##### 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 June 30, 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 July 31, 2002 is:

|                                       |  |              
|-------------------------------------- |  | -------------
|Common stock, par value $.01 per share |  | 148,282,259  
|                                       |  |              
|(Class)                                |  | (Outstanding)

Available on the Web @ www.banknorth.com





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TABLE OF CONTENTS



|                             |                                                                                       |                                                            |  |  |  |  |  | 
|---------------------------- | ------------------------------------------------------------------------------------- | ---------------------------------------------------------- |  |  |  |  |  | 
|                             |                                                                                       | CONSOLIDATED BALANCE SHEETS                               
|                             |                                                                                       | CONSOLIDATED STATEMENTS OF INCOME                         
|                             |                                                                                       | CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
|                             |                                                                                       | CONSOLIDATED STATEMENTS OF CASH FLOWS                     
|                             |                                                                                       | Notes to Consolidated Financial Statements                
|                             | 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  not applicable.                  
|                             | Item 3. Defaults Upon Senior Securities  not applicable.                            
|                             | Item 4. Submission of Matters to a Vote of Security Holders.                         
|                             | Item 5. Other Information  not applicable.                                          
|                             | Item 6. Exhibits and Reports on Form 8-K.                                            
|                             | SIGNATURES                                                                           
|EXHIBIT INDEX               
|Ex-99.1 Certification of CEO
|Ex-99.2 Certification of CFO



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##### Table of Contents



INDEX

BANKNORTH GROUP, INC. AND SUBSIDIARIES

|           |  |                       |  |                                                                                                      |  |   
|---------- |  | --------------------- |  | ---------------------------------------------------------------------------------------------------- |  | --
|PART I.    |  | FINANCIAL
INFORMATION |  | PAGE                                                                                                
|           |  |                       |  |                                                                                                     
|           |  | Item 1.               |  | Financial Statements                                                                                 |  |   
|          
|          
|          
|          
|           |  |                       |  | Consolidated Balance Sheets
June 30, 2002 and December 31, 2001                                      |  | 3 
|          
|          
|          
|          
|           |  |                       |  | Consolidated Statements of Income 
Three and six months ended
June 30, 2002 and 2001                |  | 4 
|          
|          
|          
|          
|           |  |                       |  | Consolidated Statements of Changes in Shareholders Equity -
Six months ended June 30, 2002 and 2001 |  | 5 
|          
|          
|          
|          
|           |  |                       |  | Consolidated Statements of Cash Flows 
Six months ended June 30, 2002 and 2001                      |  | 6 
|          
|          
|          
|          
|           |  |                       |  | Notes to Consolidated Financial Statements                                                           |  | 7 
|          
|          
|          
|          
|           |  | Item 2.               |  | Managements Discussion and Analysis of Financial
      Condition and Results of Operations          |  | 12
|          
|          
|          
|          
|           |  | Item 3.               |  | Quantitative and Qualitative Disclosures about Market Risk                                           |  | 39
|          
|          
|          
|          
|PART II.   |  | OTHER INFORMATION     |  |                                                                                                     
|           |  |                       |  |                                                                                                     
|          
|          
|          
|          
|           |  | Item 1.               |  | Legal proceedings                                                                                    |  | 39
|          
|          
|          
|          
|           |  | Item 2.               |  | Changes in securities and use of proceeds                                                            |  | 39
|          
|          
|          
|          
|           |  | Item 3.               |  | Defaults upon senior securities                                                                      |  | 39
|          
|          
|          
|          
|           |  | Item 4.               |  | Submission of matters to a vote of security holders                                                  |  | 39
|          
|          
|          
|          
|           |  | Item 5.               |  | Other information                                                                                    |  | 40
|          
|          
|          
|          
|           |  | Item 6.               |  | Exhibits and reports on Form 8-K                                                                     |  | 40
|          
|          
|          
|          
|Signatures |  |                       |  |                                                                                                      |  | 41

2



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##### Table of Contents






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

|                                                                                                                                                 |                                           |                                            |                |                      |            |               |            |                   |            |            |            | 
|------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------------------------- | ------------------------------------------ | -------------- | -------------------- | ---------- | ------------- | ---------- | ----------------- | ---------- | ---------- | ---------- | 
|                                                                                                                                                 |                                           |                                            |                |                      |            | June 30, 2002 |            | December 31, 2001
|                                                                                                                                                 |                                           |                                            |                |                      |            |               |            |                  
|Assets                                                                                                                                           |                                           | (Unaudited)                                |                |                      |            |              
|Cash and due from banks                                                                                                                          |                                           | $                                          | 512,703        |                      |            | $             | 650,588    |                  
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|Federal funds sold and other short term investments                                                                                              |                                           |                                            | 133,853        |                      |            |               | 270,623    |                  
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|Securities available for sale, at market value                                                                                                   |                                           |                                            | 6,031,881      |                      |            |               | 5,817,238  |                  
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|Securities held to maturity (fair value of $286,750 and $340,737 at June 30, 2002
and December 31, 2001, respectively)                           |                                           |                                            | 281,668        |                      |            |               | 339,623    |                  
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|Loans held for sale                                                                                                                              |                                           |                                            | 52,061         |                      |            |               | 117,674    |                  
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|Loans and leases:                                                                                                                                |                                           |                                            |                |                      |            |               |            |                  
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                 | Residential real estate mortgages         |                                            |                | 2,510,233            |            |               |            | 2,627,125         |           
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                 | Commercial real estate mortgages          |                                            |                | 4,316,080            |            |               |            | 4,094,039         |           
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                 | Commercial business loans and leases      |                                            |                | 2,677,760            |            |               |            | 2,462,653         |           
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                 | Consumer loans and leases                 |                                            |                | 3,549,053            |            |               |            | 3,531,513         |           
|                                                                                                                                                 |                                           |                                            |                |                      |            |               |            |                  
|                                                                                                                                                 |                                           | Total loans and leases                     |                |                      | 13,053,126 |               |            |                   | 12,715,330 |           
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                 | Less: Allowance for loan and lease losses |                                            |                | 193,444              |            |               |            | 189,837           |           
|                                                                                                                                                 |                                           |                                            |                |                      |            |               |            |                  
|                                                                                                                                                 |                                           |                                            |                | Net loans and leases |            |               | 12,859,682 |                   |            |            | 12,525,493 | 
|                                                                                                                                                 |                                           |                                            |                |                      |            |               |            |                  
|Premises and equipment, net                                                                                                                      |                                           |                                            | 238,006        |                      |            |               | 237,440    |                  
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|Goodwill                                                                                                                                         |                                           |                                            | 409,051        |                      |            |               | 409,340    |                  
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|Identifiable intangible assets                                                                                                                   |                                           |                                            | 48,849         |                      |            |               | 57,293     |                  
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|Mortgage servicing rights                                                                                                                        |                                           |                                            | 7,578          |                      |            |               | 8,484      |                  
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|Bank-owned life insurance                                                                                                                        |                                           |                                            | 369,774        |                      |            |               | 321,113    |                  
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|Other assets                                                                                                                                     |                                           |                                            | 315,532        |                      |            |               | 321,677    |                  
|                                                                                                                                                 |                                           |                                            |                |                      |            |               |            |                  
|                                                                                                                                                 | Total assets                              |                                            | $              | 21,260,638           |            |               | $          | 21,076,586        |           
|                                                                                                                                                 |                                           |                                            |                |                      |            |               |            |                  
|Liabilities and Shareholders Equity                                                                                                             |                                           |                                            |                |                      |            |               |            |                  
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|Deposits:                                                                                                                                        |                                           |                                            |                |                      |            |               |            |                  
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                 | Savings accounts                          |                                            | $              | 1,724,735            |            |               | $          | 1,604,556         |           
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                 | Money market access and NOW accounts      |                                            |                | 5,386,871            |            |               |            | 5,129,626         |           
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                 | Certificates of deposit                   |                                            |                | 4,579,648            |            |               |            | 4,811,357         |           
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                 | Brokered deposits                         |                                            |                | 41,585               |            |               |            | 72,171            |           
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                 | Demand deposits                           |                                            |                | 2,670,739            |            |               |            | 2,603,339         |           
|                                                                                                                                                 |                                           |                                            |                |                      |            |               |            |                  
|                                                                                                                                                 |                                           |                                            | Total deposits |                      |            | 14,403,578    |            |                   |            | 14,221,049 |           
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|Federal funds purchased and securities sold under repurchase agreements                                                                          |                                           |                                            | 1,842,195      |                      |            |               | 1,620,555  |                  
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|Borrowings from the Federal Home Loan Bank                                                                                                       |                                           |                                            | 2,467,378      |                      |            |               | 2,644,105  |                  
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|Other borrowings                                                                                                                                 |                                           |                                            | 71,558         |                      |            |               | 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                                                                                                                                |                                           |                                            | 166,735        |                      |            |               | 464,034    |                  
|                                                                                                                                                 |                                           |                                            |                |                      |            |               |            |                  
|                                                                                                                                                 | Total liabilities                         |                                            |                | 19,445,200           |            |               |            | 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 shares authorized,
165,120,567 shares issued in 2002 and 165,123,674 shares issued in 2001) |                                           |                                            | 1,651          |                      |            |               | 1,651      |                  
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|Paid-in capital                                                                                                                                  |                                           |                                            | 955,215        |                      |            |               | 958,764    |                  
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|Retained earnings                                                                                                                                |                                           |                                            | 1,157,457      |                      |            |               | 1,056,678  |                  
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|Unearned compensation                                                                                                                            |                                           |                                            | (371           | )                    |            |               | (1,017     | )                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|Treasury stock, at cost (18,025,230 shares in 2002 and 13,903,074 shares in 2001)                                                                |                                           |                                            | (374,417       | )                    |            |               | (267,529   | )                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|Accumulated other comprehensive income                                                                                                           |                                           |                                            | 75,903         |                      |            |               | 40,568     |                  
|                                                                                                                                                 |                                           |                                            |                |                      |            |               |            |                  
|                                                                                                                                                 | Total shareholders equity                |                                            |                | 1,815,438            |            |               |            | 1,789,115         |           
|                                                                                                                                                 |                                           |                                            |                |                      |            |               |            |                  
|                                                                                                                                                 |                                           | Total liabilities and shareholders equity |                | $                    | 21,260,638 |               |            | $                 | 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 |         | Six Months Ended
|                                                                |                                                                 |                                                                       |         | June 30,           |         | June 30,        
|                                                                |                                                                 |                                                                       |         |                    |         |                 
|                                                                |                                                                 |                                                                       |         | 2002               |         | 2001             |         | 2002    |         | 2001
|                                                                |                                                                 |                                                                       |         |                    |         |                  |         |         |         |     
|Interest and dividend income:                                   |                                                                 |                                                                       |         |                    |         |                  |         |         |         |      |         |         |         |  |         |        
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Interest and fees on loans and leases                           |                                                                       | $       | 218,981            |         |                  | $       | 221,507 |         |      | $       | 440,764 |         |  | $       | 450,330 |        
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Interest and dividends on securities                            |                                                                       |         | 90,406             |         |                  |         | 95,128  |         |      |         | 174,629 |         |  |         | 192,849 |        
|                                                                |                                                                 |                                                                       |         |                    |         |                  |         |         |         |      |         |         |         |  |         |         |        
|                                                                |                                                                 | Total interest and dividend income                                    |         |                    | 309,387 |                  |         |         | 316,635 |      |         |         | 615,393 |  |         |         | 643,179 | 
|                                                                |                                                                 |                                                                       |         |                    |         |                  |         |         |         |      |         |         |         |  |         |         |        
|Interest expense:                                               |                                                                 |                                                                       |         |                    |         |                  |         |         |         |      |         |         |         |  |         |        
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Interest on deposits                                            |                                                                       |         | 61,466             |         |                  |         | 95,989  |         |      |         | 126,307 |         |  |         | 200,227 |        
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Interest on borrowed funds                                      |                                                                       |         | 48,448             |         |                  |         | 54,946  |         |      |         | 93,127  |         |  |         | 121,304 |        
|                                                                |                                                                 |                                                                       |         |                    |         |                  |         |         |         |      |         |         |         |  |         |         |        
|                                                                |                                                                 | Total interest expense                                                |         |                    | 109,914 |                  |         |         | 150,935 |      |         |         | 219,434 |  |         |         | 321,531 | 
|                                                                |                                                                 |                                                                       |         |                    |         |                  |         |         |         |      |         |         |         |  |         |         |        
|                                                                |                                                                 | Net interest income                                                   |         |                    | 199,473 |                  |         |         | 165,700 |      |         |         | 395,959 |  |         |         | 321,648 | 
|                                                               
|                                                               
|                                                               
|                                                               
|Provision for loan and lease losses                             |                                                                 |                                                                       | 10,829  |                    |         |                  | 9,311   |         |         |      | 22,657  |         |         |  | 16,450  |        
|                                                                |                                                                 |                                                                       |         |                    |         |                  |         |         |         |      |         |         |         |  |         |         |        
|                                                                |                                                                 | Net interest income after provision
for loan and lease losses         |         |                    | 188,644 |                  |         |         | 156,389 |      |         |         | 373,302 |  |         |         | 305,198 | 
|                                                                |                                                                 |                                                                       |         |                    |         |                  |         |         |         |      |         |         |         |  |         |         |        
|Noninterest income:                                             |                                                                 |                                                                       |         |                    |         |                  |         |         |         |      |         |         |         |  |         |        
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Deposit services                                                |                                                                       |         | 19,936             |         |                  |         | 18,401  |         |      |         | 38,896  |         |  |         | 35,947  |        
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Mortgage banking services                                       |                                                                       |         | 489                |         |                  |         | 1,776   |         |      |         | 2,165   |         |  |         | 5,010   |        
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Trust and investment management services                        |                                                                       |         | 8,519              |         |                  |         | 8,703   |         |      |         | 16,796  |         |  |         | 17,490  |        
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Investment planning services                                    |                                                                       |         | 2,964              |         |                  |         | 1,760   |         |      |         | 5,681   |         |  |         | 3,458   |        
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Insurance brokerage commissions                                 |                                                                       |         | 10,060             |         |                  |         | 9,241   |         |      |         | 20,215  |         |  |         | 19,209  |        
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Bank-owned life insurance                                       |                                                                       |         | 4,994              |         |                  |         | 4,891   |         |      |         | 9,371   |         |  |         | 9,198   |        
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Merchant and electronic banking income, net                     |                                                                       |         | 9,661              |         |                  |         | 7,971   |         |      |         | 17,410  |         |  |         | 14,462  |        
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Loan fee income                                                 |                                                                       |         | 5,086              |         |                  |         | 2,981   |         |      |         | 10,519  |         |  |         | 5,685   |        
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Net securities gains                                            |                                                                       |         | 350                |         |                  |         | 45      |         |      |         | 369     |         |  |         | 803     |        
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Other noninterest income                                        |                                                                       |         | 927                |         |                  |         | 1,828   |         |      |         | 3,140   |         |  |         | 5,092   |        
|                                                                |                                                                 |                                                                       |         |                    |         |                  |         |         |         |      |         |         |         |  |         |         |        
|                                                                |                                                                 |                                                                       | 62,986  |                    |         |                  | 57,597  |         |         |      | 124,562 |         |         |  | 116,354 |        
|                                                                |                                                                 |                                                                       |         |                    |         |                  |         |         |         |      |         |         |         |  |         |         |        
|Noninterest expenses:                                           |                                                                 |                                                                       |         |                    |         |                  |         |         |         |      |         |         |         |  |         |        
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Salaries and employee benefits                                  |                                                                       |         | 75,747             |         |                  |         | 62,856  |         |      |         | 151,044 |         |  |         | 124,550 |        
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Data processing                                                 |                                                                       |         | 9,843              |         |                  |         | 8,917   |         |      |         | 20,425  |         |  |         | 17,878  |        
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Occupancy                                                       |                                                                       |         | 12,785             |         |                  |         | 11,070  |         |      |         | 25,284  |         |  |         | 22,882  |        
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Equipment                                                       |                                                                       |         | 9,908              |         |                  |         | 8,746   |         |      |         | 19,638  |         |  |         | 16,907  |        
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Amortization of goodwill                                        |                                                                       |         |                   |         |                  |         | 2,761   |         |      |         |        |         |  |         | 5,554   |        
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Amortization of identifiable intangible assets                  |                                                                       |         | 2,894              |         |                  |         | 2,631   |         |      |         | 6,230   |         |  |         | 5,262   |        
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Special charges                                                 |                                                                       |         | 1,061              |         |                  |         |        |         |      |         | 9,265   |         |  |         | 5,608   |        
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Other noninterest expenses                                      |                                                                       |         | 26,304             |         |                  |         | 24,846  |         |      |         | 51,305  |         |  |         | 48,026  |        
|                                                                |                                                                 |                                                                       |         |                    |         |                  |         |         |         |      |         |         |         |  |         |         |        
|                                                                |                                                                 |                                                                       | 138,542 |                    |         |                  | 121,827 |         |         |      | 283,191 |         |         |  | 246,667 |        
|                                                                |                                                                 |                                                                       |         |                    |         |                  |         |         |         |      |         |         |         |  |         |         |        
|Income before income tax expense                                |                                                                 |                                                                       | 113,088 |                    |         |                  | 92,159  |         |         |      | 214,673 |         |         |  | 174,885 |        
|                                                               
|                                                               
|                                                               
|                                                               
|Applicable income tax expense                                   |                                                                 |                                                                       | 38,077  |                    |         |                  | 32,266  |         |         |      | 72,333  |         |         |  | 59,608  |        
|                                                                |                                                                 |                                                                       |         |                    |         |                  |         |         |         |      |         |         |         |  |         |         |        
|                                                                |                                                                 | Net income before cumulative effect of
change in accounting principle |         |                    | 75,011  |                  |         |         | 59,893  |      |         |         | 142,340 |  |         |         | 115,277 | 
|                                                               
|                                                               
|                                                               
|                                                               
|Cumulative effect of change in accounting principle, net of tax |                                                                 |                                                                       |        |                    |         |                  |        |         |         |      |        |         |         |  | (290    | )      
|                                                                |                                                                 |                                                                       |         |                    |         |                  |         |         |         |      |         |         |         |  |         |         |        
|                                                                |                                                                 | Net income                                                            |         | $                  | 75,011  |                  |         | $       | 59,893  |      |         | $       | 142,340 |  |         | $       | 114,987 | 
|                                                                |                                                                 |                                                                       |         |                    |         |                  |         |         |         |      |         |         |         |  |         |         |        
|Basic earnings per share:                                       |                                                                 |                                                                       |         |                    |         |                  |         |         |         |      |         |         |         |  |         |        
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Net income before cumulative effect of accounting change        |                                                                       | $       | 0.51               |         |                  | $       | 0.44    |         |      | $       | 0.96    |         |  | $       | 0.83    |        
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Cumulative effect of change in accounting principle, net of tax |                                                                       |         |                   |         |                  |         |        |         |      |         |        |         |  |         |        |        
|                                                                |                                                                 |                                                                       |         |                    |         |                  |         |         |         |      |         |         |         |  |         |         |        
|                                                                | Net income                                                      |                                                                       | $       | 0.51               |         |                  | $       | 0.44    |         |      | $       | 0.96    |         |  | $       | 0.83    |        
|                                                                |                                                                 |                                                                       |         |                    |         |                  |         |         |         |      |         |         |         |  |         |         |        
|Diluted earnings per share:                                     |                                                                 |                                                                       |         |                    |         |                  |         |         |         |      |         |         |         |  |         |        
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Net income before cumulative effect of accounting change        |                                                                       | $       | 0.50               |         |                  | $       | 0.43    |         |      | $       | 0.95    |         |  | $       | 0.82    |        
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Cumulative effect of change in accounting principle, net of tax |                                                                       |         |                   |         |                  |         |        |         |      |         |        |         |  |         |        |        
|                                                                |                                                                 |                                                                       |         |                    |         |                  |         |         |         |      |         |         |         |  |         |         |        
|                                                                | Net income                                                      |                                                                       | $       | 0.50               |         |                  | $       | 0.43    |         |      | $       | 0.95    |         |  | $       | 0.82    |        
|                                                                |                                                                 |                                                                       |         |                    |         |                  |         |         |         |      |         |         |         |  |         |         |        
|Weighted average shares outstanding:                            |                                                                 |                                                                       |         |                    |         |                  |         |         |         |      |         |         |         |  |         |        
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                |                                                                 | Basic                                                                 |         |                    | 147,233 |                  |         |         | 137,659 |      |         |         | 148,258 |  |         |         | 139,236 | 
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                |                                                                 | Diluted                                                               |         |                    | 149,064 |                  |         |         | 138,901 |      |         |         | 150,068 |  |         |         | 140,461 | 

See accompanying Notes to Consolidated Financial Statements.

4



---



##### 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                                                              |                      |   |       |  |         |   |         |   |         |   | 142,340   |   |               |  |         |   |  |  |          |   |       |   |            |   |  |   | 142,340   |        
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Unrealized gain on securities, net of
reclassification adjustment       |                      |   |       |  |         |   |         |   |         |   |          |   |               |  |         |   |  |  |          |   |       |   | 36,110      |   |  |   | 36,110    |        
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Unrealized loss on cash flow hedges,
net of reclassification adjustment |                      |   |       |  |         |   |         |   |         |   |          |   |               |  |         |   |  |  |          |   |       |   | (775        | ) |  |   | (775      | )      
|                                                                        |                      |   |        |  |         |   |          |   |         |   |           |   |               |  |          |   |  |  |           |   |       |   |             |   |  |   |           |        
|                                                                        | Comprehensive income |   |        |  |         |   |          |   |         |   |           |   |               |  |          |   |  |  |           |   |       |   |             |   |  |   |           | 177,675 | 
|                                                                        |                      |   |        |  |         |   |          |   |         |   |           |   |               |  |          |   |  |  |           |   |       |   |             |   |  |   |           |        
|Treasury stock issued for employee benefit plans                        |                      |   |       |  |         |   | (6,541   | ) |         |   |          |   |               |  |         |   |  |  | 32,609    |   |       |   |            |   |  |   | 26,068    |        
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Treasury stock purchased                                                |                      |   |       |  |         |   |         |   |         |   |          |   |               |  |         |   |  |  | (141,026  | ) |       |   |            |   |  |   | (141,026  | )      
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Issuance and distribution of restricted stock                           |                      |   |       |  |         |   | (899     | ) |         |   |          |   |               |  |         |   |  |  | 1,529     |   |       |   |            |   |  |   | 630       |        
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Decrease in unearned compensation-ESOP                                  |                      |   |       |  |         |   | 3,930    |   |         |   |          |   |               |  | 646      |   |  |  |          |   |       |   |            |   |  |   | 4,576     |        
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Cash in lieu of fractional shares                                       |                      |   |       |  |         |   | (39      | ) |         |   |          |   |               |  |         |   |  |  |          |   |       |   |            |   |  |   | (39)      |        
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Cash dividends                                                          |                      |   |       |  |         |   |         |   |         |   | (41,561   | ) |               |  |         |   |  |  |          |   |       |   |            |   |  |   | (41,561   | )      
|                                                                        |                      |   |        |  |         |   |          |   |         |   |           |   |               |  |          |   |  |  |           |   |       |   |             |   |  |   |           |        
|Balances at June 30, 2002                                               |                      | $ | 1,651  |  |         | $ | 955,215  |   |         | $ | 1,157,457 |   |               |  | ($371    | ) |  |  | ($374,417 | ) |       | $ | 75,903      |   |  | $ | 1,815,438 |        
|                                                                        |                      |   |        |  |         |   |          |   |         |   |           |   |               |  |          |   |  |  |           |   |       |   |             |   |  |   |           |        
|Balances at December 31, 2000                                           |                      | $ | 1,496  |  |         | $ | 617,234  |   |         | $ | 897,214   |   |               |  | ($1,354  | ) |  |  | ($149,246 | ) |       |   | ($34,487    | ) |  | $ | 1,330,857 |        
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Net income                                                              |                      |   |       |  |         |   |         |   |         |   | 114,987   |   |               |  |         |   |  |  |          |   |       |   |            |   |  |   | 114,987   |        
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Unrealized gain on securities, net of
reclassification adjustment       |                      |   |       |  |         |   |         |   |         |   |          |   |               |  |         |   |  |  |          |   |       |   | 33,978      |   |  |   | 33,978    |        
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Unrealized gain on cash flow hedges                                     |                      |   |        |  |         |   |          |   |         |   |           |   |               |  |          |   |  |  |           |   |       |   | 319         |   |  |   | 319       |        
|                                                                        |                      |   |        |  |         |   |          |   |         |   |           |   |               |  |          |   |  |  |           |   |       |   |             |   |  |   |           |        
|                                                                        | Comprehensive income |   |        |  |         |   |          |   |         |   |           |   |               |  |          |   |  |  |           |   |       |   |             |   |  |   |           | 149,284 | 
|                                                                        |                      |   |        |  |         |   |          |   |         |   |           |   |               |  |          |   |  |  |           |   |       |   |             |   |  |   |           |        
|Treasury stock issued for employee benefit plans                        |                      |   |       |  |         |   | 297      |   |         |   | (2,156    | ) |               |  |         |   |  |  | 12,302    |   |       |   |            |   |  |   | 10,443    |        
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Treasury stock purchased                                                |                      |   |       |  |         |   |         |   |         |   |          |   |               |  |         |   |  |  | (94,938   | ) |       |   |            |   |  |   | (94,938   | )      
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Issuance and distribution of restricted stock                           |                      |   |       |  |         |   | (12      | ) |         |   | (48       | ) |               |  |         |   |  |  | 160       |   |       |   |            |   |  |   | 100       |        
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Decrease in unearned compensation-ESOP                                  |                      |   |       |  |         |   | 790      |   |         |   |          |   |               |  | 168      |   |  |  |          |   |       |   |            |   |  |   | 958       |        
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Cash in lieu of fractional shares                                       |                      |   |       |  |         |   | (2       | ) |         |   |          |   |               |  |         |   |  |  |          |   |       |   |            |   |  |   | (2        | )      
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Cash dividends                                                          |                      |   |       |  |         |   |         |   |         |   | (36,040   | ) |               |  |         |   |  |  |          |   |       |   |            |   |  |   | (36,040   | )      
|                                                                        |                      |   |        |  |         |   |          |   |         |   |           |   |               |  |          |   |  |  |           |   |       |   |             |   |  |   |           |        
|Balances at June 30, 2001                                               |                      | $ | 1,496  |  |         | $ | 618,307  |   |         | $ | 973,957   |   |               |  | ($1,186  | ) |  |  | ($231,722 | ) |       |   | ($190       | ) |  | $ | 1,360,662 |        
|                                                                        |                      |   |        |  |         |   |          |   |         |   |           |   |               |  |          |   |  |  |           |   |       |   |             |   |  |   |           |        

See accompanying Notes to Consolidated Financial Statements.

5



---



##### Table of Contents






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

|                                                                                                                                                   |                                                                                    |                                                                                                   |          |                           |          |      |          |            |          |  
|-------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------- | -------- | ------------------------- | -------- | ---- | -------- | ---------- | -------- | -
|                                                                                                                                                   |                                                                                    |                                                                                                   |          | Six months ended June 30,
|                                                                                                                                                   |                                                                                    |                                                                                                   |          |                          
|                                                                                                                                                   |                                                                                    |                                                                                                   |          | 2002                      |          | 2001
|                                                                                                                                                   |                                                                                    |                                                                                                   |          |                           |          |     
|Cash flows from operating activities:                                                                                                              |                                                                                    |                                                                                                   |          |                           |          |      |          |           
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   | Net income                                                                         |                                                                                                   | $        | 142,340                   |          |      | $        | 114,987    |         
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   | Adjustments to reconcile net income to net cash provided by operating activities:  |                                                                                                   |          |                           |          |      |          |            |         
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   |                                                                                    | Provision for loan and lease losses                                                               |          |                           | 22,657   |      |          |            | 16,450   |  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   |                                                                                    | Depreciation                                                                                      |          |                           | 17,304   |      |          |            | 14,669   |  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   |                                                                                    | Amortization of goodwill and other intangibles                                                    |          |                           | 6,230    |      |          |            | 10,816   |  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   |                                                                                    | Provision for deferred tax expense                                                                |          |                           | 6,754    |      |          |            | 363      |  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   |                                                                                    | ESOP and restricted stock expense                                                                 |          |                           | 4,576    |      |          |            | 958      |  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   |                                                                                    | Issuance of restricted stock units                                                                |          |                           | 630      |      |          |            | 100      |  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   |                                                                                    | Net (gains) realized from sales of securities and consumer loans                                  |          |                           | (369     | )    |          |            | (1,571   | )
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   |                                                                                    | Net (gains) realized from sales of loans held for sale (a component of
mortgage banking services) |          |                           | (3,640   | )    |          |            | (3,602   | )
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   |                                                                                    | Earnings from bank owned life insurance                                                           |          |                           | (9,371   | )    |          |            | (9,198   | )
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   |                                                                                    | Net decrease in mortgage servicing rights                                                         |          |                           | 906      |      |          |            | 22,730   |  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   |                                                                                    | Proceeds from sales of loans held for sale                                                        |          |                           | 361,989  |      |          |            | 437,241  |  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   |                                                                                    | Residential loans originated for sale                                                             |          |                           | (293,906 | )    |          |            | (457,687 | )
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   |                                                                                    | Net (increase) decrease in interest and dividends receivable and other assets                     |          |                           | (9,593   | )    |          |            | 19,449   |  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   |                                                                                    | Net increase in other liabilities                                                                 |          |                           | 12,257   |      |          |            | 55,405   |  
|                                                                                                                                                   |                                                                                    |                                                                                                   |          |                           |          |      |          |            |         
|Net cash provided by operating activities                                                                                                          |                                                                                    |                                                                                                   | 258,764  |                           |          |      | 221,110  |           
|                                                                                                                                                   |                                                                                    |                                                                                                   |          |                           |          |      |          |            |         
|Cash flows from investing activities:                                                                                                              |                                                                                    |                                                                                                   |          |                           |          |      |          |           
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   | Proceeds from sales of securities available for sale                               |                                                                                                   |          | 412,082                   |          |      |          | 280,742    |         
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   | Proceeds from maturities and principal repayments of securities available for sale |                                                                                                   |          | 1,067,613                 |          |      |          | 922,121    |         
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   | Purchases of securities available for sale                                         |                                                                                                   |          | (1,947,973                | )        |      |          | (1,161,735 | )       
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   | Proceeds from maturities and principal repayments of securities held to maturity   |                                                                                                   |          | 57,955                    |          |      |          | 49,601     |         
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   | Net (increase) in loans and leases                                                 |                                                                                                   |          | (356,846                  | )        |      |          | (90,028    | )       
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   | Proceeds from sale of loans                                                        |                                                                                                   |          |                          |          |      |          | 39,303     |         
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   | Net additions to premises and equipment                                            |                                                                                                   |          | (17,870                   | )        |      |          | (16,532    | )       
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   | Purchases of bank owned life insurance                                             |                                                                                                   |          | (40,000                   | )        |      |          |           |         
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   | Proceeds from death claim on bank owned life insurance                             |                                                                                                   |          |                          |          |      |          | 3,690      |         
|                                                                                                                                                   |                                                                                    |                                                                                                   |          |                           |          |      |          |            |         
|Net cash (used) provided by investing activities                                                                                                   |                                                                                    |                                                                                                   | (825,039 | )                         |          |      | 27,162   |           
|                                                                                                                                                   |                                                                                    |                                                                                                   |          |                           |          |      |          |            |         
|Cash flows from financing activities:                                                                                                              |                                                                                    |                                                                                                   |          |                           |          |      |          |           
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   | Net increase in deposits                                                           |                                                                                                   |          | 182,529                   |          |      |          | 320,263    |         
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   | Net increase in securities sold under repurchase agreements                        |                                                                                                   |          | 221,640                   |          |      |          | 132,417    |         
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   | Proceeds from Federal Home Loan Bank borrowings                                    |                                                                                                   |          | 3,555                     |          |      |          | 5,152,421  |         
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   | Payments on Federal Home Loan Bank borrowings                                      |                                                                                                   |          | (180,282                  | )        |      |          | (6,083,989 | )       
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   | Net increase in other borrowings                                                   |                                                                                                   |          | 27,586                    |          |      |          | 166,396    |         
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   | Issuance of subordinated long-term debt                                            |                                                                                                   |          |                          |          |      |          | 200,000    |         
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   | Issuance of securities of subsidiary trusts, net                                   |                                                                                                   |          | 193,150                   |          |      |          |           |         
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   | Issuance of stock                                                                  |                                                                                                   |          | 26,029                    |          |      |          | 10,441     |         
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   | Purchase of treasury stock                                                         |                                                                                                   |          | (141,026                  | )        |      |          | (94,938    | )       
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   | Dividends paid                                                                     |                                                                                                   |          | (41,561                   | )        |      |          | (36,040    | )       
|                                                                                                                                                   |                                                                                    |                                                                                                   |          |                           |          |      |          |            |         
|Net cash provided (used) by financing activities                                                                                                   |                                                                                    |                                                                                                   | 291,620  |                           |          |      | (233,029 | )         
|                                                                                                                                                   |                                                                                    |                                                                                                   |          |                           |          |      |          |            |         
|Increase (decrease) in cash and cash equivalents                                                                                                   |                                                                                    |                                                                                                   | (274,655 | )                         |          |      | 15,243   |           
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   | Cash and cash equivalents at beginning of period                                   |                                                                                                   |          | 871,211                   |          |      |          | 392,989    |         
|                                                                                                                                                   |                                                                                    |                                                                                                   |          |                           |          |      |          |            |         
|                                                                                                                                                   | Cash and cash equivalents at end of period                                         |                                                                                                   | $        | 596,556                   |          |      | $        | 408,232    |         
|                                                                                                                                                   |                                                                                    |                                                                                                   |          |                           |          |      |          |            |         
|For the six months ended June 30, 2002 and 2001, interest of $217,021 and
$324,930 and income taxes of $32,773 and $41,299 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
June 30, 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. There have been no significant changes in the methods or assumptions
used in the accounting policies which require material estimates and
assumptions.

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 Banknorth, 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 and six months ended June 30, 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 SFAS No. 142. Banknorth has completed the
transitional impairment test on goodwill assets and has concluded that the
amount of recorded goodwill was not impaired as of January 1, 2002. 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 $11.0
million, or approximately $.07 per diluted share in 2002, as a result of no
longer having to amortize goodwill. At June 30, 2002, Banknorth had $48.8
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 second
quarter of 2002 and 2001 was $2.9 million and $2.6 million, respectively, and
$6.2 million and $5.3 million for the six months ended June 30, 2002 and 2001,
respectively.

7



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##### Table of Contents



The changes in the carrying amount of goodwill and identifiable intangible
assets for the six months ended June 30, 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 year                                                                                    |      |   |         |   |             |   |             |       |              |   |             |       |       |   |       |       
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|Reclassification                                                                                            |      |   | 2,214    |   |             |   | (2,214       | )     |              |   |             |       |       |   | (2,214 | )     
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|Amortization expense                                                                                        |      |   |         |   |             |   | (2,501       | )     |              |   | (3,729       | )     |       |   | (6,230 | )     
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|Impairment recognized                                                                                       |      |   |         |   |             |   |             |       |              |   |             |       |       |   |       |       
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|Adjustment of purchase accounting estimates                                                                 |      |   | (1,060   | ) |             |   |             |       |              |   |             |       |       |   |       |       
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|Change in deferred taxes related to remaining
book/tax basis differences of purchase
accounting adjustments |      |   | (1,443   | ) |             |   |             |       |              |   |             |       |       |   |       |       
|                                                                                                            |      |   |          |   |             |   |              |       |              |   |              |       |       |   |        |       
|Balance, June 30, 2002                                                                                      |      | $ | 409,051  |   |             | $ | 16,606       |       |              | $ | 32,243       |       |       | $ | 48,849 |       
|                                                                                                            |      |   |          |   |             |   |              |       |              |   |              |       |       |   |        |       
|Estimated Annual Amortization Expense:                                                                      |      |   |          |   |             |   |              |       |              |   |              |       |       |   |        |       
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                            | 2002 |   |          |  |             |   |              | 5,684 |              |   |              | 7,338 |       |   |        | 13,022 | 
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                            | 2003 |   |          |  |             |   |              | 2,017 |              |   |              | 3,690 |       |   |        | 5,707  | 
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                            | 2004 |   |          |  |             |   |              | 1,563 |              |   |              | 2,936 |       |   |        | 4,499  | 
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                            | 2005 |   |          |  |             |   |              | 1,548 |              |   |              | 2,486 |       |   |        | 4,034  | 
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                            | 2006 |   |          |  |             |   |              | 1,548 |              |   |              | 2,486 |       |   |        | 4,034  | 

The components of identifiable intangible assets follows:

|                                |       |   |                |        |              |   |              |        |  |   |        |        | 
|------------------------------- | ----- | - | -------------- | ------ | ------------ | - | ------------ | ------ |  | - | ------ | ------ | 
|                                |       |   | June 30, 2002 
|                                |       |   |               
|                                |       |   | Gross Carrying |        | Accumulated  |   | Net Carrying
|                                |       |   | Amount         |        | Amortization |   | Amount      
|                                |       |   |                |        |              |   |             
|Identifiable intangible assets: |       |   |                |        |              |   |              |        |  |   |        |       
|                               
|                               
|                               
|                               
|Core deposit intangibles        |       | $ | 35,765         |        |              | $ | 19,159       |        |  | $ | 16,606 |       
|                               
|                               
|                               
|                               
|SFAS 72 intangibles           |       |   | 45,787         |        |              |   | 14,594       |        |  |   | 31,193 |       
|                               
|                               
|                               
|                               
|Other identifiable intangibles  |       |   | 1,350          |        |              |   | 300          |        |  |   | 1,050  |       
|                                |       |   |                |        |              |   |              |        |  |   |        |       
|                                | Total |   | $              | 82,902 |              |   | $            | 34,053 |  |   | $      | 48,849 | 
|                                |       |   |                |        |              |   |              |        |  |   |        |       

The following table sets forth the reconcilement of net income and earnings per
share excluding goodwill amortization for the three and six months ended June
30, 2002 and 2001.

|                            |                           |   |                    |   |                  |   |        |       |      |   |         |   |  |   |         |       | 
|--------------------------- | ------------------------- | - | ------------------ | - | ---------------- | - | ------ | ----- | ---- | - | ------- | - |  | - | ------- | ----- | 
|                            |                           |   | Three Months Ended |   | Six Months Ended
|                            |                           |   | June 30,           |   | June 30,        
|                            |                           |   |                    |   |                 
|                            |                           |   | 2002               |   | 2001             |   | 2002   |       | 2001
|                            |                           |   |                    |   |                  |   |        |       |     
|Reported net income         |                           | $ | 75,011             |   |                  | $ | 59,893 |       |      | $ | 142,340 |   |  | $ | 114,987 |      
|                           
|                           
|                           
|                           
|Add back:                   |                           |   |                    |   |                  |   |        |       |      |   |         |   |  |   |         |      
|                           
|                           
|                           
|                           
|                            | Goodwill amortization (1) |   |                    |  |                  |   |        | 2,529 |      |   |         |  |  |   |         | 5,091 | 
|                            |                           |   |                    |   |                  |   |        |       |      |   |         |   |  |   |         |      
|Adjusted net income         |                           | $ | 75,011             |   |                  | $ | 62,422 |       |      | $ | 142,340 |   |  | $ | 120,078 |      
|                            |                           |   |                    |   |                  |   |        |       |      |   |         |   |  |   |         |      
|Basic earnings per share:   |                           |   |                    |   |                  |   |        |       |      |   |         |   |  |   |         |      
|                           
|                           
|                           
|                           
|Reported net income         |                           | $ | 0.51               |   |                  | $ | 0.44   |       |      | $ | 0.96    |   |  | $ | 0.83    |      
|                           
|                           
|                           
|                           
|Add back:                   |                           |   |                    |   |                  |   |        |       |      |   |         |   |  |   |         |      
|                           
|                           
|                           
|                           
|                            | Goodwill amortization (1) |   |                    |  |                  |   |        | 0.02  |      |   |         |  |  |   |         | 0.04  | 
|                            |                           |   |                    |   |                  |   |        |       |      |   |         |   |  |   |         |      
|Adjusted net income         |                           | $ | 0.51               |   |                  | $ | 0.46   |       |      | $ | 0.96    |   |  | $ | 0.87    |      
|                            |                           |   |                    |   |                  |   |        |       |      |   |         |   |  |   |         |      
|Diluted earnings per share: |                           |   |                    |   |                  |   |        |       |      |   |         |   |  |   |         |      
|                           
|                           
|                           
|                           
|Reported net income         |                           | $ | 0.50               |   |                  | $ | 0.43   |       |      | $ | 0.95    |   |  | $ | 0.82    |      
|                           
|                           
|                           
|                           
|Add back:                   |                           |   |                    |   |                  |   |        |       |      |   |         |   |  |   |         |      
|                           
|                           
|                           
|                           
|                            | Goodwill amortization (1) |   |                    |  |                  |   |        | 0.02  |      |   |         |  |  |   |         | 0.04  | 
|                            |                           |   |                    |   |                  |   |        |       |      |   |         |   |  |   |         |      
|Adjusted net income         |                           | $ | 0.50               |   |                  | $ | 0.45   |       |      | $ | 0.95    |   |  | $ | 0.86    |      
|                            |                           |   |                    |   |                  |   |        |       |      |   |         |   |  |   |         |      



---

8



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##### Table of Contents



Note 3  Capital Trust Securities

On February 22, 2002, Banknorth Capital Trust II, a subsidiary of Banknorth
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 was 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  Share Repurchase Programs

During the six months ended June 30, 2002, Banknorth repurchased 5.8 million
shares of its outstanding common stock at an average price of $24.25. At June
30, 2002, there were a total of 7.8 million shares remaining under existing
repurchase authorizations.

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 six months ended June 30, 2002 and 2001.

|                                                            |                                                                     |                                                     |         |                  |        |      |         |      |        |  
|----------------------------------------------------------- | ------------------------------------------------------------------- | --------------------------------------------------- | ------- | ---------------- | ------ | ---- | ------- | ---- | ------ | -
|                                                            |                                                                     |                                                     |         | Six Months Ended
|                                                            |                                                                     |                                                     |         | June 30,        
|                                                            |                                                                     |                                                     |         |                 
|                                                            |                                                                     |                                                     |         | 2002             |        | 2001
|                                                            |                                                                     |                                                     |         |                  |        |     
|Net income                                                  |                                                                     | $                                                   | 142,340 |                  |        | $    | 114,987 |     
|                                                           
|                                                           
|                                                           
|                                                           
|Other comprehensive income (loss), net of tax:              |                                                                     |                                                     |         |                  |        |      |         |     
|                                                           
|                                                           
|                                                           
|                                                           
|Unrealized gains (losses) on available for sale securities: |                                                                     |                                                     |         |                  |        |      |         |     
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            |                                                                     | Unrealized holding gains arising during the period  |         |                  | 36,350 |      |         |      | 34,500 |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Less: reclassification adjustment for gains included in net income  |                                                     |         | 240              |        |      |         | 522  |       
|                                                            |                                                                     |                                                     |         |                  |        |      |         |     
|                                                            |                                                                     |                                                     | 36,110  |                  |        |      | 33,978  |     
|                                                            |                                                                     |                                                     |         |                  |        |      |         |     
|Unrealized gains (losses) on cash flow hedges:              |                                                                     |                                                     |         |                  |        |      |         |     
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            |                                                                     | Unrealized holding losses arising during the period |         |                  | (1,095 | )    |         |      | (224   | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Less: reclassification adjustment for losses included in net income |                                                     |         | (320             | )      |      |         | (543 | )     
|                                                            |                                                                     |                                                     |         |                  |        |      |         |     
|                                                            |                                                                     |                                                     | (775    | )                |        |      | 319     |     
|                                                            |                                                                     |                                                     |         |                  |        |      |         |     
|Other comprehensive income, net                             |                                                                     |                                                     | 35,335  |                  |        |      | 34,297  |     
|                                                            |                                                                     |                                                     |         |                  |        |      |         |     
|Comprehensive income                                        |                                                                     | $                                                   | 177,675 |                  |        | $    | 149,284 |     
|                                                            |                                                                     |                                                     |         |                  |        |      |         |     

9



---



##### Table of Contents



Note 6  Earnings Per Share

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

|                                                                |                                                                 |   |                    |      |                  |   |         |      |      |   |         |      |  |   |         |      | 
|--------------------------------------------------------------- | --------------------------------------------------------------- | - | ------------------ | ---- | ---------------- | - | ------- | ---- | ---- | - | ------- | ---- |  | - | ------- | ---- | 
|                                                                |                                                                 |   | Three Months Ended |      | Six Months Ended
|                                                                |                                                                 |   | June 30,           |      | June 30,        
|                                                                |                                                                 |   |                    |      |                 
|                                                                |                                                                 |   | 2002               |      | 2001             |   | 2002    |      | 2001
|                                                                |                                                                 |   |                    |      |                  |   |         |      |     
|Net income before cumulative effect of accounting change        |                                                                 | $ | 75,011             |      |                  | $ | 59,893  |      |      | $ | 142,340 |      |  | $ | 115,277 |     
|                                                               
|                                                               
|                                                               
|                                                               
|Cumulative effect of change in accounting principle, net of tax |                                                                 |   |                   |      |                  |   |        |      |      |   |        |      |  |   | (290    | )   
|                                                                |                                                                 |   |                    |      |                  |   |         |      |      |   |         |      |  |   |         |     
|Net income                                                      |                                                                 | $ | 75,011             |      |                  | $ | 59,893  |      |      | $ | 142,340 |      |  | $ | 114,987 |     
|                                                                |                                                                 |   |                    |      |                  |   |         |      |      |   |         |      |  |   |         |     
|Weighted average basic common shares outstanding                |                                                                 |   | 147,233            |      |                  |   | 137,659 |      |      |   | 148,258 |      |  |   | 139,236 |     
|                                                               
|                                                               
|                                                               
|                                                               
|Effect of dilutive stock options                                |                                                                 |   | 1,831              |      |                  |   | 1,242   |      |      |   | 1,810   |      |  |   | 1,225   |     
|                                                                |                                                                 |   |                    |      |                  |   |         |      |      |   |         |      |  |   |         |     
|Weighted average diluted common shares outstanding              |                                                                 |   | 149,064            |      |                  |   | 138,901 |      |      |   | 150,068 |      |  |   | 140,461 |     
|                                                                |                                                                 |   |                    |      |                  |   |         |      |      |   |         |      |  |   |         |     
|Basic earnings per share:                                       |                                                                 |   |                    |      |                  |   |         |      |      |   |         |      |  |   |         |     
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Net income before cumulative effect of accounting change        |   | $                  | 0.51 |                  |   | $       | 0.44 |      |   | $       | 0.96 |  |   | $       | 0.83 | 
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Cumulative effect of change in accounting principle, net of tax |   |                    |     |                  |   |         |     |      |   |         |     |  |   |         |     | 
|                                                                |                                                                 |   |                    |      |                  |   |         |      |      |   |         |      |  |   |         |     
|                                                                | Net income                                                      |   | $                  | 0.51 |                  |   | $       | 0.44 |      |   | $       | 0.96 |  |   | $       | 0.83 | 
|                                                                |                                                                 |   |                    |      |                  |   |         |      |      |   |         |      |  |   |         |     
|Diluted earnings per share:                                     |                                                                 |   |                    |      |                  |   |         |      |      |   |         |      |  |   |         |     
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Net income before cumulative effect of accounting change        |   | $                  | 0.50 |                  |   | $       | 0.43 |      |   | $       | 0.95 |  |   | $       | 0.82 | 
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Cumulative effect of change in accounting principle, net of tax |   |                    |     |                  |   |         |     |      |   |         |     |  |   |         |     | 
|                                                                |                                                                 |   |                    |      |                  |   |         |      |      |   |         |      |  |   |         |     
|                                                                | Net income                                                      |   | $                  | 0.50 |                  |   | $       | 0.43 |      |   | $       | 0.95 |  |   | $       | 0.82 | 
|                                                                |                                                                 |   |                    |      |                  |   |         |      |      |   |         |      |  |   |         |     

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,
among other things. 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 impact on our financial condition or results of operations.

Note 8  Pending Acquisitions

On April 11, 2002, Banknorth announced that it had entered into an
agreement to acquire Bancorp Connecticut, Inc. (Bancorp) for $28.00 per share
in cash. At June 30, 2002, Bancorp had total assets of $671 million and
shareholders equity of $62 million. Bancorp is the parent company of
Southington Savings Bank. The definitive agreement has been approved by the
Boards of Directors of Banknorth and Bancorp and all required regulatory
approvals have been received. The consummation of the merger is subject to the
receipt of the approval of the shareholders of Bancorp and other customary
closing conditions. The acquisition is expected to be completed in the third
quarter of 2002.

On July 26, 2002, Banknorth completed its acquisition of
Massachusetts-based Ipswich Bancshares, Inc. (Ipswich) for total
consideration of $19.9 million in cash and $20.0 million of Banknorth common
stock. Approximately 842,000 shares of Banknorth common stock will be issued
in this transaction following the completion of post-closing election and
allocation procedures. Ipswich had $324 million in assets and $16.7 million
in shareholders equity at June 30, 2002. Under terms of the agreement, each
outstanding share of common stock of Ipswich was 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 the 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

10



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##### Table of Contents



converted into the right to receive Banknorth common stock and 49% of the
outstanding Ipswich common stock will be converted into cash.

On July 2, 2002, the Company acquired Community Insurance Agencies, Inc.
(Community) in exchange for approximately 213,000 shares of Company common
stock. Community is headquartered in South Glens Falls, New York and has 57
employees and had $24 million of premium revenue in 2001. Community will be
combined with and managed by Banknorth Insurance Group, the insurance agency
division of Banknorth, NA.

On
August 8, 2002, the Company announced that it had entered into
an agreement to acquire Massachusetts-based Warren Bancorp, Inc.
(Warren), parent company of Warren Five Cents Savings
Bank. Warren had $460 million in assets and $44 million in
shareholders equity at June 30, 2002. Under terms of the
agreement, each outstanding share of common stock of Warren will be
converted into the right to receive $15.75 in cash or a number of
whole shares of Banknorth common stock determined by dividing $15.75
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 50% of the outstanding
shares of Warren common stock will be converted into the right to
receive Banknorth common stock and 50% of the outstanding Warren
common stock will be converted into cash. The agreement has been
approved by Banknorth and Warren Boards of Directors. The
consummation of the merger is subject to the receipt of the approval
of the shareholders of Warren and all required regulatory approvals
and other customary closing conditions. The acquisition is expected
to be completed by the end of the year.

Note 9  State Tax Assessment

In June 2002, a notice of intent to assess tax plus interest for the years
ended 1999 and 2000 was received from the Massachusetts Department of Revenue
(DOR). The assessment notices relate to Massachusetts banks which have been
acquired by the Company through July 2002 and had a real estate investment
trust (REIT) in their corporate structure. The DOR contends that dividend
distributions from a REIT to a parent company are fully taxable in
Massachusetts. The Company disagrees with the position of the DOR and contends
that Massachusetts law provides for a 95% dividends-received deduction. The
Company intends to appeal the assessment and defend its position. Should the
DOR prevail, the potential assessment for 1999, 2000 and 2001 (we have not yet
been assessed for 2001) of tax is approximately $4.5 million, net of Federal
benefit, exclusive of interest and penalties. Such tax assessment would be
accounted for as an adjustment to the purchase price for the acquisition of
these banks and would increase goodwill.

11



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##### Table of Contents



BANKNORTH GROUP, INC. AND SUBSIDIARIES




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

The Companys financial statements for the three and six month periods ended
June 30, 2002 reflect the acquisitions of Andover Bancorp, Inc. (Andover) and
MetroWest Bank (MetroWest), both of which closed on October 31, 2001.
Because these mergers were accounted for under the purchase method of
accounting, periods prior to October 31, 2001 have not been restated.
Therefore, combined operations are presented only from October 31, 2001, and
operations for the three and six month periods ended June 30, 2001 include only
Banknorth. The acquisitions of Andover and MetroWest increased the Companys
total assets by approximately $2.7 billion, or 15%. The operational
conversions of the Andover and MetroWest systems were completed in the first
quarter of 2002; related personnel and expense reductions were also
substantially completed in the first quarter of 2002.

SUMMARY

We reported consolidated net income of $75.0 million, or $0.50 per diluted
share, for the second quarter of 2002 as compared with $59.9 million, or $0.43
per diluted share, for the second quarter of 2001, an increase of 16% on a per
share basis. Results in the second quarter of 2002 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 while
the second quarter of 2001 included goodwill amortization which ceased January
1, 2002 under new accounting rules. Special charges totaled $690 thousand
(after-tax), or $.01 per diluted share for the three months ended June 30,
2002. There were no special charges in the second quarter of 2001. Goodwill
amortization totaled $2.5 million (after-tax), or $.02 per diluted share for
the three months ended June 30, 2001. There was no goodwill amortization (or
impairment) in the second quarter of 2002.

Annualized return on average equity (ROE) and return on average assets (ROA)
were 1.44% and 17.18%, respectively for the quarter ended June 30, 2002 and
were 1.32% and 17.85%, respectively, for the comparable quarter one year ago.

Annualized operating cash return on average equity (Operating Cash ROE) and
operating cash return on average assets (Operating Cash ROA) were 24.21% and
1.53%, respectively, for the quarter ended June 30, 2002 and were 22.11% and
1.44%, respectively, for the comparable quarter one year ago. Operating cash
ROE and operating cash ROA exclude the after-tax effect of special charges and
the amortization of goodwill and intangible assets.

Results for the second quarter of 2002 improved over the second quarter of 2001
due largely to increased net interest income tempered by higher expenses;
credit quality remained strong. Net interest income grew by 20% as a result of
increased net interest margins and the acquisitions of Andover and MetroWest.
The net interest margin increased by 22 basis points due to a decline in
short-term interest rates resulting from Federal Reserve Board rate cuts during
2001 and growth in higher-margin core deposits and commercial loans.
Non-interest expenses increased by 14% due in large part to the acquisitions of
Andover and MetroWest and increased incentive compensation expense. The
efficiency ratio was 52.86% in the second quarter of 2002 compared to 54.57% 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.

For the first six months of 2002 consolidated net income was $142.3 million, or
$0.95 per diluted share as compared with $115.0 million, or $0.82 per diluted
share, for the first six months of the prior year. Results in each period were
diminished by the effect of special charges which totaled $6.0 million
(after-tax), or $.04 per diluted share, for the six months ended June 30, 2002
and $3.7 million (after-tax), or $.03 per diluted share, for the six months
ended June 30, 2001. (See Table 5 for special charge activity for the six
months ended June 30, 2002). The first six months of 2001 were burdened with
goodwill amortization of $5.1 million (after-tax), or $.04 per diluted share.
Under new accounting rules, there was no goodwill amortization (or impairment)
in the six months of 2002. Net interest income for the six months ended June
30, 2002 increased 23% from the same period last year primarily due to a 35
basis point increase in net interest margin and the acquisitions of Andover and
MetroWest. The provision for loan and lease losses for the six months ended
June 30, 2002 increased 38% over the same period last year mostly due to higher
net charge-offs and

12



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##### Table of Contents



increased loans outstanding. Noninterest income for the
six months ended June 30, 2002 increased 7% compared to the same period last
year while noninterest expense increased 15%.

Annualized operating cash return on average equity (Operating Cash ROE) and
operating cash return on average assets (Operating Cash ROA) were 23.84% and
1.53%, respectively, for the six months ended June 30, 2002 and were 22.12% and
1.44%, respectively, for the comparable period one year ago. Operating cash
ROE and operating cash ROA exclude the after-tax effect of special charges and
the amortization of goodwill and intangible assets.
Annualized return on average equity (ROE) and return on average assets (ROA)
were 1.44% and 17.18%, respectively for the six months ended June 30, 2002 and
were 1.32% and 17.85%, respectively, for the comparable quarter one year ago.

13



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##### Table of Contents



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

|                                                                                             |                                                                                              |                                                                 |                                                                 |        |        |   |         |        |        |   |         |        |        |       |         |        |   |   |         |        |   |   |         |        |       |     | 
|-------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------- | --------------------------------------------------------------- | --------------------------------------------------------------- | ------ | ------ | - | ------- | ------ | ------ | - | ------- | ------ | ------ | ----- | ------- | ------ | - | - | ------- | ------ | - | - | ------- | ------ | ----- | --- | 
|                                                                                             |                                                                                              |                                                                 |                                                                 |        | 2002   |   | 2001   
|                                                                                             |                                                                                              |                                                                 |                                                                 |        |        |   |        
|                                                                                             |                                                                                              |                                                                 |                                                                 |        | Second |   | First   |        | Fourth |   | Third   |        | Second |       | First  
|                                                                                             |                                                                                              |                                                                 |                                                                 |        |        |   |         |        |        |   |         |        |        |       |        
|Net interest income                                                                          |                                                                                              | $                                                               | 199,473                                                         |        |        | $ | 196,486 |        |        | $ | 188,458 |        |        | $     | 169,784 |        |   | $ | 165,699 |        |   | $ | 155,949 |       
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Provision for loan and lease losses                                                          |                                                                                              |                                                                 | 10,829                                                          |        |        |   | 11,828  |        |        |   | 13,378  |        |        |       | 12,061  |        |   |   | 9,311   |        |   |   | 7,138   |       
|                                                                                             |                                                                                              |                                                                 |                                                                 |        |        |   |         |        |        |   |         |        |        |       |         |        |   |   |         |        |   |   |         |       
|Net interest income after loan and lease loss provision                                      |                                                                                              |                                                                 | 188,644                                                         |        |        |   | 184,658 |        |        |   | 175,080 |        |        |       | 157,723 |        |   |   | 156,388 |        |   |   | 148,811 |       
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Noninterest income (1)                                                                       |                                                                                              |                                                                 | 62,636                                                          |        |        |   | 61,557  |        |        |   | 63,560  |        |        |       | 60,065  |        |   |   | 57,552  |        |   |   | 57,997  |       
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Net securities gains                                                                         |                                                                                              |                                                                 | 350                                                             |        |        |   | 19      |        |        |   | 39      |        |        |       | 486     |        |   |   | 45      |        |   |   | 759     |       
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Noninterest expenses (excluding special charges) (2)                                         |                                                                                              |                                                                 | 137,481                                                         |        |        |   | 136,445 |        |        |   | 136,016 |        |        |       | 124,632 |        |   |   | 121,826 |        |   |   | 119,233 |       
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Special charges (2)                                                                          |                                                                                              |                                                                 | 1,061                                                           |        |        |   | 8,204   |        |        |   | 2,007   |        |        |       |        |        |   |   |        |        |   |   | 5,608   |       
|                                                                                             |                                                                                              |                                                                 |                                                                 |        |        |   |         |        |        |   |         |        |        |       |         |        |   |   |         |        |   |   |         |       
|Income before income taxes                                                                   |                                                                                              |                                                                 | 113,088                                                         |        |        |   | 101,585 |        |        |   | 100,656 |        |        |       | 93,642  |        |   |   | 92,159  |        |   |   | 82,726  |       
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Income tax expense                                                                           |                                                                                              |                                                                 | 38,077                                                          |        |        |   | 34,256  |        |        |   | 35,152  |        |        |       | 31,440  |        |   |   | 32,266  |        |   |   | 27,343  |       
|                                                                                             |                                                                                              |                                                                 |                                                                 |        |        |   |         |        |        |   |         |        |        |       |         |        |   |   |         |        |   |   |         |       
|Net income before extraordinary item and cumulative effect of
change in accounting principle |                                                                                              |                                                                 | 75,011                                                          |        |        |   | 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                                                                                   |                                                                                              | $                                                               | 75,011                                                          |        |        | $ | 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 |                                                                 | $                                                               | 0.51   |        |   | $       | 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 |                                                                 |        |       |   |         |        |       |   |         |        |       |       |         |        |  |   |         |        |  |   |         |        |      |    
|                                                                                             |                                                                                              |                                                                 |                                                                 |        |        |   |         |        |        |   |         |        |        |       |         |        |   |   |         |        |   |   |         |       
|                                                                                             |                                                                                              | $                                                               | 0.51                                                            |        |        | $ | 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 |                                                                 | $                                                               | 0.50   |        |   | $       | 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 |                                                                 |        |       |   |         |        |       |   |         |        |       |       |         |        |  |   |         |        |  |   |         |        |      |    
|                                                                                             |                                                                                              |                                                                 |                                                                 |        |        |   |         |        |        |   |         |        |        |       |         |        |   |   |         |        |   |   |         |       
|                                                                                             |                                                                                              | $                                                               | 0.50                                                            |        |        | $ | 0.45    |        |        | $ | 0.41    |        |        | $     | 0.45    |        |   | $ | 0.43    |        |   | $ | 0.39    |       
|                                                                                             |                                                                                              |                                                                 |                                                                 |        |        |   |         |        |        |   |         |        |        |       |         |        |   |   |         |        |   |   |         |       
|Return on average assets (3)                                                                 |                                                                                              |                                                                 | 1.44                                                            | %      |        |   | 1.33    | %      |        |   | 1.23    | %      |        |       | 1.37    | %      |   |   | 1.32    | %      |   |   | 1.24    | %     
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Return on average equity (3)                                                                 |                                                                                              |                                                                 | 17.18                                                           | %      |        |   | 15.46   | %      |        |   | 14.45   | %      |        |       | 17.63   | %      |   |   | 17.85   | %      |   |   | 16.59   | %     
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Net interest margin                                                                          |                                                                                              |                                                                 | 4.18                                                            | %      |        |   | 4.24    | %      |        |   | 4.13    | %      |        |       | 4.09    | %      |   |   | 3.98    | %      |   |   | 3.78    | %     
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Noninterest income as a percent of total income (1)                                          |                                                                                              |                                                                 | 23.90                                                           | %      |        |   | 23.86   | %      |        |   | 25.22   | %      |        |       | 26.13   | %      |   |   | 25.78   | %      |   |   | 27.11   | %     
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Efficiency ratio (4)                                                                         |                                                                                              |                                                                 | 52.86                                                           | %      |        |   | 56.06   | %      |        |   | 54.77   | %      |        |       | 54.22   | %      |   |   | 54.57   | %      |   |   | 58.35   | %     
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Operating data (5):                                                                          |                                                                                              |                                                                 |                                                                 |        |        |   |         |        |        |   |         |        |        |       |         |        |   |   |         |        |   |   |         |       
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                             | Net income                                                                                   |                                                                 | $                                                               | 75,011 |        |   | $       | 67,329 |        |   | $       | 61,607 |        |       | $       | 62,202 |   |   | $       | 59,893 |   |   | $       | 55,093 |      
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                             |                                                                                              | Add: Special charges, net of tax                                |                                                                 |        | 690    |   |         |        | 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                                                                             |                                                                 | $                                                               | 75,701 |        |   | $       | 72,671 |        |   | $       | 66,798 |        |       | $       | 62,202 |   |   | $       | 59,893 |   |   | $       | 59,034 |      
|                                                                                             |                                                                                              |                                                                 |                                                                 |        |        |   |         |        |        |   |         |        |        |       |         |        |   |   |         |        |   |   |         |       
|Operating ratios (5):                                                                        |                                                                                              |                                                                 |                                                                 |        |        |   |         |        |        |   |         |        |        |       |         |        |   |   |         |        |   |   |         |       
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Return on average assets (excluding special items) (2) (3)                                   |                                                                                              |                                                                 | 1.45                                                            | %      |        |   | 1.44    | %      |        |   | 1.33    | %      |        |       | 1.37    | %      |   |   | 1.32    | %      |   |   | 1.32    | %     
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Return on average equity (excluding special items) (2) (3)                                   |                                                                                              |                                                                 | 17.34                                                           | %      |        |   | 16.69   | %      |        |   | 15.67   | %      |        |       | 17.63   | %      |   |   | 17.85   | %      |   |   | 17.78   | %     
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Efficiency ratio (4) (6)                                                                     |                                                                                              |                                                                 | 52.45                                                           | %      |        |   | 52.88   | %      |        |   | 53.97   | %      |        |       | 54.22   | %      |   |   | 54.57   | %      |   |   | 55.73   | %     
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Cash return on average assets (excluding special items)(2)(3)(7)                             |                                                                                              |                                                                 | 1.53                                                            | %      |        |   | 1.53    | %      |        |   | 1.46    | %      |        |       | 1.48    | %      |   |   | 1.44    | %      |   |   | 1.44    | %     
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Cash return on average equity (excluding special items)(2)(3)(7)                             |                                                                                              |                                                                 | 24.21                                                           | %      |        |   | 23.50   | %      |        |   | 21.35   | %      |        |       | 21.57   | %      |   |   | 22.12   | %      |   |   | 22.15   | %     
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Cash efficiency ratio(4)(8)                                                                  |                                                                                              |                                                                 | 51.34                                                           | %      |        |   | 51.58   | %      |        |   | 51.64   | %      |        |       | 51.88   | %      |   |   | 52.15   | %      |   |   | 53.20   | %     



---

|(1) |  | Excludes securities transactions.                                                                                                                                                                                                                                                                                                                                                                                                         
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Special charges consist of merger charges, charter consolidation costs, asset write-downs and branch closing costs where applicable. 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) |  | Represents noninterest expenses as a percentage of net interest income and noninterest income, excluding net securities gains and losses.                                                                                                                                                                                                                                                                                                 
|   
|   
|   
|   
|(5) |  | 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 this data is comparable with similar financial
data of other issuers. However, management believes that the data provides meaningful supplemental information regarding operating results.
|   
|   
|   
|   
|(6) |  | Excludes special charges.                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|   
|   
|   
|(7) |  | Excludes the after-tax effect of amortization of intangible assets.                                                                                                                                                                                                                                                                                                                                                                       
|   
|   
|   
|   
|(8) |  | Excludes special charges and amortization of intangible assets.                                                                                                                                                                                                                                                                                                                                                                           

14



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##### Table of Contents



RESULTS OF OPERATIONS

Net Interest Income

Net interest income is the difference between interest income on earning assets
such as loans, leases and securities, and interest expense paid on liabilities
such as deposits and borrowings, and continues to be our largest revenue
source. Net interest income is affected by the level of interest rates,
changes in interest rates and by changes in the amount and composition of
interest-earning assets and interest-bearing liabilities.

Fully-taxable equivalent net interest income for the second quarter of 2002
increased $33.5 million compared to the second quarter of 2001 while the net
interest margin increased from 3.96% to 4.18% for the respective periods.
Approximately two-thirds of the $33.5 million increase in net interest income
was due to the acquisition of Andover and MetroWest, while the balance of the
increase and the improved margins were due mainly to the cost of funds falling
faster than the yields on earning assets. Average net earning assets increased
$2.3 billion for the three months ended June 30, 2002 compared to the same
period in the prior year, primarily as a result of the acquisitions of Andover
and MetroWest. The rate decreases were reflective of the Federal Reserve rate
cuts during 2001. Average loans as a percent of average earning assets was 67%
and 65% for the quarters ended June 30, 2002 and 2001, respectively. Average
loans and leases increased by $2.0 billion, or 18%, compared to the second
quarter of 2001 due primarily to the acquisition of Andover and MetroWest in
the fourth quarter of 2001 and internal loan growth.

Our fully-taxable equivalent net interest income for the six months ended June
30, 2002 increased $73.8 million compared to the six months ended June 30, 2001
primarily for the same reasons as the increase during the three months ended
June 30, 2002, as discussed above. The net interest margin increased from
3.86% for the six months ended June 30, 2001 to 4.21% for the six months ended
June 30, 2002 primarily due to a 173 basis point decrease in rates paid on
interest-bearing liabilities compared to a 119 basis point decrease in interest
rates earned on earning assets. Average net earning assets increased $488.7
million for the six months ended June 30, 2002 compared to the six months ended
June 30, 2001 due in part 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 each of the quarters in 2002 and 2001 and for
the six months ended June 30, 2002 and 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.

15



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##### Table of Contents



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

|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |         |         |                 |      |          |           |           |            |            |            |        |         |         |         |        |      |      |      | 
|--------------------------------------------------- | ------------------------------------ | ------------------------------------------ | ---------------------------------- | ---------------------- | ---------- | ------------------- | ---------- | ------------------ | ------- | ------- | ------- | --------------- | ---- | -------- | --------- | --------- | ---------- | ---------- | ---------- | ------ | ------- | ------- | ------- | ------ | ---- | ---- | ---- | 
|                                                    |                                      |                                            |                                    |                        |            | 2002 Second Quarter |            | 2002 First Quarter
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                   
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |         |         |                 |      | Yield/   |           |           |            |            |            |        |         |         |         | Yield/
|                                                    |                                      |                                            |                                    |                        |            | Average Balance     |            | Interest           |         | Rate(1) |         | Average Balance |      | Interest |           | Rate (1) 
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |         |         |                 |      |          |           |          
|Loans and leases (2):                               |                                      |                                            |                                    |                        |            |                     |            |                    |         |         |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Residential real estate mortgages    |                                            | $                                  | 2,569,964              |            |                     | $          | 43,946             |         |         |         | 6.84            | %    |          | $         | 2,675,415 |            |            | $          | 47,265 |         |         |         | 7.07   | %   
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Commercial real estate mortgages     |                                            |                                    | 4,216,766              |            |                     |            | 74,347             |         |         |         | 7.07            |      |          |           | 4,101,873 |            |            |            | 72,724 |         |         |         | 7.19   |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Commercial business loans and leases |                                            |                                    | 2,595,548              |            |                     |            | 39,333             |         |         |         | 6.08            |      |          |           | 2,464,378 |            |            |            | 38,661 |         |         |         | 6.36   |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Consumer loans and leases            |                                            |                                    | 3,530,040              |            |                     |            | 62,158             |         |         |         | 7.06            |      |          |           | 3,539,213 |            |            |            | 63,952 |         |         |         | 7.33   |     
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |         |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            |                                    | Total loans and leases |            |                     | 12,912,318 |                    |         |         | 219,784 |                 |      |          | 6.82      |           |            |            | 12,780,879 |        |         |         | 222,602 |        |      |      | 7.04 | 
|                                                   
|                                                   
|                                                   
|                                                   
|Investment securities                               |                                      |                                            | 6,276,523                          |                        |            |                     | 90,804     |                    |         |         | 5.79    |                 |      |          | 5,943,057 |           |            |            | 84,296     |        |         |         | 5.68    |       
|                                                   
|                                                   
|                                                   
|                                                   
|Federal funds sold and other short-term investments |                                      |                                            | 25,856                             |                        |            |                     | 52         |                    |         |         | 0.81    |                 |      |          | 72,107    |           |            |            | 415        |        |         |         | 2.33    |       
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |         |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      | Total earning assets                       |                                    |                        | 19,214,697 |                     |            |                    | 310,640 |         |         |                 | 6.48 |          |           |           | 18,796,043 |            |            |        | 307,313 |         |         |        | 6.59 |     
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |         |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Noninterest-earning assets                          |                                      |                                            | 1,676,185                          |                        |            |                     |            |                    |         |         |         |                 |      |          | 1,671,783 |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |         |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      | Total assets                               |                                    | $                      | 20,890,882 |                     |            |                    |         |         |         |                 |      |          |           | $         | 20,467,826 |            |            |        |         |         |         |        |      |     
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |         |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Interest-bearing deposits:                          |                                      |                                            |                                    |                        |            |                     |            |                    |         |         |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Regular savings                      |                                            | $                                  | 1,716,942              |            |                     | $          | 4,061              |         |         |         | 0.95            |      |          | $         | 1,646,822 |            |            | $          | 3,964  |         |         |         | 0.98   |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | NOW and money market accounts        |                                            |                                    | 5,246,053              |            |                     |            | 19,897             |         |         |         | 1.52            |      |          |           | 5,099,310 |            |            |            | 18,895 |         |         |         | 1.50   |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Certificates of deposit              |                                            |                                    | 4,652,499              |            |                     |            | 37,273             |         |         |         | 3.21            |      |          |           | 4,762,399 |            |            |            | 41,694 |         |         |         | 3.55   |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Brokered deposits                    |                                            |                                    | 50,741                 |            |                     |            | 235                |         |         |         | 1.86            |      |          |           | 63,594    |            |            |            | 288    |         |         |         | 1.84   |     
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |         |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            | Total interest-bearing deposits    |                        |            | 11,666,235          |            |                    |         | 61,466  |         |                 |      | 2.11     |           |           |            | 11,572,125 |            |        |         | 64,841  |         |        |      | 2.27 |     
|                                                   
|                                                   
|                                                   
|                                                   
|Borrowed funds                                      |                                      |                                            | 4,784,197                          |                        |            |                     | 48,448     |                    |         |         | 4.06    |                 |      |          | 4,511,945 |           |            |            | 44,679     |        |         |         | 4.01    |       
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |         |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            | Total interest-bearing liabilities |                        |            | 16,450,432          |            |                    |         | 109,914 |         |                 |      | 2.68     |           |           |            | 16,084,070 |            |        |         | 109,520 |         |        |      | 2.76 |     
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |         |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Non-interest bearing deposits                       |                                      |                                            | 2,520,968                          |                        |            |                     |            |                    |         |         |         |                 |      |          | 2,446,539 |           |            |            |            |        |         |         |         |       
|                                                   
|                                                   
|                                                   
|                                                   
|Other liabilities                                   |                                      |                                            | 168,403                            |                        |            |                     |            |                    |         |         |         |                 |      |          | 171,449   |           |            |            |            |        |         |         |         |       
|                                                   
|                                                   
|                                                   
|                                                   
|Shareholders equity                                |                                      |                                            | 1,751,079                          |                        |            |                     |            |                    |         |         |         |                 |      |          | 1,765,768 |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |         |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      | Total liabilities and shareholders equity |                                    | $                      | 20,890,882 |                     |            |                    |         |         |         |                 |      |          |           | $         | 20,467,826 |            |            |        |         |         |         |        |      |     
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |         |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Net earning assets                                  |                                      | $                                          | 2,764,265                          |                        |            |                     |            |                    |         |         |         |                 |      | $        | 2,711,973 |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |         |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Net interest income (fully-taxable equivalent)      |                                      |                                            |                                    |                        |            |                     | 200,726    |                    |         |         |         |                 |      |          |           |           |            |            | 197,793    |        |         |         |         |       
|                                                   
|                                                   
|                                                   
|                                                   
|Less: fully-taxable equivalent adjustments          |                                      |                                            |                                    |                        |            |                     | (1,253     | )                  |         |         |         |                 |      |          |           |           |            |            | (1,307     | )      |         |         |         |       
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |         |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      | Net interest income                        |                                    |                        |            |                     |            | $                  | 199,473 |         |         |                 |      |          |           |           |            |            |            | $      | 196,486 |         |         |        |      |     
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |         |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Net interest rate spread (fully-taxable equivalent) |                                      |                                            |                                    |                        |            |                     |            |                    |         |         | 3.80    | %               |      |          |           |           |            |            |            |        |         |         | 3.83    | %     
|                                                   
|                                                   
|                                                   
|                                                   
|Net interest margin (fully-taxable equivalent)      |                                      |                                            |                                    |                        |            |                     |            |                    |         |         | 4.18    | %               |      |          |           |           |            |            |            |        |         |         | 4.23    | %     



---

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

16



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##### Table of Contents



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

|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |        |      |      |      | 
|--------------------------------------------------- | ------------------------------------ | ------------------------------------------ | ---------------------------------- | ---------------------- | ---------- | ------------------- | ---------- | ------------------ | ------- | -------- | ------- | --------------- | ---- | -------- | --------- | --------- | ---------- | ---------- | ---------- | ------ | ------- | ------- | ------- | ------ | ---- | ---- | ---- | 
|                                                    |                                      |                                            |                                    |                        |            | 2001 Fourth Quarter |            | 2001 Third Quarter
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                   
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      | Yield/   |           |           |            |            |            |        |         |         |         | Yield/
|                                                    |                                      |                                            |                                    |                        |            | Average Balance     |            | Interest           |         | Rate (1) |         | Average Balance |      | Interest |           | Rate (1) 
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      |          |           |          
|Loans and leases (2):                               |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Residential real estate mortgages    |                                            | $                                  | 2,568,103              |            |                     | $          | 47,262             |         |          |         | 7.36            | %    |          | $         | 2,102,988 |            |            | $          | 38,716 |         |         |         | 7.36   | %   
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Commercial real estate mortgages     |                                            |                                    | 3,737,282              |            |                     |            | 70,871             |         |          |         | 7.52            |      |          |           | 3,121,928 |            |            |            | 64,802 |         |         |         | 8.24   |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Commercial business loans and leases |                                            |                                    | 2,379,623              |            |                     |            | 40,275             |         |          |         | 6.72            |      |          |           | 2,360,191 |            |            |            | 44,482 |         |         |         | 7.48   |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Consumer loans and leases            |                                            |                                    | 3,508,370              |            |                     |            | 68,384             |         |          |         | 7.73            |      |          |           | 3,359,036 |            |            |            | 69,027 |         |         |         | 8.15   |     
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            |                                    | Total loans and leases |            |                     | 12,193,378 |                    |         |          | 226,792 |                 |      |          | 7.39      |           |            |            | 10,944,143 |        |         |         | 217,027 |        |      |      | 7.88 | 
|                                                   
|                                                   
|                                                   
|                                                   
|Investment securities                               |                                      |                                            | 6,127,076                          |                        |            |                     | 88,950     |                    |         |          | 5.80    |                 |      |          | 5,815,678 |           |            |            | 90,657     |        |         |         | 6.23    |       
|                                                   
|                                                   
|                                                   
|                                                   
|Federal funds sold and other short-term investments |                                      |                                            | 52,108                             |                        |            |                     | 263        |                    |         |          | 1.99    |                 |      |          | 17,125    |           |            |            | 131        |        |         |         | 3.02    |       
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      | Total earning assets                       |                                    |                        | 18,372,562 |                     |            |                    | 316,005 |          |         |                 | 6.85 |          |           |           | 16,776,946 |            |            |        | 307,815 |         |         |        | 7.30 |     
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Noninterest-earning assets                          |                                      |                                            | 1,516,800                          |                        |            |                     |            |                    |         |          |         |                 |      |          | 1,273,973 |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      | Total assets                               |                                    | $                      | 19,889,362 |                     |            |                    |         |          |         |                 |      |          |           | $         | 18,050,919 |            |            |        |         |         |         |        |      |     
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Interest-bearing deposits:                          |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Regular savings                      |                                            | $                                  | 1,543,616              |            |                     | $          | 4,070              |         |          |         | 1.05            |      |          | $         | 1,416,784 |            |            | $          | 4,391  |         |         |         | 1.23   |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | NOW and money market accounts        |                                            |                                    | 4,826,227              |            |                     |            | 22,820             |         |          |         | 1.88            |      |          |           | 4,166,281 |            |            |            | 26,114 |         |         |         | 2.49   |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Certificates of deposit              |                                            |                                    | 4,664,683              |            |                     |            | 49,158             |         |          |         | 4.18            |      |          |           | 4,386,194 |            |            |            | 53,692 |         |         |         | 4.86   |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Brokered deposits                    |                                            |                                    | 110,772                |            |                     |            | 1,175              |         |          |         | 4.21            |      |          |           | 165,115   |            |            |            | 2,327  |         |         |         | 5.59   |     
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            | Total interest-bearing deposits    |                        |            | 11,145,298          |            |                    |         | 77,223   |         |                 |      | 2.75     |           |           |            | 10,134,374 |            |        |         | 86,524  |         |        |      | 3.39 |     
|                                                   
|                                                   
|                                                   
|                                                   
|Borrowed funds                                      |                                      |                                            | 4,495,463                          |                        |            |                     | 48,803     |                    |         |          | 4.31    |                 |      |          | 4,133,666 |           |            |            | 49,817     |        |         |         | 4.79    |       
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            | Total interest-bearing liabilities |                        |            | 15,640,761          |            |                    |         | 126,026  |         |                 |      | 3.20     |           |           |            | 14,268,040 |            |        |         | 136,341 |         |        |      | 3.79 |     
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Non-interest bearing deposits                       |                                      |                                            | 2,387,677                          |                        |            |                     |            |                    |         |          |         |                 |      |          | 2,212,517 |           |            |            |            |        |         |         |         |       
|                                                   
|                                                   
|                                                   
|                                                   
|Other liabilities                                   |                                      |                                            | 169,235                            |                        |            |                     |            |                    |         |          |         |                 |      |          | 170,672   |           |            |            |            |        |         |         |         |       
|                                                   
|                                                   
|                                                   
|                                                   
|Shareholders equity                                |                                      |                                            | 1,691,689                          |                        |            |                     |            |                    |         |          |         |                 |      |          | 1,399,690 |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      | Total liabilities and shareholders equity |                                    | $                      | 19,889,362 |                     |            |                    |         |          |         |                 |      |          |           | $         | 18,050,919 |            |            |        |         |         |         |        |      |     
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Net earning assets                                  |                                      | $                                          | 2,731,801                          |                        |            |                     |            |                    |         |          |         |                 |      | $        | 2,508,906 |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Net interest income (fully-taxable equivalent)      |                                      |                                            |                                    |                        |            |                     | 189,979    |                    |         |          |         |                 |      |          |           |           |            |            | 171,474    |        |         |         |         |       
|                                                   
|                                                   
|                                                   
|                                                   
|Less: fully-taxable equivalent adjustments          |                                      |                                            |                                    |                        |            |                     | (1,521     | )                  |         |          |         |                 |      |          |           |           |            |            | (1,690     | )      |         |         |         |       
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      | Net interest income                        |                                    |                        |            |                     |            | $                  | 188,458 |          |         |                 |      |          |           |           |            |            |            | $      | 169,784 |         |         |        |      |     
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Net interest rate spread (fully-taxable equivalent) |                                      |                                            |                                    |                        |            |                     |            |                    |         |          | 3.65    | %               |      |          |           |           |            |            |            |        |         |         | 3.51    | %     
|                                                   
|                                                   
|                                                   
|                                                   
|Net interest margin (fully-taxable equivalent)      |                                      |                                            |                                    |                        |            |                     |            |                    |         |          | 4.13    | %               |      |          |           |           |            |            |            |        |         |         | 4.08    | %     



---

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

17



---



##### Table of Contents



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

|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |        |      |      |      | 
|--------------------------------------------------- | ------------------------------------ | ------------------------------------------ | ---------------------------------- | ---------------------- | ---------- | ------------------- | ---------- | ------------------ | ------- | -------- | ------- | --------------- | ---- | -------- | --------- | --------- | ---------- | ---------- | ---------- | ------ | ------- | ------- | ------- | ------ | ---- | ---- | ---- | 
|                                                    |                                      |                                            |                                    |                        |            | 2001 Second Quarter |            | 2001 First Quarter
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                   
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      | Yield/   |           |           |            |            |            |        |         |         |         | Yield/
|                                                    |                                      |                                            |                                    |                        |            | Average Balance     |            | Interest           |         | Rate (1) |         | Average Balance |      | Interest |           | Rate (1) 
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      |          |           |          
|Loans and leases (2):                               |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Residential real estate mortgages    |                                            | $                                  | 2,206,518              |            |                     | $          | 40,866             |         |          |         | 7.41            | %    |          | $         | 2,285,219 |            |            | $          | 43,118 |         |         |         | 7.55   | %   
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Commercial real estate mortgages     |                                            |                                    | 3,036,744              |            |                     |            | 64,949             |         |          |         | 8.58            |      |          |           | 2,964,053 |            |            |            | 64,658 |         |         |         | 8.85   |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Commercial business loans and leases |                                            |                                    | 2,322,572              |            |                     |            | 46,509             |         |          |         | 8.03            |      |          |           | 2,304,625 |            |            |            | 49,439 |         |         |         | 8.70   |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Consumer loans and leases            |                                            |                                    | 3,342,216              |            |                     |            | 70,166             |         |          |         | 8.42            |      |          |           | 3,373,971 |            |            |            | 72,604 |         |         |         | 8.73   |     
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            |                                    | Total loans and leases |            |                     | 10,908,050 |                    |         |          | 222,490 |                 |      |          | 8.18      |           |            |            | 10,927,868 |        |         |         | 229,819 |        |      |      | 8.51 | 
|                                                   
|                                                   
|                                                   
|                                                   
|Investment securities                               |                                      |                                            | 5,931,974                          |                        |            |                     | 95,241     |                    |         |          | 6.42    |                 |      |          | 5,819,082 |           |            |            | 97,939     |        |         |         | 6.74    |       
|                                                   
|                                                   
|                                                   
|                                                   
|Federal funds sold and other short-term investments |                                      |                                            | 48,148                             |                        |            |                     | 476        |                    |         |          | 3.93    |                 |      |          | 20,946    |           |            |            | 296        |        |         |         | 5.68    |       
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      | Total earning assets                       |                                    |                        | 16,888,172 |                     |            |                    | 318,207 |          |         |                 | 7.55 |          |           |           | 16,767,896 |            |            |        | 328,054 |         |         |        | 7.88 |     
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Noninterest-earning assets                          |                                      |                                            | 1,264,302                          |                        |            |                     |            |                    |         |          |         |                 |      |          | 1,307,350 |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      | Total assets                               |                                    | $                      | 18,152,474 |                     |            |                    |         |          |         |                 |      |          |           | $         | 18,075,246 |            |            |        |         |         |         |        |      |     
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Interest-bearing deposits:                          |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Regular savings                      |                                            | $                                  | 1,405,540              |            |                     | $          | 4,898              |         |          |         | 1.40            |      |          | $         | 1,390,834 |            |            | $          | 5,561  |         |         |         | 1.62   |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | NOW and money market accounts        |                                            |                                    | 4,059,390              |            |                     |            | 28,525             |         |          |         | 2.82            |      |          |           | 3,969,403 |            |            |            | 32,539 |         |         |         | 3.32   |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Certificates of deposit              |                                            |                                    | 4,484,684              |            |                     |            | 60,086             |         |          |         | 5.37            |      |          |           | 4,513,295 |            |            |            | 63,502 |         |         |         | 5.71   |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Brokered deposits                    |                                            |                                    | 167,419                |            |                     |            | 2,480              |         |          |         | 5.94            |      |          |           | 165,065   |            |            |            | 2,637  |         |         |         | 6.48   |     
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            | Total interest-bearing deposits    |                        |            | 10,117,033          |            |                    |         | 95,989   |         |                 |      | 3.81     |           |           |            | 10,038,597 |            |        |         | 104,239 |         |        |      | 4.21 |     
|                                                   
|                                                   
|                                                   
|                                                   
|Borrowed funds                                      |                                      |                                            | 4,428,380                          |                        |            |                     | 54,946     |                    |         |          | 4.98    |                 |      |          | 4,572,935 |           |            |            | 66,357     |        |         |         | 5.88    |       
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            | Total interest-bearing liabilities |                        |            | 14,545,413          |            |                    |         | 150,935  |         |                 |      | 4.16     |           |           |            | 14,611,532 |            |        |         | 170,596 |         |        |      | 4.73 |     
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Non-interest bearing deposits                       |                                      |                                            | 2,101,326                          |                        |            |                     |            |                    |         |          |         |                 |      |          | 1,966,919 |           |            |            |            |        |         |         |         |       
|                                                   
|                                                   
|                                                   
|                                                   
|Other liabilities                                   |                                      |                                            | 159,955                            |                        |            |                     |            |                    |         |          |         |                 |      |          | 150,037   |           |            |            |            |        |         |         |         |       
|                                                   
|                                                   
|                                                   
|                                                   
|Shareholders equity                                |                                      |                                            | 1,345,780                          |                        |            |                     |            |                    |         |          |         |                 |      |          | 1,346,758 |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      | Total liabilities and shareholders equity |                                    | $                      | 18,152,474 |                     |            |                    |         |          |         |                 |      |          |           | $         | 18,075,246 |            |            |        |         |         |         |        |      |     
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Net earning assets                                  |                                      | $                                          | 2,342,759                          |                        |            |                     |            |                    |         |          |         |                 |      | $        | 2,156,364 |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Net interest income (fully-taxable equivalent)      |                                      |                                            |                                    |                        |            |                     | 167,272    |                    |         |          |         |                 |      |          |           |           |            |            | 157,458    |        |         |         |         |       
|                                                   
|                                                   
|                                                   
|                                                   
|Less: fully-taxable equivalent adjustments          |                                      |                                            |                                    |                        |            |                     | (1,572     | )                  |         |          |         |                 |      |          |           |           |            |            | (1,509     | )      |         |         |         |       
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      | Net interest income                        |                                    |                        |            |                     |            | $                  | 165,700 |          |         |                 |      |          |           |           |            |            |            | $      | 155,949 |         |         |        |      |     
|                                                    |                                      |                                            |                                    |                        |            |                     |            |                    |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Net interest rate spread (fully-taxable equivalent) |                                      |                                            |                                    |                        |            |                     |            |                    |         |          | 3.39    | %               |      |          |           |           |            |            |            |        |         |         | 3.15    | %     
|                                                   
|                                                   
|                                                   
|                                                   
|Net interest margin (fully-taxable equivalent)      |                                      |                                            |                                    |                        |            |                     |            |                    |         |          | 3.96    | %               |      |          |           |           |            |            |            |        |         |         | 3.76    | %     



---

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

18



---



##### Table of Contents



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

|                                                    |                                            |   |                  |            |                  |  |          |         |                 |  |          |      |          |   |           |            |  |  |         |         |        |  |      |      |  
|--------------------------------------------------- | ------------------------------------------ | - | ---------------- | ---------- | ---------------- |  | -------- | ------- | --------------- |  | -------- | ---- | -------- | - | --------- | ---------- |  |  | ------- | ------- | ------ |  | ---- | ---- | -
|                                                    |                                            |   | Six Months Ended |            | Six Months Ended
|                                                    |                                            |   | June 30, 2002    |            | June 30, 2001   
|                                                    |                                            |   |                  |            |                 
|                                                    |                                            |   |                  |            |                  |  |          |         |                 |  | Yield/   |      |          |   |           |            |  |  |         |         | Yield/
|                                                    |                                            |   | Average Balance  |            | Interest         |  | Rate (1) |         | Average Balance |  | Interest |      | Rate (1)
|                                                    |                                            |   |                  |            |                  |  |          |         |                 |  |          |      |         
|Loans and leases (2):                               |                                            |   |                  |            |                  |  |          |         |                 |  |          |      |          |   |           |            |  |  |         |         |        |  |      |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Residential real estate mortgages          |   | $                | 2,622,398  |                  |  | $        | 91,211  |                 |  |          | 6.96 | %        |   | $         | 2,245,651  |  |  | $       | 83,984  |        |  |      | 7.48 | %
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Commercial real estate mortgages           |   |                  | 4,159,637  |                  |  |          | 147,071 |                 |  |          | 7.13 |          |   |           | 3,000,600  |  |  |         | 129,607 |        |  |      | 8.71 |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Commercial business loans and leases       |   |                  | 2,530,326  |                  |  |          | 77,994  |                 |  |          | 6.21 |          |   |           | 2,313,648  |  |  |         | 95,950  |        |  |      | 8.36 |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Consumer loans and leases                  |   |                  | 3,534,601  |                  |  |          | 126,110 |                 |  |          | 7.19 |          |   |           | 3,358,006  |  |  |         | 142,770 |        |  |      | 8.57 |  
|                                                    |                                            |   |                  |            |                  |  |          |         |                 |  |          |      |          |   |           |            |  |  |         |         |        |  |      |     
|                                                    | Total loans and leases                     |   |                  | 12,846,962 |                  |  |          | 442,386 |                 |  |          | 6.93 |          |   |           | 10,917,905 |  |  |         | 452,311 |        |  |      | 8.34 |  
|                                                   
|                                                   
|                                                   
|                                                   
|Securities                                          |                                            |   | 6,110,711        |            |                  |  | 175,100  |         |                 |  | 5.73     |      |          |   | 5,875,840 |            |  |  | 193,180 |         |        |  | 6.58 |     
|                                                   
|                                                   
|                                                   
|                                                   
|Federal funds sold and other short-term investments |                                            |   | 48,854           |            |                  |  | 467      |         |                 |  | 1.93     |      |          |   | 34,622    |            |  |  | 772     |         |        |  | 4.50 |     
|                                                    |                                            |   |                  |            |                  |  |          |         |                 |  |          |      |          |   |           |            |  |  |         |         |        |  |      |     
|                                                    | Total earning assets                       |   |                  | 19,006,527 |                  |  |          | 617,953 |                 |  |          | 6.53 |          |   |           | 16,828,367 |  |  |         | 646,263 |        |  |      | 7.72 |  
|                                                    |                                            |   |                  |            |                  |  |          |         |                 |  |          |      |          |   |           |            |  |  |         |         |        |  |      |     
|Noninterest earning assets                          |                                            |   | 1,673,796        |            |                  |  |          |         |                 |  |          |      |          |   | 1,284,891 |            |  |  |         |         |        |  |      |     
|                                                    |                                            |   |                  |            |                  |  |          |         |                 |  |          |      |          |   |           |            |  |  |         |         |        |  |      |     
|                                                    | Total assets                               |   | $                | 20,680,323 |                  |  |          |         |                 |  |          |      |          |   | $         | 18,113,258 |  |  |         |         |        |  |      |      |  
|                                                    |                                            |   |                  |            |                  |  |          |         |                 |  |          |      |          |   |           |            |  |  |         |         |        |  |      |     
|Interest-bearing deposits:                          |                                            |   |                  |            |                  |  |          |         |                 |  |          |      |          |   |           |            |  |  |         |         |        |  |      |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Regular savings                            |   | $                | 1,682,076  |                  |  |          | 8,025   |                 |  |          | 0.96 |          |   | $         | 1,398,228  |  |  |         | 10,459  |        |  |      | 1.51 |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | NOW and money market accounts              |   |                  | 5,173,087  |                  |  |          | 38,792  |                 |  |          | 1.51 |          |   |           | 4,014,645  |  |  |         | 61,064  |        |  |      | 3.07 |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Certificates of deposit                    |   |                  | 4,707,146  |                  |  |          | 78,967  |                 |  |          | 3.38 |          |   |           | 4,498,911  |  |  |         | 123,588 |        |  |      | 5.54 |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Brokered deposits                          |   |                  | 57,131     |                  |  |          | 523     |                 |  |          | 1.85 |          |   |           | 166,248    |  |  |         | 5,117   |        |  |      | 6.21 |  
|                                                    |                                            |   |                  |            |                  |  |          |         |                 |  |          |      |          |   |           |            |  |  |         |         |        |  |      |     
|                                                    | Total interest-bearing deposits            |   |                  | 11,619,440 |                  |  |          | 126,307 |                 |  |          | 2.19 |          |   |           | 10,078,032 |  |  |         | 200,228 |        |  |      | 4.01 |  
|                                                   
|                                                   
|                                                   
|                                                   
|Borrowed funds                                      |                                            |   | 4,648,327        |            |                  |  | 93,127   |         |                 |  | 4.03     |      |          |   | 4,500,288 |            |  |  | 121,304 |         |        |  | 5.43 |     
|                                                    |                                            |   |                  |            |                  |  |          |         |                 |  |          |      |          |   |           |            |  |  |         |         |        |  |      |     
|                                                    | Total interest-bearing liabilities         |   |                  | 16,267,767 |                  |  |          | 219,434 |                 |  |          | 2.72 |          |   |           | 14,578,320 |  |  |         | 321,532 |        |  |      | 4.45 |  
|                                                    |                                            |   |                  |            |                  |  |          |         |                 |  |          |      |          |   |           |            |  |  |         |         |        |  |      |     
|Non-interest bearing deposits                       |                                            |   | 2,483,959        |            |                  |  |          |         |                 |  |          |      |          |   | 2,034,494 |            |  |  |         |         |        |  |      |     
|                                                   
|                                                   
|                                                   
|                                                   
|Other liabilities                                   |                                            |   | 169,654          |            |                  |  |          |         |                 |  |          |      |          |   | 153,906   |            |  |  |         |         |        |  |      |     
|                                                   
|                                                   
|                                                   
|                                                   
|Shareholders equity                                |                                            |   | 1,758,943        |            |                  |  |          |         |                 |  |          |      |          |   | 1,346,538 |            |  |  |         |         |        |  |      |     
|                                                    |                                            |   |                  |            |                  |  |          |         |                 |  |          |      |          |   |           |            |  |  |         |         |        |  |      |     
|                                                    | Total liabilities and shareholders equity |   | $                | 20,680,323 |                  |  |          |         |                 |  |          |      |          |   | $         | 18,113,258 |  |  |         |         |        |  |      |      |  
|                                                    |                                            |   |                  |            |                  |  |          |         |                 |  |          |      |          |   |           |            |  |  |         |         |        |  |      |     
|Net earning assets                                  |                                            | $ | 2,738,760        |            |                  |  |          |         |                 |  |          |      |          | $ | 2,250,047 |            |  |  |         |         |        |  |      |     
|                                                    |                                            |   |                  |            |                  |  |          |         |                 |  |          |      |          |   |           |            |  |  |         |         |        |  |      |     
|                                                    |                                           
|Net interest income (fully-taxable equivalent)      |                                            |   |                  |            |                  |  | 398,519  |         |                 |  |          |      |          |   |           |            |  |  | 324,731 |         |        |  |      |     
|                                                   
|                                                   
|                                                   
|                                                   
|Less: fully-taxable equivalent adjustments          |                                            |   |                  |            |                  |  | (2,560   | )       |                 |  |          |      |          |   |           |            |  |  | (3,083  | )       |        |  |      |     
|                                                    |                                            |   |                  |            |                  |  |          |         |                 |  |          |      |          |   |           |            |  |  |         |         |        |  |      |     
|                                                    | Net interest income                        |   |                  |            |                  |  | $        | 395,959 |                 |  |          |      |          |   |           |            |  |  | $       | 321,648 |        |  |      |      |  
|                                                    |                                            |   |                  |            |                  |  |          |         |                 |  |          |      |          |   |           |            |  |  |         |         |        |  |      |     
|Net interest rate spread (fully-taxable equivalent) |                                            |   |                  |            |                  |  |          |         |                 |  | 3.81     | %    |          |   |           |            |  |  |         |         |        |  | 3.27 | %   
|                                                   
|                                                   
|                                                   
|                                                   
|Net interest margin (fully-taxable equivalent)      |                                            |   |                  |            |                  |  |          |         |                 |  | 4.21     | %    |          |   |           |            |  |  |         |         |        |  | 3.86 | %   



---

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

19



---



##### 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 June 30, 2002 vs. 2001 |        | Six Months Ended June 30, 2002 vs. 2001
|                                                    |                               |   | Increase (decrease) due to                |        | Increase (decrease) due to             
|                                                    |                               |   |                                           |        |                                        
|                                                    |                               |   |                                           |        |                                         |   |            |         |        |  | Rate and   |        | Total |   |            |         |        |   |        |        |   |   | Rate and |         | Total
|                                                    |                               |   | Volume (1)                                |        | Rate                                    |   | Volume (2) |         | Change |  | Volume (1) |        | Rate  |   | Volume (2) |         | Change
|                                                    |                               |   |                                           |        |                                         |   |            |         |        |  |            |        |       |   |            |         |       
|Interest income:                                    |                               |   |                                           |        |                                         |   |            |         |        |  |            |        |       |   |            |         |        |   |        |        |   |   |          |         |       |  |          |        |   |   |          |        
|                                                   
|                                                   
|                                                   
|                                                   
|Loans and leases                                    |                               | $ | 40,875                                    |        |                                         |   | $(36,986   | )       |        |  | $(6,595    | )      |       |   | $(2,706    | )       |        | $ | 79,781 |        |   |   | $(76,339 | )       |       |  | $(13,367 | )      |   |   | $(9,925  | )      
|                                                   
|                                                   
|                                                   
|                                                   
|Securities                                          |                               |   | 5,515                                     |        |                                         |   | (9,317     | )       |        |  | (635       | )      |       |   | (4,437     | )       |        |   | 7,664  |        |   |   | (24,767  | )       |       |  | (977     | )      |   |   | (18,080  | )      
|                                                   
|                                                   
|                                                   
|                                                   
|Federal funds sold and other short-term investments |                               |   | (218                                      | )      |                                         |   | (375       | )       |        |  | 169        |        |       |   | (424       | )       |        |   | 318    |        |   |   | (441     | )       |       |  | (182     | )      |   |   | (305     | )      
|                                                    |                               |   |                                           |        |                                         |   |            |         |        |  |            |        |       |   |            |         |        |   |        |        |   |   |          |         |       |  |          |        |   |   |          |        
|Total interest income                               |                               |   | 46,172                                    |        |                                         |   | (46,678    | )       |        |  | (7,061     | )      |       |   | (7,567     | )       |        |   | 87,763 |        |   |   | (101,547 | )       |       |  | (14,526  | )      |   |   | (28,310  | )      
|                                                    |                               |   |                                           |        |                                         |   |            |         |        |  |            |        |       |   |            |         |        |   |        |        |   |   |          |         |       |  |          |        |   |   |          |        
|Interest expense:                                   |                               |   |                                           |        |                                         |   |            |         |        |  |            |        |       |   |            |         |        |   |        |        |   |   |          |         |       |  |          |        |   |   |          |        
|                                                   
|                                                   
|                                                   
|                                                   
|Interest-bearing
deposits                           |                               |   |                                           |        |                                         |   |            |         |        |  |            |        |       |   |            |         |        |   |        |        |   |   |          |         |       |  |          |        |   |   |          |        
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Regular savings               |   |                                           | 1,087  |                                         |   |            | (1,577  | )      |  |            | (347   | )     |   |            | (837    | )      |   |        | 2,125  |   |   |          | (3,814  | )     |  |          | (745   | ) |   |          | (2,434  | )
|                                                    | NOW and money market accounts |   |                                           | 8,343  |                                         |   |            | (13,157 | )      |  |            | (3,814 | )     |   |            | (8,628  | )      |   |        | 17,636 |   |   |          | (31,057 | )     |  |          | (8,851 | ) |   |          | (22,272 | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Certificates of deposit       |   |                                           | 2,247  |                                         |   |            | (24,151 | )      |  |            | (909   | )     |   |            | (22,813 | )      |   |        | 5,721  |   |   |          | (48,189 | )     |  |          | (2,153 | ) |   |          | (44,621 | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Brokered deposits             |   |                                           | (1,728 | )                                       |   |            | (1,703  | )      |  |            | 1,186  |       |   |            | (2,245  | )      |   |        | (3,360 | ) |   |          | (3,594  | )     |  |          | 2,360  |   |   |          | (4,594  | )
|                                                    |                               |   |                                           |        |                                         |   |            |         |        |  |            |        |       |   |            |         |        |   |        |        |   |   |          |         |       |  |          |        |   |   |          |        
|Total interest-bearing deposits                     |                               |   | 9,949                                     |        |                                         |   | (40,588    | )       |        |  | (3,884     | )      |       |   | (34,523    | )       |        |   | 22,122 |        |   |   | (86,654  | )       |       |  | (9,389   | )      |   |   | (73,921  | )      
|                                                   
|                                                   
|                                                   
|                                                   
|Borrowed funds                                      |                               |   | 4,418                                     |        |                                         |   | (10,157    | )       |        |  | (759       | )      |       |   | (6,498     | )       |        |   | 3,986  |        |   |   | (31,243  | )       |       |  | (920     | )      |   |   | (28,177  | )      
|                                                    |                               |   |                                           |        |                                         |   |            |         |        |  |            |        |       |   |            |         |        |   |        |        |   |   |          |         |       |  |          |        |   |   |          |        
|Total interest expense                              |                               |   | 14,367                                    |        |                                         |   | (50,745    | )       |        |  | (4,643     | )      |       |   | (41,021    | )       |        |   | 26,108 |        |   |   | (117,897 | )       |       |  | (10,309  | )      |   |   | (102,098 | )      
|                                                    |                               |   |                                           |        |                                         |   |            |         |        |  |            |        |       |   |            |         |        |   |        |        |   |   |          |         |       |  |          |        |   |   |          |        
|Net interest income (fully taxable equivalent)      |                               | $ | 31,805                                    |        |                                         | $ | 4,067      |         |        |  | $(2,418    | )      |       | $ | 33,454     |         |        | $ | 61,655 |        |   | $ | 16,350   |         |       |  | $(4,217  | )      |   | $ | 73,788   |        
|                                                    |                               |   |                                           |        |                                         |   |            |         |        |  |            |        |       |   |            |         |        |   |        |        |   |   |          |         |       |  |          |        |   |   |          |        



---

|(1) |  | Volume increases include the effects of the acquisitions of Andover and MetroWest on October 31, 2001.
|--- |  | ------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Includes changes in interest income and expense not due solely to volume or rate changes.             

20



---



##### Table of Contents



Noninterest Income

Second quarter noninterest income totaled $63.0 million, an increase of $5.4
million, or 9%, from the second quarter of 2001. Noninterest income for the
six months ended June 30, 2002 totaled $124.6 million, a 7% increase from the
comparable period of 2001. These increases were primarily due to increases in
loan fee income, merchant and electronic banking income and deposit services
income. These increases were partially offset lower mortgage banking services
income. Noninterest income, excluding securities gains and losses, as a
percent of total income was 24% and 26% for the quarters ended June 30, 2002
and 2001, respectively. The decline was attributable in large part to the
acquisition of Andover and MetroWest, which had a combined ratio of
noninterest income as a percent of total income of 8%.

Deposit services income increased by $1.5 million, or 8%, during the three
months ended June 30, 2002 as compared to the same period in the prior year,
and by $2.9 million, or 8%, during the six months ended June 30, 2002, as
compared to the same period in the prior year. For the six months ended June
30, 2002 and 2001, deposit services income amounted to $38.9 million and $35.9
million, respectively. These increases were primarily attributable to
volume-driven increases in checking account, ATM and overdraft fees which in
part were due to the acquisitions of Andover and MetroWest.

Mortgage banking services income was $489 thousand and $1.8 million for the
quarters ended June 30, 2002 and 2001, respectively. Residential mortgage sales
income decreased $869 thousand as compared to the second quarter of last year
due to lower gains on the sale of mortgage loans as a result of the retention
of 15-year and 20-year fixed-rate loans as well as all variable-rate loans in
our loan portfolio in 2002. Mortgage loan originations remained strong in the
second quarter of 2002, as loan refinancings continued in the favorable rate
environment. Residential mortgage loan originations were $301.0 million,
$376.9 million and $361.7 million for the three months ended June 30, 2002,
March 31, 2002 and June 30, 2001, respectively. Included in mortgage banking
services income for the quarter ended June 30, 2002 is amortization expense of
$925 thousand on capitalized mortgage servicing rights resulting from the
acquisition of Andover in the fourth quarter of 2001. Amortization of mortgage
servicing rights increased $595 thousand from the quarter ended March 31, 2002
due to continued high prepayment levels in this low interest rate environment.
For the six months ended June 30, 2002 and 2001, mortgage banking services
income amounted to $2.2 million and $5.0 million, respectively. This decrease
was primarily for the same reasons as the decrease during the three months
ended June 30, 2002, as discussed above, and a $706 thousand gain on the sale
of mortgage servicing rights in the first quarter of 2001. The amount of loans
serviced for others was $847.5 million, $964.0 million and $303.6 million at
June 30, 2002, December 31, 2001 and June 30, 2001, respectively. Capitalized
mortgage servicing rights amounted to $7.6 million at June 30, 2002, $8.5
million at December 31, 2001 and $0.5 million at June 30, 2001. 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.

21



---



##### Table of Contents



TABLE 4  Mortgage Banking
Services(In thousands)

|                                             |                                                                  |   |                                  |       |         |   |          |       |         |   |         |       |         |   |         |       |   |   |         |       |  |   |         |         |  
|-------------------------------------------- | ---------------------------------------------------------------- | - | -------------------------------- | ----- | ------- | - | -------- | ----- | ------- | - | ------- | ----- | ------- | - | ------- | ----- | - | - | ------- | ----- |  | - | ------- | ------- | -
|                                             |                                                                  |   | At or for the Three Months Ended
|                                             |                                                                  |   |                                 
|                                             |                                                                  |   | 6/30/02                          |       | 3/31/02 |   | 12/31/01 |       | 9/30/01 |   | 6/30/01 |       | 3/31/01
|                                             |                                                                  |   |                                  |       |         |   |          |       |         |   |         |       |        
|Residential
mortgages serviced for investors |                                                                  | $ | 847,545                          |       |         | $ | 866,689  |       |         | $ | 964,027 |       |         | $ | 285,400 |       |   | $ | 303,590 |       |  | $ | 294,898 |        
|                                             |                                                                  |   |                                  |       |         |   |          |       |         |   |         |       |         |   |         |       |   |   |         |       |  |   |         |        
|Mortgage servicing rights:                   |                                                                  |   |                                  |       |         |   |          |       |         |   |         |       |         |   |         |       |   |   |         |       |  |   |         |        
|                                            
|                                            
|                                            
|                                            
|                                             | Balance at beginning of period                                   |   | $                                | 8,503 |         |   | $        | 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       |   |                                  | (925  | )       |   |          | (330  | )       |   |         | (589  | )       |   |         | (55   | ) |   |         | 4     |  |   |         | (500    | )
|                                            
|                                            
|                                            
|                                            
|                                             | Mortgage servicing rights sold                                   |   |                                  |      |         |   |          |      |         |   |         | (348  | )       |   |         |      |   |   |         |      |  |   |         | (22,616 | )
|                                             |                                                                  |   |                                  |       |         |   |          |       |         |   |         |       |         |   |         |       |   |   |         |       |  |   |         |        
|                                             | Balance at end of period                                         |   | $                                | 7,578 |         |   | $        | 8,503 |         |   | $       | 8,484 |         |   | $       | 440   |   |   | $       | 495   |  |   | $       | 491     |  
|                                             |                                                                  |   |                                  |       |         |   |          |       |         |   |         |       |         |   |         |       |   |   |         |       |  |   |         |        
|Mortgage banking services income:            |                                                                  |   |                                  |       |         |   |          |       |         |   |         |       |         |   |         |       |   |   |         |       |  |   |         |        
|                                            
|                                            
|                                            
|                                            
|                                             | Residential mortgage sales income                                |   | $                                | 693   |         |   | $        | 1,068 |         |   | $       | 3,580 |         |   | $       | 1,734 |   |   | $       | 1,562 |  |   | $       | 2,184   |  
|                                            
|                                            
|                                            
|                                            
|                                             | Residential mortgage servicing income, net                       |   |                                  | (204  | )       |   |          | 608   |         |   |         | 358   |         |   |         | 448   |   |   |         | 214   |  |   |         | 344     |  
|                                            
|                                            
|                                            
|                                            
|                                             | Gain on sale of capitalized mortgage
servicing rights            |   |                                  |      |         |   |          |      |         |   |         |      |         |   |         |      |   |   |         |      |  |   |         | 706     |  
|                                             |                                                                  |   |                                  |       |         |   |          |       |         |   |         |       |         |   |         |       |   |   |         |       |  |   |         |        
|                                             | Total                                                            |   | $                                | 489   |         |   | $        | 1,676 |         |   | $       | 3,938 |         |   | $       | 2,182 |   |   | $       | 1,776 |  |   | $       | 3,234   |  
|                                             |                                                                  |   |                                  |       |         |   |          |       |         |   |         |       |         |   |         |       |   |   |         |       |  |   |         |        

|                                  |                                                              |  |                  |       |         |  |   |       | 
|--------------------------------- | ------------------------------------------------------------ |  | ---------------- | ----- | ------- |  | - | ----- | 
|                                  |                                                              |  | Six Months Ended
|                                  |                                                              |  |                 
|                                  |                                                              |  | 6/30/02          |       | 6/30/01
|                                  |                                                              |  |                  |       |        
|Mortgage banking services income: |                                                              |  |                  |       |         |  |   |      
|                                 
|                                 
|                                 
|                                 
|                                  | Residential mortgage sales income                            |  | $                | 1,761 |         |  | $ | 3,746 | 
|                                 
|                                 
|                                 
|                                 
|                                  | Residential mortgage servicing income, net                   |  |                  | 404   |         |  |   | 558   | 
|                                 
|                                 
|                                 
|                                 
|                                  | Gain (loss) on sale of capitalized mortgage
servicing rights |  |                  |      |         |  |   | 706   | 
|                                  |                                                              |  |                  |       |         |  |   |       | 
|                                  | Total                                                        |  | $                | 2,165 |         |  | $ | 5,010 | 
|                                  |                                                              |  |                  |       |         |  |   |       | 

Trust and investment management services income amounted to $8.5 million for
the quarter ended June 30, 2002 compared to $8.7 million for the second quarter
of 2001, a decrease of 2%. For the six months ended June 30, 2002 and 2001,
trust and investment management services income amounted to $16.8 million and
$17.5 million, respectively, a decrease of 4%. Assets under management
decreased to $8.0 billion at June 30, 2002 from $8.6 billion at June 30, 2001
as a result of broad-based declines in the stock markets.

Investment planning services income increased $1.2 million, or 68%, in the
second quarter of 2002 compared to the second quarter of 2001. For the six
months ended June 30, 2002 and 2001, investment planning services income
amounted to $5.7 million and $3.5 million, respectively, an increase of 64%.
These increases were primarily attributable to higher sales of fixed annuities.

Insurance brokerage commissions income amounted to $10.1 million for the second
quarter of 2002 compared to $9.2 million for the same period in 2001, an
increase of 9%. For the six months ended June 30, 2002 and 2001, insurance
brokerage commissions income amounted to $20.2 million and $19.2 million,
respectively. Approximately two-thirds of the increase was due to rate
increases on existing policies while one-third of the increase was due to new
business.

22



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##### Table of Contents



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 June 30, 2002. We purchased
$40 million of BOLI in the first quarter of 2002. The BOLI investment provides
a means to finance increasing employee benefit costs. BOLI income was $5.0
million for the second quarter of 2002, compared to $4.9 million for the same
period in 2001, an increase of 2%. For the six months ended June 30, 2002 and
2001, BOLI income amounted to $9.4 million and $9.2 million, respectively. For
the second quarter of 2002, the average carrying value of BOLI was $366 million
compared to $310 million for the second quarter of 2001. BOLI represented
20.83% of capital and reserves at June 30, 2002.

Merchant and electronic banking income was $9.7 million for the second quarter
of 2002 compared to $8.0 million for the second quarter of 2001, an increase of
21%. For the six months ended June 30, 2002 and 2001, merchant and electronic
banking income amounted to $17.4 million and $14.5 million, respectively, an
increase of 20%. 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. The increases were due to increases in the volume
of transactions processed.

Loan fee income was $5.1 million for the second quarter of 2002 compared to
$3.0 million for the second quarter of 2001, an increase of $2.1 million, or
71%. For the six months ended June 30, 2002 and 2001, loan fee income amounted
to $10.5 million and $5.7 million, respectively, an increase of $4.8 million,
or 85%. Loan fee income includes early payoff charges, letter of credit fees,
late charges and other loan related fees. The increases in fee income in 2002
were primarily due to increased volumes and refinancing activities.

Net securities gains amounted to $350 thousand and $45 thousand during the
quarters ended June 30, 2002 and 2001, respectively. For the six months ended
June 30, 2002 and 2001, net securities gains amounted to $369 thousand and $803
thousand, 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 $901 thousand, or 49%, for the quarter ended
June 30, 2002 compared to the same quarter last year. For the six months ended
June 30, 2002 and 2001, other noninterest income amounted to $3.1 million and
$5.1 million, respectively. The declines were primarily due to losses on
venture capital investments and funded executive retirement plans, which were
partially offset by increases in income on covered call options.

Noninterest Expense

Noninterest expense was $138.5 million and $121.8 million for the quarters
ended June 30, 2002 and 2001, respectively, which represented an increase of
$16.7 million, or 14%. The increase was primarily due to salaries and employee
benefits expense ($12.9 million), occupancy expense ($1.7 million) and other
noninterest expense ($1.5 million.) which were partially offset by a decrease
in goodwill amortization expense of $2.8 million. The cash efficiency ratio
was 51.34% and 52.16% for the quarters ended June 30, 2002 and 2001,
respectively. For a description of the methodology we used to calculate the
cash efficiency ratio, see Note 5 to Table 1. For the six months ended June
30, 2002 and 2001, noninterest expense amounted to $283.2 million and $246.7
million, respectively, an increase of 15%. The increase was due to additional
expenses from the acquisitions of Andover and MetroWest and increased incentive
compensation.

Salaries and benefits expense of $75.8 million for the quarter ended June 30,
2002 increased $12.9 million, or 21%, from the same quarter of last year. For
the six months ended June 30, 2002 and 2001, salaries and benefits expense
amounted to $151.0 million and $124.6 million, respectively, also a 21%
increase. These increases were primarily due to additional employees from the
acquisitions of Andover and MetroWest in the fourth quarter of 2001 and
increased incentive compensation. The total number of full-time equivalent
employees was approximately 6,100 at June 30, 2002 compared to 5,600 at June
30, 2001. Pension expense under the defined benefit pension plan (which is
included in salaries and benefits expense) was $1.7 million and $1.1 million
for the six months ended June 30, 2002 and 2001, respectively. An important
component in the annual determination of pension expense is the fair value of
assets in the pension plan at the end of the year. The fair value of plan
assets as of June 30, 2002 was $128.7 million as compared to $141.0 million at
December 31, 2001. The year-to-date return on plan assets was minus 5%
primarily

23



---



##### Table of Contents



due to broad-based declines in the stock markets. It is not possible
to determine whether the fair value of plan assets will increase, decrease, or
stay the same by the next measurement date (December 31,
2002.)

Data processing expense of $9.8 million for the quarter ended June 30, 2002
increased $926 thousand, or 10%, from the same quarter a year ago. For the six
months ended June 30, 2002 and 2001, data processing expense amounted to $20.4
million and $17.9 million, respectively. Continued investments in information
technology and increased transaction volume contributed to the increases.

Occupancy expense of $12.8 million during the three months ended June 30, 2002
increased $1.7 million, or 15%, from the same quarter in 2001 due to the cost
of additional facilities from two acquisitions in the fourth quarter of 2001.
For the six months ended June 30, 2002 and 2001, occupancy expense amounted to
$25.3 million and $22.9 million respectively, a 11% increase.

Equipment expense of $9.9 million during the three months ended June 30, 2002
increased $1.2 million, or 13%, from the second quarter of last year. For the
six months ended June 30, 2002 and 2001, equipment expense amounted to $19.6
million and $16.9 million, respectively, an increase of 16%. These increases
were primarily due to depreciation relating to new technology equipment and
software.

Amortization of goodwill was $0 and $2.8 million for the quarters ended June
30, 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 $263 thousand due largely to the
amortization of core deposit intangibles recorded in connection with the two
acquisitions consummated during the fourth quarter of 2001. Amortization of
goodwill amounted to $5.6 million for the six months ended June 30, 2001 while
there was no amortization expense in 2002.

During the three months ended June 30, 2002, special charges of $1.1 million
($690 thousand after-tax) included merger-related expenses for the two
acquisitions effected in the fourth quarter of 2001 and costs related to
consolidating the charters of our eight national bank subsidiaries and trust
subsidiary to a single national bank charter effective January 1, 2002. There
were no special charges recorded in the second quarter of 2001. Special
charges for the six months ended June 30, 2002 and 2001 amounted to $9.3
million ($6.0 million after-tax) and $5.6 million ($3.7 million after-tax)
respectively. The following table summarizes the detail of special charges for
the three and six months ended June 30, 2002 and 2001.

24



---



##### Table of Contents



TABLE 5  Special Charges(In thousands)

|                                         |  |                    |       |                  |  |      |   |      |  |   |       |   |  |   |       | 
|---------------------------------------- |  | ------------------ | ----- | ---------------- |  | ---- | - | ---- |  | - | ----- | - |  | - | ----- | 
|                                         |  | Three Months Ended |       | Six Months Ended
|                                         |  | June 30,           |       | June 30,        
|                                         |  |                    |       |                 
|                                         |  | 2002               |       | 2001             |  | 2002 |   | 2001
|                                         |  |                    |       |                  |  |      |   |     
|Andover/MetroWest
Merger Charges         |  |                    |       |                  |  |      |   |      |  |   |       |   |  |   |       | 
|Severance costs (1)                      |  | $                  | (423  | )                |  | $    | 0 |      |  | $ | 635   |   |  | $ | 0     | 
|                                        
|                                        
|                                        
|                                        
|Data processing/systems integration      |  |                    | 336   |                  |  |      |  |      |  |   | 3,052 |   |  |   |      | 
|                                        
|                                        
|                                        
|                                        
|Other costs (1)                          |  |                    | (174  | )                |  |      |  |      |  |   | 1,858 |   |  |   |      | 
|                                         |  |                    |       |                  |  |      |   |      |  |   |       |   |  |   |       | 
|                                         |  |                    | (261  | )                |  |      |  |      |  |   | 5,545 |   |  |   |      | 
|                                         |  |                    |       |                  |  |      |   |      |  |   |       |   |  |   |       | 
|Ipswich
Merger Charges                   |  |                    |       |                  |  |      |   |      |  |   |       |   |  |   |       | 
|Data processing/systems integration      |  |                    | 133   |                  |  |      |  |      |  |   | 133   |   |  |   |      | 
|                                        
|                                        
|                                        
|                                        
|Other costs                              |  |                    | 499   |                  |  |      |  |      |  |   | 502   |   |  |   |      | 
|                                         |  |                    |       |                  |  |      |   |      |  |   |       |   |  |   |       | 
|                                         |  |                    | 632   |                  |  |      |  |      |  |   | 635   |   |  |   |      | 
|                                         |  |                    |       |                  |  |      |   |      |  |   |       |   |  |   |       | 
|Southington
Merger Charges               |  |                    |       |                  |  |      |   |      |  |   |       |   |  |   |       | 
|Data processing/systems integration      |  |                    | 1     |                  |  |      |  |      |  |   | 1     |   |  |   |      | 
|                                        
|                                        
|                                        
|                                        
|Other costs                              |  |                    | 78    |                  |  |      |  |      |  |   | 78    |   |  |   |      | 
|                                         |  |                    |       |                  |  |      |   |      |  |   |       |   |  |   |       | 
|                                         |  |                    | 79    |                  |  |      |  |      |  |   | 79    |   |  |   |      | 
|                                         |  |                    |       |                  |  |      |   |      |  |   |       |   |  |   |       | 
|Banknorth
Merger Charges                 |  |                    |       |                  |  |      |   |      |  |   |       |   |  |   |       | 
|Severance costs                          |  |                    |      |                  |  |      |  |      |  |   |      |   |  |   | 2,329 | 
|                                        
|                                        
|                                        
|                                        
|Asset write-downs/facility costs         |  |                    | 29    |                  |  |      |  |      |  |   | 29    |   |  |   |      | 
|                                        
|                                        
|                                        
|                                        
|Gain on regulatory-mandated branch sales |  |                    | (478  | )                |  |      |  |      |  |   | (478  | ) |  |   |      | 
|                                         |  |                    |       |                  |  |      |   |      |  |   |       |   |  |   |       | 
|                                         |  |                    | (449  | )                |  |      |  |      |  |   | (449  | ) |  |   | 2,329 | 
|                                         |  |                    |       |                  |  |      |   |      |  |   |       |   |  |   |       | 
|Charter
Consolidation Costs              |  |                    |       |                  |  |      |   |      |  |   |       |   |  |   |       | 
|Severance costs                          |  |                    | 770   |                  |  |      |   |      |  |   | 770   |   |  |   |       | 
|                                        
|                                        
|                                        
|                                        
|Branch signage                           |  |                    |      |                  |  |      |  |      |  |   | 729   |   |  |   |      | 
|                                        
|                                        
|                                        
|                                        
|Customer notices                         |  |                    |      |                  |  |      |  |      |  |   | 567   |   |  |   |      | 
|                                        
|                                        
|                                        
|                                        
|Forms and documents                      |  |                    | 192   |                  |  |      |  |      |  |   | 576   |   |  |   |      | 
|                                        
|                                        
|                                        
|                                        
|Other costs                              |  |                    | 131   |                  |  |      |  |      |  |   | 780   |   |  |   |      | 
|                                         |  |                    |       |                  |  |      |   |      |  |   |       |   |  |   |       | 
|                                         |  |                    | 1,093 |                  |  |      |  |      |  |   | 3,422 |   |  |   |      | 
|                                         |  |                    |       |                  |  |      |   |      |  |   |       |   |  |   |       | 
|Branch
closings                          |  |                    |       |                  |  |      |   |      |  |   |       |   |  |   |       | 
|Severance costs                          |  |                    |      |                  |  |      |  |      |  |   |      |   |  |   | 47    | 
|                                        
|                                        
|                                        
|                                        
|Asset write-downs/lease terminations     |  |                    |      |                  |  |      |  |      |  |   |      |   |  |   | 1,585 | 
|                                        
|                                        
|                                        
|                                        
|Branch decommissioning costs             |  |                    |      |                  |  |      |  |      |  |   | 66    |   |  |   | 755   | 
|                                        
|                                        
|                                        
|                                        
|Reversal of prior accruals               |  |                    | (33   | )                |  |      |  |      |  |   | (33   | ) |  |   |      | 
|                                         |  |                    |       |                  |  |      |   |      |  |   |       |   |  |   |       | 
|                                         |  |                    | (33   | )                |  |      |  |      |  |   | 33    |   |  |   | 2,387 | 
|                                         |  |                    |       |                  |  |      |   |      |  |   |       |   |  |   |       | 
|Other
Special Charges                    |  |                    |       |                  |  |      |   |      |  |   |       |   |  |   |       | 
|Write-down of auto lease residuals       |  |                    |      |                  |  |      |  |      |  |   |      |   |  |   | 892   | 
|                                         |  |                    |       |                  |  |      |   |      |  |   |       |   |  |   |       | 
|                                         |  |                    |      |                  |  |      |  |      |  |   |      |   |  |   | 892   | 
|                                         |  |                    |       |                  |  |      |   |      |  |   |       |   |  |   |       | 
|Total Special Charges                    |  | $                  | 1,061 |                  |  | $    | 0 |      |  | $ | 9,265 |   |  | $ | 5,608 | 
|                                         |  |                    |       |                  |  |      |   |      |  |   |       |   |  |   |       | 



---

|(1) |  | Includes reversal of prior accruals.
|--- |  | ------------------------------------

The following table summarizes activity in the accrual account for special
charges from December 31, 2001 through June 30, 2002.

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

|                                           |  |           |         |         |  |             |      |           |  |               |     |             |  |           |      |       |  |   |        |   |  |   |      |   |  |   |   |  |  |   |         |  
|------------------------------------------ |  | --------- | ------- | ------- |  | ----------- | ---- | --------- |  | ------------- | --- | ----------- |  | --------- | ---- | ----- |  | - | ------ | - |  | - | ---- | - |  | - | - |  |  | - | ------- | -
|                                           |  |           |         |         |  |             |      |           |  |               |     |             |  | Banknorth |      |       |  |   |        |   |  |   |      |   |  |   |   |  |  |  
|                                           |  | Andover/  |         |         |  |             |      |           |  |               |     | Group, Inc. |  |           |      |       |  |   |        |   |  |   |      |   |  |   |   | 
|                                           |  | MetroWest |         | Ipswich |  | Southington |      | (Vermont) |  | Charter       |     | Branch      |  |           |      |       |  |   |        |  
|                                           |  | Mergers   |         | Merger  |  | Merger      |      | Merger    |  | Consolidation |     | Closings    |  | Other     |      | Total
|                                           |  |           |         |         |  |             |      |           |  |               |     |             |  |           |      |      
|Balance, December 31, 2001                 |  | $         | 11,207  |         |  | $           | 0    |           |  | $             | 0   |             |  | $         | 330  |       |  | $ | 0      |   |  | $ | 296  |   |  | $ | 0 |  |  | $ | 11,833  |  
|                                          
|                                          
|                                          
|                                          
|Special charges                            |  |           | 5,545   |         |  |             | 635  |           |  |               | 79  |             |  |           | (449 | )     |  |   | 3,422  |   |  |   | 33   |   |  |   |  |  |  |   | 9,265   |  
|                                          
|                                          
|                                          
|                                          
|Cash payments                              |  |           | (15,915 | )       |  |             | (635 | )         |  |               | (79 | )           |  |           | 304  |       |  |   | (2,748 | ) |  |   | (218 | ) |  |   |  |  |  |   | (19,291 | )
|                                          
|                                          
|                                          
|                                          
|Non-cash write-downs and other adjustments |  |           | (49     | )       |  |             |     |           |  |               |    |             |  |           |     |       |  |   | (674   | ) |  |   | 166  |   |  |   |  |  |  |   | (557    | )
|                                           |  |           |         |         |  |             |      |           |  |               |     |             |  |           |      |       |  |   |        |   |  |   |      |   |  |   |   |  |  |   |         |  
|Balance, June 30, 2002                     |  | $         | 788     |         |  | $           | 0    |           |  | $             | 0   |             |  | $         | 185  |       |  | $ | 0      |   |  | $ | 277  |   |  | $ | 0 |  |  | $ | 1,250   |  
|                                           |  |           |         |         |  |             |      |           |  |               |     |             |  |           |      |       |  |   |        |   |  |   |      |   |  |   |   |  |  |   |         |  

25



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##### Table of Contents



Other non-interest expenses increased by $1.5 million, or 6%, during the three
months ended June 30, 2002 as compared to the comparable period in the prior
year. Through the six months ended June 30, 2002 and 2001, other noninterest
expenses amounted to $51.3 million and $48.0 million, respectively, a $3.3
million, or 7% increase. The following table summarizes the principal
components of other noninterest expenses for the periods indicated.

TABLE 7  Other Noninterest
Expenses(In thousands)

|                                                       |  |         |        |         |  |         |        |         |  |         |        |         |  |   |        |  |  |   |        |  |  |   |        | 
|------------------------------------------------------ |  | ------- | ------ | ------- |  | ------- | ------ | ------- |  | ------- | ------ | ------- |  | - | ------ |  |  | - | ------ |  |  | - | ------ | 
|                                                       |  | 2002    |        | 2001   
|                                                       |  |         |        |        
|                                                       |  | Second  |        | First   |  | Fourth  |        | Third   |  | Second  |        | First  
|                                                       |  | Quarter |        | Quarter |  | Quarter |        | Quarter |  | Quarter |        | Quarter
|                                                       |  |         |        |         |  |         |        |         |  |         |        |        
|Advertising and marketing                              |  | $       | 4,237  |         |  | $       | 3,977  |         |  | $       | 3,615  |         |  | $ | 2,582  |  |  | $ | 3,324  |  |  | $ | 2,387  | 
|                                                      
|                                                      
|                                                      
|                                                      
|Telephone                                              |  |         | 3,332  |         |  |         | 3,189  |         |  |         | 2,796  |         |  |   | 2,918  |  |  |   | 2,853  |  |  |   | 3,007  | 
|                                                      
|                                                      
|                                                      
|                                                      
|Office supplies                                        |  |         | 2,597  |         |  |         | 2,819  |         |  |         | 2,183  |         |  |   | 2,097  |  |  |   | 2,506  |  |  |   | 2,320  | 
|                                                      
|                                                      
|                                                      
|                                                      
|Postage and freight                                    |  |         | 2,206  |         |  |         | 2,609  |         |  |         | 2,400  |         |  |   | 2,039  |  |  |   | 2,448  |  |  |   | 2,478  | 
|                                                      
|                                                      
|                                                      
|                                                      
|Miscellaneous loan costs                               |  |         | 1,706  |         |  |         | 1,167  |         |  |         | 2,041  |         |  |   | 1,902  |  |  |   | 1,699  |  |  |   | 1,737  | 
|                                                      
|                                                      
|                                                      
|                                                      
|Deposits and other assessments                         |  |         | 901    |         |  |         | 799    |         |  |         | 963    |         |  |   | 825    |  |  |   | 837    |  |  |   | 835    | 
|                                                      
|                                                      
|                                                      
|                                                      
|Collection and carrying costs
of non-performing assets |  |         | 807    |         |  |         | 649    |         |  |         | 1,714  |         |  |   | 705    |  |  |   | 482    |  |  |   | 610    | 
|                                                      
|                                                      
|                                                      
|                                                      
|Other                                                  |  |         | 10,518 |         |  |         | 9,793  |         |  |         | 12,678 |         |  |   | 9,661  |  |  |   | 10,697 |  |  |   | 9,806  | 
|                                                       |  |         |        |         |  |         |        |         |  |         |        |         |  |   |        |  |  |   |        |  |  |   |        | 
|Total                                                  |  | $       | 26,304 |         |  | $       | 25,002 |         |  | $       | 28,390 |         |  | $ | 22,729 |  |  | $ | 24,846 |  |  | $ | 23,180 | 
|                                                       |  |         |        |         |  |         |        |         |  |         |        |         |  |   |        |  |  |   |        |  |  |   |        | 

|                                                       |  |                  |        |         |  |   |        | 
|------------------------------------------------------ |  | ---------------- | ------ | ------- |  | - | ------ | 
|                                                       |  | Six Months Ended
|                                                       |  |                 
|                                                       |  | 6/30/02          |        | 6/30/01
|                                                       |  |                  |        |        
|Advertising and marketing                              |  | $                | 8,214  |         |  | $ | 5,711  | 
|                                                      
|                                                      
|                                                      
|                                                      
|Telephone                                              |  |                  | 6,521  |         |  |   | 5,860  | 
|                                                      
|                                                      
|                                                      
|                                                      
|Office supplies                                        |  |                  | 5,416  |         |  |   | 4,826  | 
|                                                      
|                                                      
|                                                      
|                                                      
|Postage and freight                                    |  |                  | 4,815  |         |  |   | 4,926  | 
|                                                      
|                                                      
|                                                      
|                                                      
|Miscellaneous loan costs                               |  |                  | 2,873  |         |  |   | 3,436  | 
|                                                      
|                                                      
|                                                      
|                                                      
|Deposits and other assessments                         |  |                  | 1,700  |         |  |   | 1,672  | 
|                                                      
|                                                      
|                                                      
|                                                      
|Collection and carrying costs
of non-performing assets |  |                  | 1,456  |         |  |   | 1,092  | 
|                                                      
|                                                      
|                                                      
|                                                      
|Other                                                  |  |                  | 20,310 |         |  |   | 20,503 | 
|                                                       |  |                  |        |         |  |   |        | 
|Total                                                  |  | $                | 51,305 |         |  | $ | 48,026 | 
|                                                       |  |                  |        |         |  |   |        | 

Taxes

The effective tax rate was 34% and 35% for the quarters ended June 30, 2002 and
2001, respectively, and 34% for each of the six months ended June 30, 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.

Stock Option Accounting

The Company currently accounts for employee stock options using the intrinsic
value method. Under the intrinsic value method, no compensation cost is
recognized related to options if the exercise price of the option is greater
than

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##### Table of Contents



or equal to the fair market value of the underlying stock on the date of grant.
Under an alternative method, the fair value method, the cost of the option
is estimated using an option valuation model and recognized as compensation
expense over the vesting period of the option. Any change from the intrinsic
value method to the fair value method of accounting for stock options is
required to be applied prospectively for options granted after the date of
change in method which must be as of the beginning of a fiscal year. The
Company generally awards stock options annually with a grant date in October.
In 2001 the Company granted 3,193,168 options with a weighted average fair
value of $6.10 using the Black- Scholes option pricing model; these options
vest ratably over a 3 year period. Had the Company adopted the fair value
method of accounting for stock options effective as of January 1, 2001, the
options granted in 2001 would have resulted in compensation expense (after tax
effect) of $0.9 million in 2001, $4.2 million in 2002, $4.2 million in 2003,
and $3.3 million in 2004. Assuming stock options were issued annually after
October 31, 2001, the after-tax compensation expense attributable to stock
options would continue to increase annually through 2004 and then level off.
The accounting standard-setters are contemplating changes to the transition
requirements with respect to the adoption of the fair market value method.

Comprehensive Income

Comprehensive income amounted to $177.7 million and $149.3 million during the
six months ended June 30, 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 $76.4 million, $40.3 million and ($510)
thousand at June 30, 2002, December 31, 2001 and June 30, 2001, respectively.
At June 30, 2002, the net unrealized gains of $117.5 million, before related
tax effect, represented 2% 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.

27



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##### Table of Contents



FINANCIAL CONDITION

Our consolidated total assets amounted to $21.3 billion and $21.1 billion at
June 30, 2002 and December 31, 2001, respectively. Total average assets were
$20.9 billion and $20.7 billion for the three and six months ended June 30,
2002, respectively, compared to $18.2 billion and $18.1 billion for the
comparable periods of 2001; these increases were largely due to the Andover and
MetroWest acquisitions on October 31, 2001. Shareholders equity totaled $1.8
billion at June 30, 2002 and December 31, 2001, respectively.

Securities and Other Earning Assets

The securities portfolio averaged $6.3 billion during the second quarter of
2002, as compared to $5.9 billion in the second quarter of 2001. The
securities portfolio consisted primarily of mortgage-backed securities, most of
which were seasoned 15-year federal agency securities and U.S. Government and
agency securities. Other securities in the portfolio were collateralized
mortgage obligations, which included securitized residential real estate loans
held in a REMIC, and asset-backed securities. The majority of securities
available for sale were rated AAA or equivalently rated. The average yield on
securities was 5.79% for the quarter ended June 30, 2002 and 6.42% for the
quarter ended June 30, 2001. With the exception of the securitized residential
real estate loans held in a REMIC that were 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 $76.4 million and $40.3 million at June 30, 2002 and
December 31, 2001, respectively. The increase was primarily due to lower
prevailing long-term rates at June 30, 2002.

Loans and Leases

Total loans and leases (including loans held for sale) averaged $12.9 billion
during the second quarter of 2002, an increase of $2.0 billion, or 18%, from
the second quarter of 2001. This increase was primarily attributable to the
acquisition of $1.9 billion of loans and leases in connection with the
acquisitions of Andover and MetroWest in the fourth quarter of 2001. Average
loans as a percent of average earning assets was 67% during the quarter ended
June 30, 2002 compared to 65% during the quarter ended June 30, 2001.

Average residential real estate loans (which include mortgage loans held for
sale) of $2.6 billion during the second quarter of 2002 increased $363 million
from the second quarter of last year. Excluding the fourth quarter of 2001
acquisitions, average residential loans decreased $458 million. Increased
refinancing activity and prepayments in a lower interest rate environment
caused residential loans to decline. Mortgage loans held for sale amounted
to $52.1 million and $75.1 million at June 30, 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 while all new 15-year and
20-year fixed-rate loans and all adjustable-rate loans are originated for our
portfolio.

Average commercial real estate loans of $4.2 billion increased $1.2 billion, or
39%, from the second quarter of last year. Excluding the acquisitions in the
fourth quarter of 2001, average commercial real estate loans increased $530
million. The majority of the increase was in the Massachusetts market. The
average yield on commercial real estate loans during the second quarter of 2002
was 7.07%, as compared to 8.58% in the second quarter of 2001, a decrease of
151 basis points. The lower yield reflects the effect of the Federal Reserve
Board rate cuts in 2001 on variable-rate loans as well as fixed-rate loans
which have refinanced at lower rates.

Commercial business loans and leases averaged $2.6 billion during the second
quarter of 2002, an increase of $273 million, or 12%, over the second quarter
of 2001. Excluding the acquisitions in the fourth quarter of 2001, average
commercial business loans and leases increased $140 million. The largest
increases were in New York, Maine and Massachusetts. The yield on commercial
business loans and leases decreased to 6.08% in the second quarter of 2002 from
8.03% in the second 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 second quarter of
2002 increased $188 million, or 6%, from the second quarter of 2001.
Acquisitions in the fourth quarter of 2001 accounted for approximately $150

28



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##### Table of Contents



million (or 5%) of the increase while internal loan growth accounted for
approximately $38 million (or 1%) of the increase. Although the internal
increase is seemingly small, origination levels have offset significant
prepayment activity as proceeds of mortgage loans refinancings have been used
to pay down consumer loans. The average yield on consumer loans and leases
decreased to 7.06% in the second quarter of 2002 from 8.42% in the second
quarter of 2001, which also reflected the Federal Reserve Board rate cuts in
2001.

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 $72.2 million at June 30, 2002, or 0.34% of total
assets, compared to $81.2 million, or 0.39% of total assets, at December 31,
2001 and to $73.3 million, or 0.40% of total assets, at June 30, 2001. Total
nonperforming loans as a percentage of total loans (excluding residential real
estate loans held for sale) was 0.51%, 0.59% and 0.62% at June 30, 2002,
December 31, 2001 and June 30, 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 19% of the total loan portfolio at
June 30, 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 June 30, 2002, 0.28% of the residential loans were
nonperforming, as compared with 0.32% at December 31, 2001 and 0.46% at June
30, 2001.

Commercial real estate loans accounted for 33% of the total loan portfolio at
June 30, 2002 and 32% at 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 upstate New York, particularly Maine, Massachusetts, New Hampshire
and Vermont. At June 30, 2002, 0.47% of the commercial real estate loans were
nonperforming, as compared with 0.42% at December 31, 2001 and 0.41% at June
30, 2001.

Commercial business loans and leases accounted for 21% of the total loan
portfolio at June 30, 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 June 30, 2002, we had $147
million of participations in syndicated commercial loans and commitments to
purchase an additional $244 million of such participations. At June 30, 2002,
1.25% of commercial business loans and leases were non-performing, as compared
with 1.64% at December 31, 2001 and June 30, 2001.

Consumer loans and leases accounted for 27% of the total loan portfolio at June
30, 2002 and 28% at 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
June 30, 2002 and 2001, 0.17% of our consumer loans and leases were
nonperforming, as compared with 0.27% at December 31, 2001.

At June 30, 2002, we had $2.7 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 $5.8 million at June 30, 2001. The decrease was due to a reduction in
delinquent consumer loans, particularly guaranteed student loans and fee plan
loans.

29



---



##### Table of Contents



TABLE 8  Nonperforming Assets(Dollars in thousands)

|                                                                                                            |                                      |   |         |        |         |   |          |        |         |   |         |        |         |   |        |        |  |   |        |        |  |   |        |        | 
|----------------------------------------------------------------------------------------------------------- | ------------------------------------ | - | ------- | ------ | ------- | - | -------- | ------ | ------- | - | ------- | ------ | ------- | - | ------ | ------ |  | - | ------ | ------ |  | - | ------ | ------ | 
|                                                                                                            |                                      |   | 6/30/02 |        | 3/31/02 |   | 12/31/01 |        | 9/30/01 |   | 6/30/01 |        | 3/31/01
|                                                                                                            |                                      |   |         |        |         |   |          |        |         |   |         |        |        
|Nonaccrual loans and leases:                                                                                |                                      |   |         |        |         |   |          |        |         |   |         |        |         |   |        |        |  |   |        |        |  |   |        |       
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|Residential real estate loans                                                                               |                                      | $ | 7,075   |        |         | $ | 7,689    |        |         | $ | 8,311   |        |         | $ | 8,222  |        |  | $ | 9,590  |        |  | $ | 10,575 |       
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|Commercial real estate loans                                                                                |                                      |   | 20,254  |        |         |   | 20,812   |        |         |   | 17,124  |        |         |   | 15,145 |        |  |   | 12,550 |        |  |   | 13,205 |       
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|Commercial business loans and leases                                                                        |                                      |   | 33,573  |        |         |   | 34,481   |        |         |   | 40,341  |        |         |   | 34,220 |        |  |   | 39,208 |        |  |   | 32,233 |       
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|Consumer loans and leases                                                                                   |                                      |   | 6,008   |        |         |   | 8,183    |        |         |   | 9,470   |        |         |   | 6,380  |        |  |   | 5,795  |        |  |   | 5,611  |       
|                                                                                                            |                                      |   |         |        |         |   |          |        |         |   |         |        |         |   |        |        |  |   |        |        |  |   |        |       
|Total nonaccrual loans and leases                                                                           |                                      |   | 66,910  |        |         |   | 71,165   |        |         |   | 75,246  |        |         |   | 63,967 |        |  |   | 67,143 |        |  |   | 61,624 |       
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|Total troubled debt restructurings                                                                          |                                      |   |        |        |         |   |         |        |         |   |        |        |         |   |       |        |  |   |       |        |  |   |       |       
|                                                                                                            |                                      |   |         |        |         |   |          |        |         |   |         |        |         |   |        |        |  |   |        |        |  |   |        |       
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                            | Total nonperforming loans and leases |   |         | 66,910 |         |   |          | 71,165 |         |   |         | 75,246 |         |   |        | 63,967 |  |   |        | 67,143 |  |   |        | 61,624 | 
|                                                                                                            |                                      |   |         |        |         |   |          |        |         |   |         |        |         |   |        |        |  |   |        |        |  |   |        |       
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|Other nonperforming assets:                                                                                 |                                      |   |         |        |         |   |          |        |         |   |         |        |         |   |        |        |  |   |        |        |  |   |        |       
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|Other real estate owned, net of related reserves                                                            |                                      |   | 1,212   |        |         |   | 1,262    |        |         |   | 1,861   |        |         |   | 4,468  |        |  |   | 4,508  |        |  |   | 4,310  |       
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|Repossessions, net of related reserves                                                                      |                                      |   | 1,964   |        |         |   | 2,251    |        |         |   | 2,016   |        |         |   | 2,428  |        |  |   | 1,618  |        |  |   | 1,935  |       
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|Securities available for sale                                                                               |                                      |   | 2,104   |        |         |   | 2,104    |        |         |   | 2,104   |        |         |   |       |        |  |   |       |        |  |   |       |       
|                                                                                                            |                                      |   |         |        |         |   |          |        |         |   |         |        |         |   |        |        |  |   |        |        |  |   |        |       
|                                                                                                            | Total other nonperforming assets     |   |         | 5,280  |         |   |          | 5,617  |         |   |         | 5,981  |         |   |        | 6,896  |  |   |        | 6,126  |  |   |        | 6,245  | 
|                                                                                                            |                                      |   |         |        |         |   |          |        |         |   |         |        |         |   |        |        |  |   |        |        |  |   |        |       
|Total nonperforming assets                                                                                  |                                      | $ | 72,190  |        |         | $ | 76,782   |        |         | $ | 81,227  |        |         | $ | 70,863 |        |  | $ | 73,269 |        |  | $ | 67,869 |       
|                                                                                                            |                                      |   |         |        |         |   |          |        |         |   |         |        |         |   |        |        |  |   |        |        |  |   |        |       
|Accruing loans and leases which are 90 days or more overdue                                                 |                                      | $ | 2,680   |        |         | $ | 5,430    |        |         | $ | 6,227   |        |         | $ | 6,055  |        |  | $ | 5,799  |        |  | $ | 7,664  |       
|                                                                                                            |                                      |   |         |        |         |   |          |        |         |   |         |        |         |   |        |        |  |   |        |        |  |   |        |       
|Total nonperforming loans as a percentage of total
loans andleases(1)                                       |                                      |   | 0.51    | %      |         |   | 0.56     | %      |         |   | 0.59    | %      |         |   | 0.59   | %      |  |   | 0.62   | %      |  |   | 0.57   | %     
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|Total nonperforming assets as a percentage of total assets                                                  |                                      |   | 0.34    | %      |         |   | 0.37     | %      |         |   | 0.39    | %      |         |   | 0.39   | %      |  |   | 0.40   | %      |  |   | 0.37   | %     
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|Total nonperforming assets as a percentage of total loans
andleases(1) and total other nonperforming assets |                                      |   | 0.55    | %      |         |   | 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 $10.8 million and $9.3 million for loan and lease losses in the
quarters ended June 30, 2002 and 2001, respectively. As shown in Table 9, net
charge-offs for the second quarter of 2002 were $8.3 million, or 0.26% of
average loans outstanding, compared to $7.6 million, or 0.28% of average loans
outstanding, for the second quarter of 2001. The increase in the provision for
loan and lease losses for the three months ended June 30, 2002 reflect higher
levels of net charge-offs and increased loans outstanding, as compared to the
second quarter of 2001. At June 30, 2002, the allowance for loan and lease
losses amounted to $193.4 million, or 1.48% of total portfolio loans and
leases, as compared to $155.3 million, or 1.43%, at June 30, 2001. The ratio
of the allowance for loan and lease losses to nonperforming loans was 289% at
June 30, 2002 and 231% at June 30, 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. During 2002, we have not changed our overall
approach in the determination of the allowance for loan and lease losses and
there have been no material changes in assumptions or estimation techniques as
compared to prior periods in determining the adequacy of the allowance for loan
and lease losses in the current period.

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

30



---



##### Table of Contents



our market areas, 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.

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

|                                                                                                   |                                    |                                      |            |             |       |            |            |             |       |            |            |             |       |            |            |        |       |   |            |        |       |   |            |       |       |  
|-------------------------------------------------------------------------------------------------- | ---------------------------------- | ------------------------------------ | ---------- | ----------- | ----- | ---------- | ---------- | ----------- | ----- | ---------- | ---------- | ----------- | ----- | ---------- | ---------- | ------ | ----- | - | ---------- | ------ | ----- | - | ---------- | ----- | ----- | -
|                                                                                                   |                                    |                                      |            | 2002 Second |       | 2002 First |            | 2001 Fourth |       | 2001 Third |            | 2001 Second |       | 2001 First
|                                                                                                   |                                    |                                      |            | Quarter     |       | Quarter    |            | Quarter     |       | Quarter    |            | Quarter     |       | Quarter   
|                                                                                                   |                                    |                                      |            |             |       |            |            |             |       |            |            |             |       |           
|Allowance at beginning of period                                                                   |                                    | $                                    | 190,890    |             |       | $          | 189,837    |             |       | $          | 158,532    |             |       | $          | 155,303    |        |       | $ | 153,621    |        |       | $ | 153,550    |      
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Additions due to acquisitions                                                                      |                                    |                                      |           |             |       |            |           |             |       |            | 31,277     |             |       |            |           |        |       |   |           |        |       |   |           |      
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Charge-offs:                                                                                       |                                    |                                      |            |             |       |            |            |             |       |            |            |             |       |            |            |        |       |   |            |        |       |   |            |      
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Real estate mortgages                                                                              |                                    |                                      | 474        |             |       |            | 501        |             |       |            | 644        |             |       |            | 735        |        |       |   | 724        |        |       |   | 790        |      
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Commercial business loans and leases                                                               |                                    |                                      | 5,319      |             |       |            | 5,374      |             |       |            | 8,186      |             |       |            | 4,074      |        |       |   | 4,864      |        |       |   | 3,774      |      
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Consumer loans and leases                                                                          |                                    |                                      | 5,834      |             |       |            | 7,042      |             |       |            | 7,253      |             |       |            | 5,439      |        |       |   | 4,706      |        |       |   | 4,463      |      
|                                                                                                   |                                    |                                      |            |             |       |            |            |             |       |            |            |             |       |            |            |        |       |   |            |        |       |   |            |      
|                                                                                                   | Total loans and leases charged off |                                      |            | 11,627      |       |            |            | 12,917      |       |            |            | 16,083      |       |            |            | 10,248 |       |   |            | 10,294 |       |   |            | 9,027 |      
|                                                                                                   |                                    |                                      |            |             |       |            |            |             |       |            |            |             |       |            |            |        |       |   |            |        |       |   |            |      
|Recoveries:                                                                                        |                                    |                                      |            |             |       |            |            |             |       |            |            |             |       |            |            |        |       |   |            |        |       |   |            |      
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Real estate mortgages                                                                              |                                    |                                      | 48         |             |       |            | 50         |             |       |            | (87        | )           |       |            | 62         |        |       |   | 349        |        |       |   | 138        |      
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Commercial business loans and leases                                                               |                                    |                                      | 2,137      |             |       |            | 1,101      |             |       |            | 1,908      |             |       |            | 476        |        |       |   | 1,524      |        |       |   | 890        |      
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Consumer loans and leases                                                                          |                                    |                                      | 1,168      |             |       |            | 991        |             |       |            | 911        |             |       |            | 878        |        |       |   | 792        |        |       |   | 932        |      
|                                                                                                   |                                    |                                      |            |             |       |            |            |             |       |            |            |             |       |            |            |        |       |   |            |        |       |   |            |      
|                                                                                                   | Total loans and leases recovered   |                                      |            | 3,353       |       |            |            | 2,142       |       |            |            | 2,732       |       |            |            | 1,416  |       |   |            | 2,665  |       |   |            | 1,960 |      
|                                                                                                   |                                    |                                      |            |             |       |            |            |             |       |            |            |             |       |            |            |        |       |   |            |        |       |   |            |      
|Net charge-offs                                                                                    |                                    |                                      | 8,274      |             |       |            | 10,775     |             |       |            | 13,351     |             |       |            | 8,832      |        |       |   | 7,629      |        |       |   | 7,067      |      
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Provision for loan and lease losses                                                                |                                    |                                      | 10,829     |             |       |            | 11,828     |             |       |            | 13,379     |             |       |            | 12,061     |        |       |   | 9,311      |        |       |   | 7,138      |      
|                                                                                                   |                                    |                                      |            |             |       |            |            |             |       |            |            |             |       |            |            |        |       |   |            |        |       |   |            |      
|Allowance at end of period                                                                         |                                    | $                                    | 193,445    |             |       | $          | 190,890    |             |       | $          | 189,837    |             |       | $          | 158,532    |        |       | $ | 155,303    |        |       | $ | 153,621    |      
|                                                                                                   |                                    |                                      |            |             |       |            |            |             |       |            |            |             |       |            |            |        |       |   |            |        |       |   |            |      
|Average loans and leases outstanding
during the period (1)                                         |                                    | $                                    | 12,912,318 |             |       | $          | 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) |                                    |                                      | 0.26       | %           |       |            | 0.34       | %           |       |            | 0.44       | %           |       |            | 0.32       | %      |       |   | 0.28       | %      |       |   | 0.26       | %    
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Ratio of allowance to total loans and leases
at end of period (1)                                  |                                    |                                      | 1.48       | %           |       |            | 1.50       | %           |       |            | 1.49       | %           |       |            | 1.45       | %      |       |   | 1.43       | %      |       |   | 1.43       | %    
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Ratio of allowance to nonperforming loans
and leases at end of period                              |                                    |                                      | 289        | %           |       |            | 268        | %           |       |            | 252        | %           |       |            | 248        | %      |       |   | 231        | %      |       |   | 249        | %    
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Ratio of net charge-offs as a percent of average
outstanding loans and leases, annualized (1):     |                                    |                                      |            |             |       |            |            |             |       |            |            |             |       |            |            |        |       |   |            |        |       |   |            |      
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   |                                    | Real estate mortgages                |            |             | 0.025 | %          |            |             | 0.027 | %          |            |             | 0.046 | %          |            |        | 0.052 | % |            |        | 0.029 | % |            |       | 0.051 | %
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   |                                    | Commercial business loans and leases |            |             | 0.486 | %          |            |             | 0.688 | %          |            |             | 1.047 | %          |            |        | 0.605 | % |            |        | 0.577 | % |            |       | 0.508 | %
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   |                                    | Consumer loans and leases            |            |             | 0.524 | %          |            |             | 0.678 | %          |            |             | 0.717 | %          |            |        | 0.539 | % |            |        | 0.470 | % |            |       | 0.424 | %



---

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

31



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##### Table of Contents



Deposits

Total deposits averaged $14.2 billion during the second quarter of 2002, an
increase of $2.0 billion from the second quarter of 2001. Excluding deposits
of Andover and MetroWest acquired in the fourth quarter of 2001, deposits were
essentially unchanged from the second quarter of last year. However, the
deposit mix changed favorably. Certificates of deposit and brokered deposits
(which tend to pay higher rates) as a percent of total deposits declined from
37% in the second quarter of 2001 to 32% in the second quarter of 2002. The
ratio of loans to deposits was 91% and 89% at June 30, 2002 and December 31,
2001, respectively.

Average non-interest bearing deposits of $2.5 billion during the second quarter
of 2002 increased $419.6 million, or 20%, from the second quarter of 2001,
including approximately $294.0 million from Andover and MetroWest. The
increase in non-interest bearing deposits reflected strong growth in
commercial, government and personal accounts.

Average interest-bearing deposits of $11.7 billion during the second quarter of
2002 increased $1.5 billion from the second quarter of 2001 primarily due to
the acquisition of Andover and MetroWest in the fourth quarter of 2001. Andover
and MetroWest had combined interest-bearing deposits of approximately $1.7
billion. The net decrease in interest-bearing deposits, exclusive of
acquisitions, was primarily due to the planned run-off of brokered deposits
and, to a lesser extent, certificates of deposit run-off related to relatively
low market rates. The average rates paid on NOW and money market accounts
decreased 130 basis points from 2.82% in the second quarter of 2001 to 1.52% in
the second quarter of 2002 due largely to lower prevailing interest rates. The
average rates paid on all deposit types decreased by 170 basis points from
3.81% in the second quarter of 2001 to 2.11% in the second 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 second quarter of 2002 and $1.2 billion in
the second 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

Other than deposits, our primary sources of funds are borrowings. Our
principal borrowing sources are advances from Federal Home Loan Banks (FHLB)
and securities sold under repurchase agreements. Other borrowing sources which
we have used include the U.S. Treasurys Note Option Treasury, Tax and Loan
program, overnight borrowings from other banks, trust preferred securities, and
public/private debt offerings. Average total borrowings in the second quarter
of 2002 were $4.8 billion, an increase of $356 million from the second quarter
of 2001. This increase was primarily the result of borrowings assumed in the
acquisitions of Andover and MetroWest. Average total borrowings in the first
six months of 2002 were $4.6 billion, an increase of $148 million from the
comparable period of 2001.

Significant transactions related to borrowings from the second quarter of 2001
through June 30, 2002 include the issuance of $200 million of subordinated debt
by a subsidiary bank in June 2001, the assumption of approximately
$480 million
of borrowings in the Andover and MetroWest acquisitions, the prepayment of
approximately $175 million of FHLB advances in the fourth quarter of 2001 and
the issuance of $200 million of trust preferred securities in February 2002.

Average FHLB borrowings for the second quarter of 2002 were $2.5 billion, which
decreased $489 million or 16% from the second 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 4.50% during the quarter ended June 30,
2002 as compared to 5.15% for the comparable period last year. The 65 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 June 30, 2002, FHLB borrowings amounted to $2.5 billion and our
additional borrowing capacity from the FHLB was $1.8 billion.

32



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##### Table of Contents



Average balances for securities sold under repurchase agreements were $1.6
billion and $1.1 billion for the quarters ended June 30, 2002 and 2001,
respectively, an increase of $473.3 million. Our borrowings under wholesale
repurchase agreements increased while our FHLB borrowings decreased because of
better pricing on the wholesale repurchase agreements. Borrowings under
repurchase agreements had a weighted average rate of 2.35% and 4.14% for the
quarters ended June 30, 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. Interest is payable semi-annually in June and December. The
notes qualify as Tier 2 capital.

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 six months ended June 30, 2002 was $4.3 million.

In February 2002, we filed a shelf registration statement with the SEC which
allows us to sell up to $1.0 billion of debt securities, preferred stock,
depository shares, common stock, and warrants and which allows subsidiary
trusts to sell capital securities. In February 2002, Banknorth Capital Trust
II issued $200 million of 8% trust preferred securities (Securities) to the
public under the shelf registration. These Securities pay interest quarterly
and are mandatorily redeemable on April 1, 2032 and may be redeemed by the
Trust at par any time on or after April 1, 2007. The Securities qualify as
Tier 1 capital.

CONTRACTUAL OBLIGATIONS

We have entered into numerous contractual obligations and commitments. The
following tables summarize our contractual cash obligations and other
commitments at June 30, 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                     |  | $     | 2,947,159 |        |  | $                        | 257,318 |       |  | $     | 896,091   |         |  | $ | 662,881 |  |  | $ | 1,130,869 | 
|                                  
|                                  
|                                  
|                                  
|Facility lease obligations         |  |       | 133,004   |        |  |                          | 18,310  |       |  |       | 29,855    |         |  |   | 22,977  |  |  |   | 61,862    | 
|                                  
|                                  
|                                  
|                                  
|Other long-term obligations        |  |       | 894,745   |        |  |                          | 23,382  |       |  |       | 571,363   |         |  |   | 200,000 |  |  |   | 100,000   | 
|                                   |  |       |           |        |  |                          |         |       |  |      
|                                  
|                                  
|                                  
|                                  
|Total contractual cash obligations |  | $     | 3,974,908 |        |  | $                        | 299,010 |       |  | $     | 1,497,309 |         |  | $ | 885,858 |  |  | $ | 1,292,731 | 
|                                   |  |       |           |        |  |                          |         |       |  |      

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                   |  | $         | 3,274,665 |                                              |  | $     | 456,451 |       |  | $       | 157,558 |  |  | $ | 80,902  |  |  | $ | 2,579,754 | 
|                                 
|                                 
|                                 
|                                 
|Standby letters of credit         |  |           | 245,390   |                                              |  |       | 131,810 |       |  |         | 71,433  |  |  |   | 29,653  |  |  |   | 12,494    | 
|                                 
|                                 
|                                 
|                                 
|Other commitments                 |  |           | 1,503,385 |                                              |  |       | 214,903 |       |  |         | 157,670 |  |  |   | 65,189  |  |  |   | 1,065,623 | 
|                                 
|                                 
|                                 
|                                 
|Forward commitments to sell loans |  |           | 99,000    |                                              |  |       | 99,000  |       |  |         |        |  |  |   |        |  |  |   |          | 
|                                  |  |           |           |                                              |  |       |         |       |  |        
|                                 
|                                 
|                                 
|                                 
|Total commitments                 |  | $         | 5,122,440 |                                              |  | $     | 902,164 |       |  | $       | 386,661 |  |  | $ | 175,744 |  |  | $ | 3,657,871 | 
|                                  |  |           |           |                                              |  |       |         |       |  |        

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 develop 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

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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 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.

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.

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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 June 30, 2002, there were no such agreements in effect.
During the quarter ended June 30, 2002, the ALCO, Corporate Credit Committee
and Board Risk Management Committee approved a pilot program to offer interest
rate derivative hedging products to commercial customers, provided these
products are in turn hedged. The program is geared to putting variable rate
commercial loans on the balance sheet while allowing the customer to
synthetically fix the rate by purchasing a variable to fixed interest rate
swap. The Bank would enter into an exact offsetting fixed to variable interest
rate swap with a broker. The programs success depends on the receptiveness of
commercial customers, but it is anticipated that interest rate
derivatives will reduce interest rate risk. As of June 30, 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 approximately 80% 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 second quarter of 2002 of residential mortgage
loans held for sale and related average
hedge positions are summarized below (in millions):

|                                                    |  |   |        | 
|--------------------------------------------------- |  | - | ------ | 
|Residential mortgage loans held for sale            |  | $ | 53,033 | 
|                                                   
|                                                   
|                                                   
|                                                   
|Rate-locked loan commitments                        |  |   | 51,967 | 
|                                                   
|                                                   
|                                                   
|                                                   
|Forward sales contracts                             |  |   | 94,270 | 
|                                                   
|                                                   
|                                                   
|                                                   
|Purchased mortgage-backed security/treasury options |  |   | 1,667  | 

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 5%. Our gradual 2% rising rate
scenario was within compliance guidelines at June 30, 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 flattens
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.

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|                  |  |                 |       |                 |  |                 |       |                 |  |  |      |   |  |  |      |  
|----------------- |  | --------------- | ----- | --------------- |  | --------------- | ----- | --------------- |  |  | ---- | - |  |  | ---- | -
|                  |  | 200 Basis Point |       | 100 Basis Point |  | 100 Basis Point |       | 200 Basis Point
|                  |  | Rate Decrease   |       | Rate Decrease   |  | Rate Increase   |       | Rate Increase  
|                  |  |                 |       |                 |  |                 |       |                
|June 30, 2002     |  |                 | (5.58 | %)              |  |                 | (2.18 | %)              |  |  | 2.06 | % |  |  | 2.94 | %
|                  |  |                 |       |                 |  |                 |       |                 |  |  |      |   |  |  |      |  
|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 June 30, 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, and (iv) changes in the wholesale borrowings
portfolio structure. Since March 2002, the yield curve fell most significantly
in the 2-year term (approximately 90 basis points) and in the 10-year term
(approximately 60 basis points). As a result, projected mortgage and loan
prepayments were faster in the second quarter of 2002 than in the first quarter
of 2002. Overall total loans and securities available for sale effective
duration estimates became slightly shorter due to increased prepayment
estimates. To help protect against rising rates, during the quarter ended June
30, 2002, $200 million of wholesale borrowings were replaced with variable-rate
borrowings with interest rates tied to three-month LIBOR with caps ranging from
3% to 6%. The above 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 second 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. Mortgage servicing rights as of June 30, 2002
totaled $7.6 million compared to $8.5 million as December 31, 2001. 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.

LIQUIDITY

Parent Company

On a parent-only basis at June 30, 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 its small investment 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%.
Our subsidiary bank had $213.5 million available for dividends that could be
paid without prior

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regulatory approval. The average balance outstanding on the line of credit
during the six months ended June 30, 2002 was $4.3 million. In addition, the
parent company had $181.6 million in cash or cash equivalents at June 30, 2002.

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 June 30, 2002, Banknorth, NA had in the aggregate $2.7 billion of
immediately accessible liquidity, defined as cash that could be raised within
1-3 days through collateralized borrowings or security sales. This represents
19% of deposits, as compared to a current policy minimum of 10% of deposits.

Also as of June 30, 2002, Banknorth, NA had in the aggregate potentially
volatile funds of $1.4 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 June 30, 2002, the ratio of immediately accessible liquidity to
potentially volatile funds was 190%, 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 June 30, 2002, shareholders equity amounted to $1.8 billion, or 8.54% 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 $0.145 per share dividend on our common stock during the second
quarter of 2002. In February 2002, the Board authorized 8 million shares to be
repurchased in the open market in addition to the 13 million share repurchase
program authorized in 2001. During the six months ended June 30, 2002, we
repurchased 5.8 million shares at an average price of $24.25. As of June 30,
2002, a total of 7.8 million shares were available for repurchase under these
authorizations.

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.

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TABLE 10  Regulatory Capital
Requirements(Dollars in thousands)

|                                            |  |                      |           |          |  |        |       |       |  |        |           |       |  |  |      |   |  |   |         |  |  |  |      |  
|------------------------------------------- |  | -------------------- | --------- | -------- |  | ------ | ----- | ----- |  | ------ | --------- | ----- |  |  | ---- | - |  | - | ------- |  |  |  | ---- | -
|                                            |  | For Capital Adequacy
|                                            |  |                     
|                                            |  | Actual               |           | Purposes |  | Excess
|                                            |  |                      |           |          |  |       
|                                            |  | Amount               |           | Ratio    |  | Amount |       | Ratio |  | Amount |           | Ratio
|                                            |  |                      |           |          |  |        |       |       |  |        |           |      
|As of June 30, 2002:                        |  |                      |           |          |  |        |       |       |  |        |           |       |  |  |      |   |  |   |         |  |  |  |      |  
|                                           
|                                           
|                                           
|                                           
|Total capital (to risk weighted assets)     |  | $                    | 1,967,272 |          |  |        | 13.23 | %     |  |        | 1,189,490 |       |  |  | 8.00 | % |  | $ | 777,782 |  |  |  | 5.23 | %
|                                           
|                                           
|                                           
|                                           
|Tier 1 capital (to risk weighted assets)    |  |                      | 1,581,321 |          |  |        | 10.64 | %     |  |        | 594,745   |       |  |  | 4.00 | % |  |   | 986,576 |  |  |  | 6.64 | %
|                                           
|                                           
|                                           
|                                           
|Tier 1 leverage capital (to average assets) |  |                      | 1,581,321 |          |  |        | 7.75  | %     |  |        | 816,234   |       |  |  | 4.00 | % |  |   | 765,087 |  |  |  | 3.75 | %
|                                           
|                                           
|                                           
|                                           
|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 $14.9 billion and $14.4 billion at June 30, 2002
and December 31, 2001, respectively.

Banknorth NA is also subject to federal regulatory capital requirements. At
June 30, 2002, Banknorth NA was deemed to be well capitalized under the
regulations of the Office of the Comptroller of Currency of the United States
and in compliance with applicable capital requirements.

IMPACT OF NEW ACCOUNTING STANDARDS

In July 2002, the FASB issued SFAS No. 146,
Accounting for Costs Associated
with Exit or Disposal Activities. SFAS No. 146 addresses financial accounting
and reporting for costs associated with exit or disposal activities and
nullifies EITF Issue No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring). SFAS No. 146 requires
the recognition of costs associated with exit or disposal activities when they
are incurred rather than at the date of a commitment to an exit or disposal
plan. This Statement is to be applied prospectively to exit or disposal
activities initiated after December 31, 2002. Adoption of this standard is not
expected to materially affect our financial condition, results of operations,
earnings per share or cash flows.

In April 2002, the FASB issued SFAS No. 145,
Rescission 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 rescission 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

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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 No. 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.




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.



| | (a) |  | An annual meeting of shareholders of Banknorth was held on
April 23, 2002 (Annual Meeting).                                                                                                                                                                                                                                                
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Not applicable.                                                                                                                                                                                                                                                                                                                              
|
| | (c) |  | There were 147,369,279 shares of Common Stock eligible to
be voted at the Annual Meeting and 130,747,980 shares were
represented at the meeting by the holders thereof, which
constituted a quorum. The items voted upon at the Annual Meeting
and the vote for each proposal were as follows:
1. Election of directors for Three Year Terms:

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Director Nominees Elected for Three Year Terms:

|                                          |                                               |  |     |             |         |  |  |           | 
|----------------------------------------- | --------------------------------------------- |  | --- | ----------- | ------- |  |  | --------- | 
|                                          |                                               |  | FOR |             | AGAINST
|                                          |                                               |  |     |             |        
|                                          | P. Kevin Condron                              |  |     | 129,552,143 |         |  |  | 1,195,832 | 
|                                         
|                                         
|                                         
|                                         
|                                          | Colleen Khoury                                |  |     | 127,344,886 |         |  |  | 3,403,089 | 
|                                         
|                                         
|                                         
|                                         
|                                          | Irving E. Rogers, III                         |  |     | 129,522,015 |         |  |  | 1,225,960 | 
|                                         
|                                         
|                                         
|                                         
|                                          | William J. Ryan                               |  |     | 129,554,879 |         |  |  | 1,203,096 | 
|                                         
|                                         
|                                         
|                                         
|                                          | Curtis M. Scribner                            |  |     | 129,536,629 |         |  |  | 1,211,346 | 
|                                         
|                                         
|                                         
|                                         
|Election of director for a two-year term: |                                               |  |     |             |         |  |  |          
|                                         
|                                         
|                                         
|                                         
|                                          | Director Nominee elected for Two Year Term:   |  |     |             |         |  |  |           | 
|                                         
|                                         
|                                         
|                                         
|                                          | Luther F. Hackett                             |  |     | 129,524,170 |         |  |  | 1,223,805 | 
|                                         
|                                         
|                                         
|                                         
|Election of director for a one-year term: |                                               |  |     |             |         |  |  |          
|                                         
|                                         
|                                         
|                                         
|                                          | Director Nominee elected for a One Year Term: |  |     |             |         |  |  |           | 
|                                         
|                                         
|                                         
|                                         
|                                          | Allen M. Glick                                |  |     | 127,321,433 |         |  |  | 3,426,542 | 



| | 2. |  | Proposal to approve the Executive Incentive Plan.
| | -- |  | -------------------------------------------------

|            |  |         |            |         |  |  |           | 
|----------- |  | ------- | ---------- | ------- |  |  | --------- | 
|FOR         |  | AGAINST |            | ABSTAIN
|            |  |         |            |        
|118,729,260 |  |         | 10,467,393 |         |  |  | 1,598,454 | 



| | 3. |  | Proposal to approve an amended and restated
Employee Stock Purchase Plan.
| | -- |  | -------------------------------------------------------------------------

|            |  |         |           |         |  |  |           | 
|----------- |  | ------- | --------- | ------- |  |  | --------- | 
|FOR         |  | AGAINST |           | ABSTAIN
|            |  |         |           |        
|126,836,924 |  |         | 2,994,954 |         |  |  | 1,239,834 | 



| | 4. |  | Proposal to ratify the appointment of KPMG LLP as
the Companys independent auditors for the year ending
December 31, 2002.
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------

|            |  |         |           |         |  |  |         | 
|----------- |  | ------- | --------- | ------- |  |  | ------- | 
|FOR         |  | AGAINST |           | ABSTAIN
|            |  |         |           |        
|126,885,746 |  |         | 3,812,218 |         |  |  | 323,752 | 




Item 5.    Other Information  not applicable.




|        |  |                                                                                                                                                                                                                                                                               
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item 6. |  | Exhibits and Reports on Form 8-K.
(a) The following exhibits are filed as part of this report.
      Exhibit No. 99.1 Certification of Chief Executive Officer Under 18 U.S.C. § 1350.
      Exhibit No. 99.2 Certification of Chief Financial Officer Under 18 U.S.C. § 1350.

(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.

40



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##### Table of Contents






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.

|                      |  |                       |  |                                                                                                       
|--------------------- |  | --------------------- |  | ------------------------------------------------------------------------------------------------------
|                      |  | BANKNORTH GROUP, INC.
|                     
|                     
|                     
|                     
|                      |  |                       |  |                                                                                                       
|                     
|                     
|                     
|                     
|Date: August 13, 2002 |  | By:                   |  | /s/ William J. Ryan                                                                                   
|                      |  |                       |  |                                                                                                       
|                      |  |                       |  | William J. Ryan
Chairman, President and
Chief Executive Officer                                       
|                     
|                     
|                     
|                     
|                      |  |                       |  |                                                                                                       
|                     
|                     
|                     
|                     
|Date: August 13, 2002 |  | By:                   |  | /s/ Peter J. Verrill                                                                                  
|                      |  |                       |  |                                                                                                       
|                      |  |                       |  | Peter J. Verrill 
Senior Executive Vice President,
Chief Operating Officer and
Chief Financial Officer
|                     
|                     
|                     
|                     
|                      |  |                       |  |                                                                                                       
|                     
|                     
|                     
|                     
|Date: August 13, 2002 |  | By:                   |  | /s/ Stephen J. Boyle                                                                                  
|                      |  |                       |  |                                                                                                       
|                      |  |                       |  | Stephen J. Boyle
Executive Vice President and
Controller
(principal accounting officer)               

41



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##### Table of Contents






EXHIBIT INDEX

|             |  |                                                                           
|------------ |  | --------------------------------------------------------------------------
|Exhibit 99.1 |  | Statement under oath of Principal Executive Officer, dated August 13, 2002
|            
|            
|            
|            
|             |  |                                                                           
|            
|            
|            
|            
|Exhibit 99.2 |  | Statement under oath of Principal Financial Officer, dated August 13, 2002

42