sale at December 31, 2000.

Comprehensive Income

Comprehensive income amounted to $38.9 million and $102.0 million during the
three months ended March 31, 2002 and 2001, respectively, which were different
from our reported net income during the respective periods as a result of
changes in the amount of unrealized gains and losses on our portfolio of
securities available for sale and on our derivative contracts (primarily
forward sales commitments) that are accounted for as cash flow hedges. For
additional information, see Note 5 to the Unaudited Consolidated Financial
Statements included herein.

Our available for sale investment portfolio had unrealized gains (losses), net
of applicable income tax effects, of $11.9 million, $40.3 million and $12.6
million at March 31, 2002, December 31, 2001 and March 31, 2001, respectively.
The
decrease was reflective of prevailing market conditions. At March 31, 2002,
the net unrealized gains of $18.3 million, before related tax effect,
represented less than 1% of securities available for sale. We attempt to
balance the interest rate risk of assets with liabilities (see Interest Rate
Risk and Asset Liability Management). However, the change in value of our
liabilities, which tend to fall in rising interest rate environments and rise
in falling interest rate environments, is not included in other comprehensive
income.

21



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##### Table of Contents



FINANCIAL CONDITION

Our consolidated total assets amounted to $20.9 billion and $21.1 billion at
March 31, 2002 and December 31, 2001, respectively. The decrease was due
mainly to lower cash and cash equivalents and was attributable to routine cash
management activity. Shareholders equity totaled $1.7 billion and $1.8
billion at March 31, 2002 and December 31, 2001, respectively. The decrease
was attributable to the repurchase of shares for treasury for a total of $132.8
million, a decrease in the unrealized gain on securities available
for sale of $28.4 million and dividends to shareholders of $20.3 million, which were
partially offset by net income of $67.3 million.

Securities and Other Earning Assets

The securities portfolio averaged $5.9 billion during the first quarter of
2002, as compared to $5.8 billion in the first quarter of 2001. The securities
portfolio consisted primarily of mortgage-backed securities, most of which are
seasoned 15-year federal agency securities and U.S. Government and agency
securities. Other securities in the portfolio are collateralized mortgage
obligations, which include securitized residential real estate loans held in a
REMIC, and asset-backed securities. The majority of securities available for
sale are rated AAA or equivalently rated. The average yield on securities was
5.68% for the quarter ended March 31, 2002 and 6.74% for the quarter ended
March 31, 2001. With the exception of the securitized residential real estate
loans held in a REMIC that are classified as held to maturity and carried at
cost, all of our securities are classified as available for sale and carried at
market value. Securities available for sale had an after-tax unrealized gain
of $11.9 million and $40.3 million at March 31, 2002 and at December 31, 2001,
respectively. The decline was primarily due to higher prevailing long-term
rates at March 31, 2002.

Loans and Leases

Total loans and leases (including loans held for sale) averaged $12.8 billion
during the first quarter of 2002, an increase of $1.9 billion,
or 17%, from the
first quarter of 2001. This increase was primarily attributable to the
acquisition of $1.8 billion of loans and leases in connection with the
acquisition of Andover and MetroWest in the fourth quarter of 2001. Average
loans as a percent of average earning assets was 68% during the quarter ended
March 31, 2002 compared to 65% during the quarter ended March 31, 2001.

Average residential real estate loans (which include mortgage loans held for
sale) of $2.7 billion during the first quarter of 2002 increased $390 million
from the first quarter of last year. Excluding the fourth quarter of 2001
acquisitions, average residential loans decreased $442 million. Increased
refinancing activity and prepayments in a lower interest rate environment
caused residential loans to decline. Mortgage loans held for sale amounted
to $62.5 million and $112.7 million at March 31, 2002 and 2001, respectively,
and $117.7 million at December 31, 2001. We are currently selling substantially
all of the 30-year fixed-rate loans we originate and are putting into portfolio
all new 15 year and 20 year fixed-rate loans and all adjustable-rate loans.

Average commercial real estate loans of $4.1 billion increased $1.1 billion, or
38%, from the first quarter of last year. Excluding the acquisitions in the
fourth quarter of 2001, average commercial real estate loans increased $487
million. The majority of the increase was in the Massachusetts market. The
average yield on commercial real estate loans during the first quarter of 2002
was 7.19%, as compared to 8.85% in the first quarter of 2001, a decrease of 166
basis points. This decrease reflected the Federal Reserve Board rate cuts in
2001.

Commercial business loans and leases averaged $2.5 billion during the first
quarter of 2002, an increase of $160 million, or 7%, over the first quarter of
2001. Excluding the acquisitions in the fourth quarter of 2001, average
commercial business loans and leases increased $27 million. The largest
increases were in Maine and Massachusetts. The yield on commercial business
loans and leases decreased to 6.36% in the first quarter of 2002 from 8.70% in
the first quarter of 2001 due to repricing of variable-rate loans in response
to the Federal Reserve Board rate cuts and to competition for new loans.

Average consumer loans and leases of $3.5 billion during the first quarter of
2002 increased $165 million, or 5%, from the first quarter of 2001, $15 million
of which was due to the acquisitions in the fourth quarter of 2001. The
increase was primarily in indirect automobile and home equity loans and lines
of credit. The largest increases were in Maine and Massachusetts. The average
yield on consumer loans and leases decreased to 7.33% in the first quarter of
2002 from 8.73% in the first quarter of 2001 which also reflected the Federal
Reserve Board rate cuts in 2001.

22



---



##### Table of Contents



Asset Quality

Nonperforming assets consist of nonperforming loans (which do not include
accruing loans 90 days or more overdue), other real estate owned, repossessed
assets and certain securities available for sale.
As shown in Table 8, nonperforming assets were $76.8 million at March 31, 2002,
or 0.37% of total assets, compared to $81.2 million, or 0.39% of
total assets, at
December 31, 2001 and to $67.9 million, or 0.37% of total
assets, at March 31,
2001. Total nonperforming loans as a percentage of total loans (excluding residential real estate loans held
for sale) was 0.56%, 0.59% and 0.57% at March
31, 2002, December 31, 2001 and March 31, 2001, respectively. We continue to
focus on asset quality issues and allocate significant resources to the key
asset quality control functions of credit policy and administration and loan
review. We maintain an internal rating system which provides a mechanism to
regularly monitor the credit quality of our loan portfolio.

Residential real estate loans accounted for 20% of the total loan portfolio at
March 31, 2002, as compared with 21% at December 31, 2001. Residential loans
are generally secured by single-family homes (one to four units) and have a
maximum loan to value ratio of 80%, unless they are protected by mortgage
insurance. At March 31, 2002, 0.30% of the residential loans were
nonperforming, as compared with 0.32% at December 31, 2001 and 0.49% at March
31, 2001.

Commercial real estate loans accounted for 32% of the total loan portfolio at
March 31, 2002 and December 31, 2001. Commercial real estate loans consist
primarily of loans secured by income-producing commercial real estate
(including office and industrial buildings), service industry real estate
(including hotels and health care facilities), multi-family (over four units)
residential properties and retail trade real estate (including food stores).
These loans generally are secured by properties located in the New England
states and New York, particularly Maine, Massachusetts, New Hampshire and
Vermont. At March 31, 2002, 0.50% of the commercial real estate loans were
nonperforming, as compared with 0.42% at December 31, 2001 and 0.45% at March
31, 2001.

Commercial business loans and leases accounted for 20% of the total loan
portfolio at March 31, 2002 and 19% at December 31, 2001. Commercial business
loans and leases are not concentrated in any particular industry, but reflect
the broad-based economies of New England and upstate New York. Commercial
loans consist primarily of loans secured by various equipment, machinery and
other corporate assets, as well as loans to provide working capital to
businesses in the form of lines of credit. Our commercial business loans and
leases are generally to small and medium size businesses located within our
geographic market area. We generally do not emphasize the purchase of
participations in syndicated commercial loans. At March 31, 2002, we had $148
million of participations in syndicated commercial loans and commitments to
purchase an additional $193 million of such participations. At March 31, 2002,
1.38% of commercial business loans and leases were non-performing, as compared
with 1.64% at December 31, 2001 and 1.40% at March 31, 2001.

Consumer loans and leases accounted for 28% of the total loan portfolio at
March 31, 2002 and December 31, 2001. We have a diversified consumer loan and
lease portfolio consisting of home equity, automobile, mobile home, boat and
recreational vehicles and education loans, as well as loans to finance certain
medical /dental procedures (vision, dental and orthodontia fee plan loans). At
March 31, 2002 and December 31, 2001, 0.23% and 0.27%, respectively, of our
consumer loans and leases were nonperforming, as compared with 0.17% at March
31, 2001.

At March 31, 2002, we had $5.4 million of accruing loans which were 90 days or
more delinquent, as compared to $6.2 million of such loans at December 31, 2001
and $7.7 million at March 31, 2001.

23



---



##### Table of Contents



TABLE 8  Nonperforming Assets(Dollars in thousands)

|                                                                                                              |                                      |   |         |        |          |   |         |        |         |   |         |        |  |   |        |        |  |   |        |        |  |  |  |  | 
|------------------------------------------------------------------------------------------------------------- | ------------------------------------ | - | ------- | ------ | -------- | - | ------- | ------ | ------- | - | ------- | ------ |  | - | ------ | ------ |  | - | ------ | ------ |  |  |  |  | 
|                                                                                                              |                                      |   | 3/31/02 |        | 12/31/01 |   | 9/30/01 |        | 6/30/01 |   | 3/31/01 |        |  |   |       
|                                                                                                              |                                      |  
|Nonaccrual loans and leases:                                                                                  |                                      |   |         |        |          |   |         |        |         |   |         |        |  |   |        |        |  |   |        |        |  |  |  | 
|                                                                                                             
|                                                                                                             
|                                                                                                             
|                                                                                                             
|Residential real estate loans                                                                                 |                                      | $ | 7,689   |        |          | $ | 8,311   |        |         | $ | 8,222   |        |  | $ | 9,590  |        |  | $ | 10,575 |        |  |  |  | 
|                                                                                                             
|                                                                                                             
|                                                                                                             
|                                                                                                             
|Commercial real estate loans                                                                                  |                                      |   | 20,812  |        |          |   | 17,124  |        |         |   | 15,145  |        |  |   | 12,550 |        |  |   | 13,205 |        |  |  |  | 
|                                                                                                             
|                                                                                                             
|                                                                                                             
|                                                                                                             
|Commercial business loans and leases                                                                          |                                      |   | 34,481  |        |          |   | 40,341  |        |         |   | 34,220  |        |  |   | 39,208 |        |  |   | 32,233 |        |  |  |  | 
|                                                                                                             
|                                                                                                             
|                                                                                                             
|                                                                                                             
|Consumer loans and leases                                                                                     |                                      |   | 8,183   |        |          |   | 9,470   |        |         |   | 6,380   |        |  |   | 5,795  |        |  |   | 5,611  |        |  |  |  | 
|                                                                                                              |                                      |  
|Total nonaccrual loans and leases                                                                             |                                      |   | 71,165  |        |          |   | 75,246  |        |         |   | 63,967  |        |  |   | 67,143 |        |  |   | 61,624 |        |  |  |  | 
|                                                                                                             
|                                                                                                             
|                                                                                                             
|                                                                                                             
|Total troubled debt restructurings                                                                            |                                      |   |        |        |          |   |        |        |         |   |        |        |  |   |       |        |  |   |       |        |  |  |  | 
|                                                                                                              |                                      |  
|                                                                                                              | Total nonperforming loans and leases |   |         | 71,165 |          |   |         | 75,246 |         |   |         | 63,967 |  |   |        | 67,143 |  |   |        | 61,624 |  |  |  |  | 
|                                                                                                              |                                      |  
|Other nonperforming assets:                                                                                   |                                      |   |         |        |          |   |         |        |         |   |         |        |  |   |        |        |  |   |        |        |  |  |  | 
|                                                                                                             
|                                                                                                             
|                                                                                                             
|                                                                                                             
|Other real estate owned, net of related reserves                                                              |                                      |   | 1,262   |        |          |   | 1,861   |        |         |   | 4,468   |        |  |   | 4,508  |        |  |   | 4,310  |        |  |  |  | 
|                                                                                                             
|                                                                                                             
|                                                                                                             
|                                                                                                             
|Repossessions, net of related reserves                                                                        |                                      |   | 2,251   |        |          |   | 2,016   |        |         |   | 2,428   |        |  |   | 1,618  |        |  |   | 1,935  |        |  |  |  | 
|                                                                                                             
|                                                                                                             
|                                                                                                             
|                                                                                                             
|Securities available for sale                                                                                 |                                      |   | 2,104   |        |          |   | 2,104   |        |         |   |        |        |  |   |       |        |  |   |       |        |  |  |  | 
|                                                                                                              |                                      |  
|                                                                                                              | Total other nonperforming assets     |   |         | 5,617  |          |   |         | 5,981  |         |   |         | 6,896  |  |   |        | 6,126  |  |   |        | 6,245  |  |  |  |  | 
|                                                                                                              |                                      |  
|Total nonperforming assets                                                                                    |                                      | $ | 76,782  |        |          | $ | 81,227  |        |         | $ | 70,863  |        |  | $ | 73,269 |        |  | $ | 67,869 |        |  |  |  | 
|                                                                                                              |                                      |  
|Accruing loans and leases which are 90 days or more
overdue                                                   |                                      | $ | 5,430   |        |          | $ | 6,227   |        |         | $ | 6,055   |        |  | $ | 5,799  |        |  | $ | 7,664  |        |  |  |  | 
|                                                                                                              |                                      |  
|Total nonperforming loans as a percentage of total
loans and leases(1)                                        |                                      |   | 0.56    | %      |          |   | 0.59    | %      |         |   | 0.59    | %      |  |   | 0.62   | %      |  |   | 0.57   | %      |  |  |  | 
|                                                                                                             
|                                                                                                             
|                                                                                                             
|                                                                                                             
|Total nonperforming assets as a percentage of total assets                                                    |                                      |   | 0.37    | %      |          |   | 0.39    | %      |         |   | 0.39    | %      |  |   | 0.40   | %      |  |   | 0.37   | %      |  |  |  | 
|                                                                                                             
|                                                                                                             
|                                                                                                             
|                                                                                                             
|Total nonperforming assets as a percentage of total loans
and leases (1) and total other nonperforming assets |                                      |   | 0.60    | %      |          |   | 0.64    | %      |         |   | 0.65    | %      |  |   | 0.67   | %      |  |   | 0.63   | %      |  |  |  | 



---

|(1) |  | Total loans and leases exclude residential real estate loans held for sale.
|--- |  | ---------------------------------------------------------------------------

Provision/Allowance for Loan and Lease Losses

We provided $11.8 million and $7.1 million for loan and lease losses in the
quarters ended March 31, 2002 and 2001, respectively. As shown
in Table 9, net
charge-offs for the first quarter of 2002 were $10.8 million, or 0.34% of
average loans outstanding, compared to $7.1 million, or 0.26% of average loans
outstanding, for the first quarter of 2001. The increase in the provision for
loan and lease losses for the three months ended March 31, 2002 reflect higher
levels of net charge-offs, nonperforming loans and classified loans during this
period, as compared to the first quarter of 2001 as well as the uncertain economic climate. At March 31, 2002, the allowance
for loan and lease losses amounted to $190.9 million, or 1.50% of total
portfolio loans and leases, as compared to $153.6 million, or
1.43%, at March 31,
2001. The ratio of the allowance for loan and lease losses to nonperforming
loans was 268% at March 31, 2002 and 249% at March 31, 2001.

Provisions are made to the allowance for loan and lease 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 and lease
portfolio. Management considers the allowance appropriate and adequate to
cover probable losses inherent in the loan and lease portfolio based on the
current economic environment.

Provisions for loan and lease losses are attributable to managements ongoing
evaluation of the adequacy of the allowance for loan and lease losses, which
includes, among other factors, consideration of the character and size of the
loan and lease portfolio, such as internal risk ratings and credit
concentrations, trends in nonperforming loans, delinquency trends and
charge-off experience, portfolio migration data, the volume of new loan
originations and other asset quality factors. Although management utilizes its
judgment in providing for probable losses, there can be no assurance that we
will not have to change our provisions for loan and lease losses in future
periods. Changing economic and business conditions in our market areas,
particularly northern New England, fluctuations in local markets for real
estate, future changes in nonperforming asset trends, large movements in
market-based interest rates or other reasons could affect our future provisions
for loan and lease losses.

24



---



##### Table of Contents



TABLE 9  Allowance for Loan and Lease Losses(Dollars in thousands)

|                                                                                                   |                                    |                                      |            |            |       |             |            |            |       |             |            |            |       |   |            |        |       |   |            |       |       |   |  |  |  | 
|-------------------------------------------------------------------------------------------------- | ---------------------------------- | ------------------------------------ | ---------- | ---------- | ----- | ----------- | ---------- | ---------- | ----- | ----------- | ---------- | ---------- | ----- | - | ---------- | ------ | ----- | - | ---------- | ----- | ----- | - |  |  |  | 
|                                                                                                   |                                    |                                      |            | 2002 First |       | 2001 Fourth |            | 2001 Third |       | 2001 Second |            | 2001 First |       |   |            |       
|                                                                                                   |                                    |                                      |            | Quarter    |       | Quarter     |            | Quarter    |       | Quarter     |            | Quarter    |       |   |            |       
|                                                                                                   |                                    |                                     
|Allowance at beginning of period                                                                   |                                    | $                                    | 189,837    |            |       | $           | 158,532    |            |       | $           | 155,303    |            |       | $ | 153,621    |        |       | $ | 153,550    |       |       |   |  | 
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Additions due to acquisitions                                                                      |                                    |                                      |           |            |       |             | 31,277     |            |       |             |           |            |       |   |           |        |       |   |           |       |       |   |  | 
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   |                                    |                                      |            |            |       |             |            |            |       |             |            |            |       |   |            |        |       |   |            |       |       |   |  | 
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Charge-offs:                                                                                       |                                    |                                      |            |            |       |             |            |            |       |             |            |            |       |   |            |        |       |   |            |       |       |   |  | 
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Real estate mortgages                                                                              |                                    |                                      | 501        |            |       |             | 644        |            |       |             | 735        |            |       |   | 724        |        |       |   | 790        |       |       |   |  | 
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Commercial business loans and leases                                                               |                                    |                                      | 5,374      |            |       |             | 8,186      |            |       |             | 4,074      |            |       |   | 4,864      |        |       |   | 3,774      |       |       |   |  | 
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Consumer loans and leases                                                                          |                                    |                                      | 7,042      |            |       |             | 7,253      |            |       |             | 5,439      |            |       |   | 4,706      |        |       |   | 4,463      |       |       |   |  | 
|                                                                                                   |                                    |                                     
|                                                                                                   | Total loans and leases charged off |                                      |            | 12,917     |       |             |            | 16,083     |       |             |            | 10,248     |       |   |            | 10,294 |       |   |            | 9,027 |       |   |  |  | 
|                                                                                                   |                                    |                                     
|Recoveries:                                                                                        |                                    |                                      |            |            |       |             |            |            |       |             |            |            |       |   |            |        |       |   |            |       |       |   |  | 
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Real estate mortgages                                                                              |                                    |                                      | 50         |            |       |             | (87        | )          |       |             | 62         |            |       |   | 349        |        |       |   | 138        |       |       |   |  | 
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Commercial business loans and leases                                                               |                                    |                                      | 1,101      |            |       |             | 1,908      |            |       |             | 476        |            |       |   | 1,524      |        |       |   | 890        |       |       |   |  | 
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Consumer loans and leases                                                                          |                                    |                                      | 991        |            |       |             | 911        |            |       |             | 878        |            |       |   | 792        |        |       |   | 932        |       |       |   |  | 
|                                                                                                   |                                    |                                     
|                                                                                                   | Total loans and leases recovered   |                                      |            | 2,142      |       |             |            | 2,732      |       |             |            | 1,416      |       |   |            | 2,665  |       |   |            | 1,960 |       |   |  |  | 
|                                                                                                   |                                    |                                     
|Net charge-offs                                                                                    |                                    |                                      | 10,775     |            |       |             | 13,351     |            |       |             | 8,832      |            |       |   | 7,629      |        |       |   | 7,067      |       |       |   |  | 
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   |                                    |                                      |            |            |       |             |            |            |       |             |            |            |       |   |            |        |       |   |            |       |       |   |  | 
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Provision for loan and lease losses                                                                |                                    |                                      | 11,828     |            |       |             | 13,379     |            |       |             | 12,061     |            |       |   | 9,311      |        |       |   | 7,138      |       |       |   |  | 
|                                                                                                   |                                    |                                     
|Allowance at end of period                                                                         |                                    | $                                    | 190,890    |            |       | $           | 189,837    |            |       | $           | 158,532    |            |       | $ | 155,303    |        |       | $ | 153,621    |       |       |   |  | 
|                                                                                                   |                                    |                                     
|Average loans and leases outstanding
during the period (1)                                         |                                    | $                                    | 12,723,083 |            |       | $           | 11,173,723 |            |       | $           | 10,869,870 |            |       | $ | 10,816,524 |        |       | $ | 10,880,534 |       |       |   |  | 
|                                                                                                   |                                    |                                     
|Ratio of net charge-offs to average loans and
leases outstanding during the period, annualized (1) |                                    |                                      | 0.34       | %          |       |             | 0.44       | %          |       |             | 0.32       | %          |       |   | 0.28       | %      |       |   | 0.26       | %     |       |   |  | 
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Ratio of allowance to total loans and leases
at end of period (1)                                  |                                    |                                      | 1.50       | %          |       |             | 1.49       | %          |       |             | 1.45       | %          |       |   | 1.43       | %      |       |   | 1.43       | %     |       |   |  | 
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Ratio of allowance to nonperforming loans
and leases at end of period                              |                                    |                                      | 268        | %          |       |             | 252        | %          |       |             | 248        | %          |       |   | 231        | %      |       |   | 249        | %     |       |   |  | 
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Ratio of net charge-offs as a percent of average
outstanding loans and leases, annualized (1):     |                                    |                                      |            |            |       |             |            |            |       |             |            |            |       |   |            |        |       |   |            |       |       |   |  | 
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   |                                    | Real estate mortgages                |            |            | 0.027 | %           |            |            | 0.046 | %           |            |            | 0.052 | % |            |        | 0.029 | % |            |       | 0.051 | % |  |  |  | 
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   |                                    | Commercial business loans and leases |            |            | 0.688 | %           |            |            | 1.047 | %           |            |            | 0.605 | % |            |        | 0.577 | % |            |       | 0.508 | % |  |  |  | 
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   |                                    | Consumer loans and leases            |            |            | 0.678 | %           |            |            | 0.717 | %           |            |            | 0.539 | % |            |        | 0.470 | % |            |       | 0.424 | % |  |  |  | 



---

|(1) |  | Excludes residential real estate loans held for
sale.
|--- |  | -----------------------------------------------------

Consumer loan charge-offs as a percent of average loans and leases outstanding
have increased over the past several quarters. The increased charge-offs rate
was primarily due to higher charge-offs on loans to finance medical/dental
procedures and indirect auto loans. On fee plan loans we have tightened
underwriting criteria.

25



---



##### Table of Contents



Deposits

Total deposits averaged $14.0 billion during the first quarter of 2002, an
increase of $2.0 billion from the first quarter of 2001. Excluding deposits
acquired from the acquisitions of Andover and MetroWest in the fourth quarter
of 2001, total deposits increased $12.4 million. The ratio of loans to
deposits was 90% and 89% at March 31, 2002 and December 31, 2001, respectively.

Average non-interest bearing deposits of $2.4 billion during the first quarter
of 2002 increased $479.6 million, or 24%, from the first quarter of 2001,
including $294.0 million from Andover and MetroWest. The increase in
non-interest bearing deposits reflect strong growth in commercial, government
and personal accounts.

Average interest-bearing deposits of $11.6 billion during the first quarter of
2002 increased $1.5 billion from the first quarter of 2001,
including $1.7 billion from Andover and MetroWest. The net decrease in interest-bearing
deposits exclusive of acquisitions reflected the run-off of higher-cost
certificates of deposit to alternative investments. The average rates paid on
NOW and money market accounts decreased 182 basis points from 3.32% in the
first quarter of 2001 to 1.50% in the first quarter of 2002 due largely to
lower prevailing interest rates. The average rates paid on all deposit types
decreased by 194 basis points from 4.21% in the first quarter of 2001 to 2.27%
in the first quarter of 2002, reflecting the decline in prevailing interest
rates during 2001.

Included within the deposit categories above are government banking deposits,
which averaged $1.3 billion in the first quarter of 2002 and $1.1 billion in
the first quarter of 2001. Government banking deposits include deposits
received from state and local governments, school districts, public
colleges/universities, utility districts, public housing authorities and court
systems in our market area. Many of these deposits exceed the FDIC insurance
coverage amounts and require us to pledge specific collateral or maintain
private insurance.

Other Funding Sources

Our primary sources of funding, other than deposits, are advances from Federal
Home Loan Banks (FHLB) and securities sold under repurchase agreements. We
also borrow funds under the U.S. Treasurys Note Option Treasury, Tax and Loan
program and by overnight borrowings from other banks as needed. Average
borrowed funds for the first quarter of 2002 were $4.5 billion, a decrease of
$61 million from the first quarter of 2001. Borrowing levels declined as a
result of the early extinguishment of $174.6 million of FHLB borrowings in the
fourth quarter of 2001 in addition to increased average deposit levels.

Average FHLB borrowings for the first quarter of 2002 were $2.5 billion, which
decreased $523 million or 17% from the first quarter of 2001. Collateral for
FHLB borrowings consists primarily of first mortgage loans secured by 1  4
family properties, certain unencumbered securities and other qualified assets.
These borrowings had an average cost of 4.43% during the quarter ended March
31, 2002 as compared to 5.99% for the comparable period last year. The 156
basis point decrease was due to the Federal Reserve Board rate cuts during 2001
and prepayment of $174.6 million of FHLB borrowings with a weighted average
cost of 5.62%. At March 31, 2002, FHLB borrowings amounted to $2.5 billion and
our additional borrowing capacity from the FHLB was $1.9 billion.

Average balances for securities sold under repurchase agreements were $1.5
billion and $1.1 billion for the quarters ended March 31, 2002 and 2001,
respectively, an increase of $332.6 million. These borrowings had a weighted
average rate of 2.23% and 5.08% for the quarters ended March 31, 2002 and 2001,
respectively, and are secured by mortgage-backed securities and U.S. Government
obligations.

In June 2001, Banknorth, NA issued $200 million of 7.625% subordinated notes
due in 2011. The notes are still outstanding and qualify as Tier 2 capital of
Banknorth , NA.

In January 2002, we renewed an existing line of credit in the amount of $80
million at the rate of LIBOR plus 0.625%. The average outstanding balance on
this line for the quarter ended March 31, 2002 was $8.6 million.

In February 2002, Banknorth Capital Trust II
issued $200 million of 8% trust preferred securities
("Securities"). These Securities pay interest quarterly and are
mandatorily redeemable on April 1, 2032. The Securities qualify
as Tier 1 Capital.

26



---



##### Table of Contents



CONTRACTUAL OBLIGATIONS

We have entered into numerous contractual obligations and commitments. The
following tables summarize our contractual cash obligations and other
commitments at March 31, 2002.

Contractual Cash Obligations
(In thousands)

|                                   |  |       |           |        |  |                          |         |       |  |       |           |         |  |   |         |  |  |   |           |  |  |  |  | 
|---------------------------------- |  | ----- | --------- | ------ |  | ------------------------ | ------- | ----- |  | ----- | --------- | ------- |  | - | ------- |  |  | - | --------- |  |  |  |  | 
|                                   |  |       |           |        |  | Payments Due - By Period |         |       |  |      
|                                   |  |       |           |        |  |                         
|                                   |  |       |           |        |  | Less than                |         | 1 - 3 |  | 4 -5  |           | After 5 |  |   |         | 
|                                   |  | Total |           | 1 Year |  | Years                    |         | Years |  | Years |           |         |  |  
|                                   |  |      
|Long-term debt                     |  | $     | 3,007,514 |        |  | $                        | 107,083 |       |  | $     | 1,004,800 |         |  | $ | 764,849 |  |  | $ | 1,130,782 |  |  |  |  | 
|                                  
|                                  
|                                  
|                                  
|Operating lease obligations        |  |       | 133,004   |        |  |                          | 18,310  |       |  |       | 29,855    |         |  |   | 22,977  |  |  |   | 61,862    |  |  |  |  | 
|                                  
|                                  
|                                  
|                                  
|Other long-term obligations        |  |       | 736,579   |        |  |                          | 65,195  |       |  |       | 471,384   |         |  |   | 100,000 |  |  |   | 100,000   |  |  |  |  | 
|                                   |  |      
|Total contractual cash obligations |  | $     | 3,877,097 |        |  | $                        | 190,588 |       |  | $     | 1,506,039 |         |  | $ | 887,826 |  |  | $ | 1,292,644 |  |  |  |  | 
|                                   |  |      

Other Commitments
(In thousands)

|                                  |  |           |           |           |  |                                              |           |       |  |         |         |  |  |   |         |  |  |   |           |  |  |  |  | 
|--------------------------------- |  | --------- | --------- | --------- |  | -------------------------------------------- | --------- | ----- |  | ------- | ------- |  |  | - | ------- |  |  | - | --------- |  |  |  |  | 
|                                  |  |           |           |           |  | Amount of Commitment Expiration - Per Period |          
|                                  |  |           |           |           |  |                                              |           |      
|                                  |  | Total     |           |           |  |                                              |           |       |  |         |         |  |  |   |         |  |  |   |           |  |  | 
|                                  |  | Amounts   |           | Less than |  | 1 - 3                                        |           | 4 -5  |  | After 5 |         |  |  |  
|                                  |  | Committed |           | 1 Year    |  | Years                                        |           | Years |  | Years   |         |  |  |  
|                                  |  |          
|Lines of credit                   |  | $         | 3,177,607 |           |  | $                                            | 517,899   |       |  | $       | 146,372 |  |  | $ | 51,831  |  |  | $ | 2,461,505 |  |  |  |  | 
|                                 
|                                 
|                                 
|                                 
|Standby letters of credit         |  |           | 216,038   |           |  |                                              | 130,783   |       |  |         | 52,011  |  |  |   | 20,590  |  |  |   | 12,654    |  |  |  |  | 
|                                 
|                                 
|                                 
|                                 
|Other commitments                 |  |           | 1,264,748 |           |  |                                              | 751,646   |       |  |         | 175,278 |  |  |   | 55,555  |  |  |   | 282,269   |  |  |  |  | 
|                                 
|                                 
|                                 
|                                 
|Forward commitments to sell loans |  |           | 102,200   |           |  |                                              | 102,200   |       |  |         |        |  |  |   |        |  |  |   |          |  |  |  |  | 
|                                  |  |          
|Total commitments                 |  | $         | 4,760,593 |           |  | $                                            | 1,502,528 |       |  | $       | 373,661 |  |  | $ | 127,976 |  |  | $ | 2,756,428 |  |  |  |  | 
|                                  |  |          

RISK MANAGEMENT

The primary goal of our risk management program is to determine how
certain existing or emerging issues facing us or the financial services
industry affect the nature and extent of the risks faced by us. Based on a
periodic self-evaluation, we determine key issues and develops plans and/or
objectives to address risk. The Board of Directors (the Board) and
management believe that there are seven applicable risk categories,
consisting of credit risk, interest rate risk, liquidity risk, transaction
risk, compliance risk, strategic risk and reputation risk. Each risk category
is viewed from a quantity of risk perspective (high, medium or low) coupled
with a quality of risk perspective. In addition, an aggregate level of risk is
assigned as a whole as well as the direction of risk (stable, increasing or
decreasing). Each risk category and the overall risk level is compared to
regulatory views on a regular basis and then reported to the Board with an
accompanying explanation as to the existence of any differences. The risk
program includes risk identification, measurement, control and monitoring.

The Board has established the overall strategic direction. It approves
the overall risk policies and oversees the overall risk management process.
The Board has delegated authority to two Board Committees, consisting of Audit
and Board Risk Management, and has charged each Committee with overseeing key
risks. In addition, there is a management Operational Risk Committee, which is
comprised of senior officers in key business lines, which identifies and
monitors key operational risks. The Operational Risk Committee reports to the
Board Risk Management Committee on a regular basis.

ASSET-LIABILITY MANAGEMENT

The goal of asset-liability management is the prudent control of market risk,
liquidity and capital. Asset-liability management is governed by policies
reviewed and approved annually by the Board and monitored periodically by a
committee of the Board. The Board delegates responsibility for asset-liability
management to the Asset Liability Management Committee (ALCO), which is
comprised of members of senior management who set strategic directives that
guide the day-to-day asset-liability management of our activities. The ALCO
also reviews and approves all major risk, liquidity and capital management
programs, except for product pricing. Product pricing is reviewed and approved
by the Pricing Committee, which is comprised of a subset of ALCO members and
Regional presidents.

Market Risk

Market risk is the sensitivity of income to changes in interest rates,
foreign exchange rates, commodity prices and other market-driven rates or
prices. We have no trading operations and thus are only exposed to non-trading
market risk.

27



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##### Table of Contents



Interest-rate risk, including mortgage prepayment risk, is by far the most
significant non-credit risk to which we are exposed. Interest-rate risk is the
sensitivity of income to changes in interest rates. Changes in interest rates,
as well as fluctuations in the level and duration of assets and liabilities,
affect net interest income, our primary source of revenue. This risk arises
directly from our core banking activities  lending, deposit gathering and loan
servicing. In addition to directly impacting net interest income, changes in
the level of interest rates can also affect (i) the amount of loans originated
and sold by the institution, (ii) the ability of borrowers to repay adjustable
or variable rate loans, (iii) the average maturity of loans, (iv) the rate of
amortization of capitalized mortgage servicing rights and premiums paid on
securities, (v) the amount of unrealized gains and losses on securities
available for sale and (vi) the fair value of our saleable assets and
derivatives and the resultant ability to realize gains.

The primary objective of interest-rate risk management is to control our
exposure to interest-rate risk both within limits approved by the Board and
guidelines established by the ALCO. These limits and guidelines reflect our
tolerance for interest-rate risk over both short-term and long-term horizons.
We attempt to control interest-rate risk by identifying, quantifying and, where
appropriate, hedging our exposure.

We quantify and measure interest-rate exposure using a model to
dynamically simulate net interest income under various interest rate scenarios
over a 12-month period. Simulated scenarios include deliberately extreme
interest rate shocks and more gradual interest rate ramps. Key assumptions
in these simulation analyses relate to behavior of interest rates and spreads,
increases or decreases of product balances and the behavior of our deposit and
loan customers. The most material assumptions relate to the prepayment of
mortgage assets (including mortgage loans, mortgage-backed securities and
mortgage servicing rights). The risk of prepayment tends to increase when
interest rates fall. Since future prepayment behavior of loan customers is
uncertain, the resultant interest rate sensitivity of loan assets cannot be
determined exactly. Complicating our efforts to measure interest rate risk is
the uncertainty of the maturity, repricing and/or runoff of some of our assets
and liabilities.

To cope with these uncertainties, we give careful attention to our
assumptions. For example, many of our interest-bearing deposit products (e.g.
interest checking, savings and money market deposits) have no contractual
maturity and based on historical experience have only a limited sensitivity to
movements in market rates. Because we believe we have some control with
respect to the extent and timing of rates paid on non-maturity deposits,
certain assumptions regarding rate changes are built into the model. In the
case of prepayment of mortgage assets, assumptions are derived from published
dealer median prepayment estimates for comparable mortgage loans or from a
vendor supported loan prepayment model that is periodically tested using
observed loan prepayment behavior.

We manage the interest-rate risk inherent in our core banking operations
primarily using
on-balance sheet instruments, which sometimes contain embedded options, mainly
fixed-rate portfolio
securities and borrowed funds. When appropriate, we utilize interest rate
instruments such as
interest-rate swaps, interest rate floors and interest rate corridor
agreements, among other instruments. As of March 31, 2002, there were no such
agreements in effect.

We manage the interest-rate risk inherent in our mortgage banking
operations by entering into
forward sales contracts and, to a lesser extent, by using purchased
mortgage-backed security options.
An increase in market interest rates between the time we commit to terms on a
loan and the time we
ultimately sell the loan in the secondary market will have the effect of
reducing the gain (or increasing
the loss) we record on the sale. We attempt to mitigate this risk by entering
into forward sales
commitments in amounts sufficient to cover all closed loans and a certain
percentage of loan
commitments on rate-locked loans. Purchased mortgage-backed security options
are used to hedge a
percentage of rate-locked loans.

The average balances during the first quarter of 2002 of residential mortgage
loans held for sale and related average
hedge positions are summarized below (in millions):

|                                                    |  |   |       | 
|--------------------------------------------------- |  | - | ----- | 
|Average Balance                                     |  |   |       | 
|(In millions)                                       |  |   |       | 
|Residential mortgage loans held for sale            |  | $ | 78.6  | 
|                                                   
|                                                   
|                                                   
|                                                   
|Rate-locked loan commitments                        |  |   | 58.6  | 
|                                                   
|                                                   
|                                                   
|                                                   
|Forward sales contracts                             |  |   | 117.2 | 
|                                                   
|                                                   
|                                                   
|                                                   
|Purchased mortgage-backed security/treasury options |  |   | 13.3  | 

Our policy on interest-rate risk simulation specifies that if interest rates
were to shift gradually up
or down 2%, estimated net interest income for the subsequent 12 months should
decline by less than

28



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##### Table of Contents



5%. Our gradual 2% rising rate scenario was within compliance guidelines at
March 31, 2002.
However, the gradual 2% falling rate scenario was slightly outside guidelines.
Given the slight exception
to the guidelines, historically low rates and the steep yield curve, which is
thought to imply that further
significant rate reductions are unlikely, we have not taken immediate
corrective action to bring the
falling rate exposure within guidelines. Rather, we continue to focus on
strategies that prove beneficial
to income should rates rise or the yield curve flatten without worsening
exposure to falling rates.

The following table sets forth the estimated effects on our net interest income
over a 12-month
period following the indicated dates in the event of the indicated increases or
decreases in market
interest rates.

|                  |  |                 |       |                 |  |                 |       |                 |  |  |      |   |  |  |      |  
|----------------- |  | --------------- | ----- | --------------- |  | --------------- | ----- | --------------- |  |  | ---- | - |  |  | ---- | -
|                  |  | 200 Basis Point |       | 100 Basis Point |  | 100 Basis Point |       | 200 Basis Point
|                  |  | Rate Decrease   |       | Rate Decrease   |  | Rate Increase   |       | Rate Increase  
|                  |  |                 |       |                 |  |                 |       |                
|March 31, 2002    |  |                 | (5.77 | %)              |  |                 | (2.34 | %)              |  |  | 1.72 | % |  |  | 2.59 | %
|                  |  |                 |       |                 |  |                 |       |                 |  |  |      |   |  |  |      |  
|December 31, 2001 |  |                 | (5.37 | )%              |  |                 | (2.45 | )%              |  |  | 1.71 | % |  |  | 2.73 | %
|                  |  |                 |       |                 |  |                 |       |                 |  |  |      |   |  |  |      |  

The results implied in the above table indicate estimated changes in
simulated net interest income for the subsequent 12 months assuming a gradual
shift up or down in market rates of 100 and 200 basis points across the entire
yield curve. Assuming a downward shift in rates, savings, money market and NOW
accounts have implied interest rate floors and it is assumed that the related
interest expense on these accounts will not decrease in proportion to the
downward shift in rates. Assuming an upward shift in rates of 200 basis
points, the simulated increase in interest income would be more than the
simulated increase in interest expense because total adjustable earning assets
will reprice more quickly than will total adjustable cost liabilities. It
should be emphasized, however, that the results are dependent on material
assumptions such as those discussed above. For instance, asymmetrical rate
behavior can have a material impact on the simulation results.

The most significant factors affecting market risk exposure of net interest
income during the three months ended March 31, 2002 were (i) the shape of the
U.S. Government securities and interest rate swap yield curve, (ii) changes in
the composition and prepayment speeds of mortgage assets, (iii) reduction of
deposit interest expense, (iv) changes in the wholesale borrowings portfolio
structure, and (v) the $200 million issuance of trust preferred securities.
Since December 2001, the yield curve rose most significantly in the 2-year term
(approximately 40 basis points) and in the long term (approximately 20 basis
points). As a result, projected mortgage and loan prepayments were slightly
slower in the first quarter of 2002 than in the fourth quarter of 2001.
Effective duration estimates for total loans remained slightly longer, however,
total investments available for sale estimates increased 0.25%. The $200
million issuance of callable trust preferred securities, which has a long
effective duration, increased asset sensitivity and offset the slightly higher
asset durations. Effective duration estimates of borrowings increased from
1.85 years as of December 31, 2001 to 2.40 years as of March 31, 2002 as a result of
repositioning term funding and the Andover and Metrowest acquisitions. The
table reflects the impact of these changes. There was little net change in the
estimated sensitivity of our net interest income to changes in interest rates
during the first quarter of 2002 as a result of these factors. We remain asset
sensitive and project net interest income to increase if short and long
interest rates move symmetrically higher.

In connection with the Andover and MetroWest acquisitions in the fourth
quarter of 2001, we recorded $8.8 million of mortgage servicing rights at
market value at the date of acquisition. These mortgage servicing rights are
expected
to be sold in 2002. New mortgage servicing rights from originations are sold on
a flow basis shortly
after the mortgages are sold. As a result, future earnings exposure to changes
in the value of mortgage
servicing rights is not expected to be material.

Our earnings are not directly and materially impacted by movements in
foreign currency rate or commodity prices. Virtually all transactions are
denominated in the U.S. dollar. Movements in equity prices may have an
indirect but modest impact on earnings by affecting the volume of activity or
the amount of fees from investment-related businesses.

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##### Table of Contents



LIQUIDITY

Parent Company

On a parent-only basis at March 31, 2002, our debt service requirements
consisted primarily of junior subordinated debentures issued to three
subsidiaries: $103 million to Peoples Heritage Capital Trust I, $31 million to
Banknorth Capital Trust I and $200 million to Banknorth Capital Trust II, in
connection with the issuance of 9.06% Capital Securities due 2027, 10.52%
Capital Securities due 2027 and 8% Capital Securities due 2032, respectively.
The principal sources of funds for us to meet parent-only obligations are
dividends from our banking subsidiary, which are subject to regulatory
limitations, income from Banknorths securities portfolio and borrowings,
including draws on a $80 million unsecured line of credit which is renewable
every 364 days and, if used, carries interest at LIBOR plus 0.625%. The average
balance outstanding on this line during the three months ended March 31, 2002
was $8.6 million.

Banking Subsidiary

For our banking subsidiary Banknorth, NA, liquidity represents the ability to
fund asset growth and accommodate deposit withdrawals and meet other funding
requirements. Liquidity risk is the danger that Banknorth, NA cannot meet
anticipated or unexpected funding requirements or can meet them only at
excessive cost. Liquidity is measured by the ability to raise cash when needed
at a reasonable cost. Many factors affect a banks ability to meet liquidity
needs, including variations in the markets served, its asset-liability mix, its
reputation and credit standing in the market and general economic conditions.

In addition to traditional retail deposits, Banknorth NA has various other
liquidity sources, including proceeds from maturing securities and loans, the
sale of securities, asset securitizations and borrowed funds such as FHLB
advances, reverse repurchase agreements and brokered deposits.

We continually monitor and forecast our liquidity position. There are several
interdependent methods which we use for this purpose, including daily review of
fed funds positions, monthly review of balance sheet changes, monthly review of
liquidity ratios, periodic liquidity forecasts and periodic review of
contingent funding plans.

As of March 31, 2002, Banknorth, NA had in the aggregate $3.0 billion of
immediately accessible liquidity, defined as cash that could be raised within
1-3 days through collateralized borrowings or security sales. This represents
21% of deposits, as compared to a current policy minimum of 10% of deposits.

Also as of March 31, 2002, Banknorth, NA had in the aggregate potentially
volatile funds of $1.5 billion. These are funds that might flow out of the
bank over a 90-day period in an adverse environment. Management estimates this
figure by applying adverse probabilities to its various credit-sensitive and
economically-sensitive funding sources.

As of March 31, 2002, the ratio of immediately accessible liquidity to
potentially volatile funds was 193%, versus a policy minimum of 100%.

In addition to the liquidity sources discussed above, we believe that our
residential and consumer loan portfolio provide a significant amount of
contingent liquidity that could be accessed in a reasonable time period through
sales or securitizations. We believe we also have significant untapped access
to the national brokered deposit market. These sources are contemplated as
secondary liquidity in our contingent funding plan. We believe that the level
of liquidity is sufficient to meet current and future funding requirements.

CAPITAL

At March 31, 2002, shareholders equity amounted to $1.7 billion, or 8.14% of
total assets. In addition, through subsidiary trusts, we had outstanding at
such date $293.8 million of capital securities, of which $93.8 million mature
in 2027 and $200 million mature in 2032, which qualify as Tier 1 Capital. We
also have $200 million of 7.625% subordinated notes due in 2011 which qualify
as Tier 2 capital.

We paid a $0.135 per share dividend on our common stock during the first
quarter of 2002.
During the first quarter of 2002, we repurchased 5.5 million shares at an
average price of $24.14 as part of the 13 million share repurchase program
authorized in 2001. In February 2002, the Board authorized an additional 8
million shares to be repurchased in the open market. As of March 31, 2002, a
total of 8.2 million shares were available for repurchase under these
authorizations.

30



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##### Table of Contents



Capital guidelines issued by the Federal Reserve Board require us to maintain
certain ratios, set forth in Table 9. As indicated in such table, our
regulatory capital currently substantially exceeds all applicable requirements.

TABLE 9  Regulatory Capital Requirements(Dollars in thousands)

|                                                  |  |        |           |          |  |        |       |       |  |                      |           |       |  |  |      |   |  |   |         |  |  |  |      |  
|------------------------------------------------- |  | ------ | --------- | -------- |  | ------ | ----- | ----- |  | -------------------- | --------- | ----- |  |  | ---- | - |  | - | ------- |  |  |  | ---- | -
|                                                  |  |        |           |          |  |        |       |       |  | For Capital Adequacy |           |       |  |  |      |   |  |  
|                                                  |  | Actual |           | Purposes |  | Excess
|                                                  |  |        |           |          |  |       
|                                                  |  | Amount |           | Ratio    |  | Amount |       | Ratio |  | Amount               |           | Ratio
|                                                  |  |        |           |          |  |        |       |       |  |                      |           |      
|As of March 31, 2002:                             |  |        |           |          |  |        |       |       |  |                      |           |       |  |  |      |   |  |   |         |  |  |  |      |  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |  |        |           |          |  |        |       |       |  |                      |           |       |  |  |      |   |  |   |         |  |  |  |      |  
|                                                 
|                                                 
|                                                 
|                                                 
|Total capital (to risk weighted assets)           |  | $      | 1,904,361 |          |  |        | 13.18 | %     |  |                      | 1,156,084 |       |  |  | 8.00 | % |  | $ | 748,277 |  |  |  | 5.18 | %
|                                                 
|                                                 
|                                                 
|                                                 
|Tier 1 capital (to risk weighted assets)          |  |        | 1,523,596 |          |  |        | 10.54 | %     |  |                      | 578,042   |       |  |  | 4.00 | % |  |   | 945,554 |  |  |  | 6.54 | %
|                                                 
|                                                 
|                                                 
|                                                 
|Tier 1 leverage capital ratio (to average assets) |  |        | 1,523,596 |          |  |        | 7.63  | %     |  |                      | 799,082   |       |  |  | 4.00 | % |  |   | 724,514 |  |  |  | 3.63 | %
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |  |        |           |          |  |        |       |       |  |                      |           |       |  |  |      |   |  |   |         |  |  |  |      |  
|                                                 
|                                                 
|                                                 
|                                                 
|As of December 31, 2001:                          |  |        |           |          |  |        |       |       |  |                      |           |       |  |  |      |   |  |   |         |  |  |  |      |  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |  |        |           |          |  |        |       |       |  |                      |           |       |  |  |      |   |  |   |         |  |  |  |      |  
|                                                 
|                                                 
|                                                 
|                                                 
|Total capital (to risk weighted assets)           |  | $      | 1,763,236 |          |  |        | 12.23 | %     |  |                      | 1,153,369 |       |  |  | 8.00 | % |  |   | 609,867 |  |  |  | 4.23 | %
|                                                 
|                                                 
|                                                 
|                                                 
|Tier 1 capital (to risk weighted assets)          |  |        | 1,382,903 |          |  |        | 9.59  | %     |  |                      | 576,685   |       |  |  | 4.00 | % |  |   | 806,218 |  |  |  | 5.59 | %
|                                                 
|                                                 
|                                                 
|                                                 
|Tier 1 leverage capital (to average assets)       |  |        | 1,382,903 |          |  |        | 7.14  | %     |  |                      | 775,163   |       |  |  | 4.00 | % |  |   | 607,740 |  |  |  | 3.14 | %

Net risk weighted assets were $14.5 billion and $14.4 billion at March 31, 2002
and December 31, 2001, respectively.

Banknorth NA is also subject to federal regulatory capital requirements. At
March 31, 2002, Banknorth NA was deemed to be well capitalized under the
regulations of the applicable federal banking agency and in compliance with
applicable capital requirements.

IMPACT OF NEW ACCOUNTING STANDARDS

In April 2002, the FASB issued SFAS No. 145,
Recission of FASB Statement Nos. 4, 44 and 64, Amendment
of FASB Statement No. 13, and Technical Corrections. SFAS
No. 145 rescinds Statement No. 4, which required all gains
and losses from extinguishment of debt to be aggregated and, if
material, classified as an extraordinary item, net of related income
tax effect. Upon adoption of Statement No. 145, companies will
be required to apply the criteria in APB Opinion No. 30,
Reporting the Results of Operations  Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions in
determining the classification of gains and losses resulting from the
extinguishment of debt. Additionally, SFAS No. 145 amends SFAS
No. 13 to require that certain lease modifications that have
economic effects similar to sale-leaseback transactions be accounted
for in the same manner as sale-leaseback transactions. SFAS
No. 145 will be effective for fiscal years beginning after
May 15, 2002, with early adoption of the provisions related to
the recission of Statement No. 4 encouraged. Upon adoption,
enterprises must reclassify prior period items that do not meet the
extraordinary item classification criteria in Opinion No. 30. We
have not yet adopted this standard. In the fourth quarter of 2001,
under the provisions of SFAS No. 4, we recorded an extraordinary
item from the early extinguishment of debt of $3.9 million after-tax,
or $.03 per diluted share. Upon adoption of SFAS No. 145, this
will no longer qualify for extraordinary treatment and must be
reclassified.

In August, 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
or Disposal of Long-lived Assets. SFAS No. 144 provides additional
implementation guidance and supersedes SFAS No. 121, Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to be Disposed Of.
It is effective for financial statements issued for fiscal years beginning
after December 15, 2001.
Adoption of this standard did not materially affect our financial condition,
results of operations, earnings per share or cash flows.

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. SFAS 143 applies to legal obligations associated with the
retirement of long-lived assets that result from the acquisition, construction,
development and (or) the normal operation of a long-lived asset. It is
effective for financial statements issued for fiscal years beginning after June
15, 2002.
The adoption of this standard is not expected to have a material impact on our
financial condition, results of operations, earnings per share or cash flows.

FORWARD LOOKING STATEMENTS

Certain statements contained herein are not based on historical facts and are
forward-looking statements within the meaning of Section 21A of the
Securities Exchange Act of 1934. Forward-looking statements, which are based
on various assumptions (some of which are beyond our control), may be
identified by reference to a future period or periods, or by the use of
forward-looking terminology, such as may, will, believe, expect,
estimate, anticipate, continue or similar terms or variations on those
terms or the negative of those terms. Forward-looking statements are subject to
various factors which could cause actual results to differ materially from
these estimates. These factors include, but are not limited to, changes in
general economic conditions, interest rates, deposit flows, loan demand,
competition, legislation or regulation and accounting principles, policies or
guidelines, as well as other economic, competitive, governmental, regulatory
and technological factors affecting Banknorths operations. In addition,
acquisitions may result in large one-time charges to income, may not produce
revenue enhancements or cost savings at levels or within time frames originally
anticipated and may result in unforeseen integration difficulties.

We do not undertake, and specifically disclaim any obligation, to publicly
release the result of any revisions
which may be made to any forward-looking statements to reflect the occurrence
of events or circumstances after the date of such statements.

31



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##### Table of Contents






Item 3. Quantitative and Qualitative Disclosures about Market Risk

The information contained in the section captioned Managements Discussion and
Analysis  Asset-Liability Management is incorporated herein by reference.




Part II  Other Information




Item 1. Legal Proceedings



| |  |  | We are involved in routine legal proceedings occurring in the ordinary
course of business which in the aggregate are believed by management to
be immaterial to our financial condition and results of operations.
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Item 2. Changes in Securities and Use of Proceeds  not applicable.




Item 3. Defaults Upon Senior Securities  not applicable.




Item 4. Submission of Matters to a Vote of Security Holders  not applicable.




Item 5. Other Information  not applicable.




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



(a) Not applicable.

(b) We filed a Current Report on Form 8-K or 8-K/A on January 22, 2002,
February 22,2002, February 28, 2002, April 11, 2002 and April 12, 2002.




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.

|                         |  |                                   |  |                                                                                                       |  | 
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|                         |  | BANKNORTH GROUP, INC. GROUP, INC.
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|Date:       May 15, 2002 |  | By:                               |  | /s/ William J. Ryan                                                                                   |  | 
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|                         |  |                                   |  | William J. Ryan
Chairman, President and
Chief Executive Officer                                       |  | 
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|Date:       May 15, 2002 |  | By:                               |  | /s/ Peter J. Verrill                                                                                  |  | 
|                         |  |                                   |  |                                                                                                       |  | 
|                         |  |                                   |  | Peter J. Verrill
Senior Executive Vice President,
Chief Operating Officer and
Chief Financial Officer |  | 
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|Date:       May 15, 2002 |  | By:                               |  | /s/ Stephen J. Boyle                                                                                  |  | 
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|                         |  |                                   |  | Stephen J. Boyle
Executive Vice President and
Controller
(principal accounting officer)               |  | 

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