<PAGE>
                                    FORM 10-Q
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

             [ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                For the Quarterly Period Ended SEPTEMBER 30, 2001

                                       OR

             [ ] 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                (I.R.S. Employer
      incorporation or organization)               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 [ x ]    No  [   ]

The number of shares outstanding of the Registrant's common stock and related
stock purchase rights as of October 31, 2001 is:

Common stock, par value $.01 per share                       136,584,535
              (Class)                                        (Outstanding)
<PAGE>
                                      INDEX

                     BANKNORTH GROUP, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>

PART I.           FINANCIAL INFORMATION                                                            PAGE
-------           ---------------------                                                            ----
<S>               <C>                                                                              <C>
                  Item 1.     Financial Statements

                              Consolidated Balance Sheets
                              September 30, 2001 and December 31, 2000                               3

                              Consolidated Statements of Income -
                              Three and nine months ended
                              September 30, 2001 and 2000                                            4

                              Consolidated Statements of Changes in Shareholders' Equity -
                              Nine months ended September 30, 2001 and 2000                          5

                              Consolidated Statements of Cash Flows -
                              Nine months ended September 30, 2001 and 2000                          6

                              Notes to Consolidated Financial Statements                             7

                  Item 2.     Management's Discussion and Analysis of Financial
                                    Condition and Results of Operations                              9

                  Item 3.     Quantitative and Qualitative Disclosures about Market Risk            33

PART II.          OTHER INFORMATION

                  Item 1.     Legal proceedings                                                     33

                  Item 2.     Changes in securities and use of proceeds                             33

                  Item 3.     Defaults upon senior securities                                       33

                  Item 4.     Submission of matters to a vote of security holders                   33

                  Item 5      Other information                                                     33

                  Item 6      Exhibits and reports on Form 8-K                                      33

                  Signatures                                                                        33
</TABLE>

                                       2
<PAGE>
  BANKNORTH GROUP, INC. AND SUBSIDIARIES
  CONSOLIDATED BALANCE SHEETS
  (In thousands, except share data)

<TABLE>
<CAPTION>

                                                                                          September 30, 2001     December 31, 2000
                                                                                          ------------------     -----------------
ASSETS                                                                                        (Unaudited)
<S>                                                                                       <C>                    <C>
Cash and due from banks                                                                       $    492,035         $    515,934
Federal funds sold and other short term investments                                                 15,165               29,058
Securities available for sale, at market value                                                   5,515,429            5,425,111
Securities held to maturity (fair value of $383,277 and $457,110 at September 30, 2001
   and December 31, 2000, respectively)                                                            373,120              455,547
Loans held for sale                                                                                 58,203               51,131
Loans and leases:
   Residential real estate mortgages                                                             1,998,663            2,248,714
   Commercial real estate mortgages                                                              3,164,501            2,955,163
   Commercial business loans and leases                                                          2,320,702            2,308,904
   Consumer loans and leases                                                                     3,413,644            3,332,881
                                                                                              ------------         ------------
                                                                                                10,897,510           10,845,662
   Less:  Allowance for loan and lease losses                                                      158,534              153,550
                                                                                              ------------         ------------
              Net loans and leases                                                              10,738,976           10,692,112
                                                                                              ------------         ------------
Premises and equipment                                                                             200,336              201,192
Goodwill                                                                                           163,732              176,576
Core deposit intangibles                                                                             6,306                8,944
Mortgage servicing rights                                                                              440               23,225
Bank-owned life insurance                                                                          316,392              306,411
Other assets                                                                                       280,449              348,569
                                                                                              ------------         ------------
                                                                                              $ 18,160,583         $ 18,233,810
                                                                                              ============         ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:

   Savings accounts                                                                           $  1,420,162         $  1,386,286
   Money market access and NOW accounts                                                          4,240,945            3,975,318
   Certificates of deposit                                                                       4,317,648            4,461,983
   Brokered deposits                                                                               164,855              169,069
   Noninterest-bearing deposits                                                                  2,181,233            2,114,600
                                                                                              ------------         ------------
        Total deposits                                                                          12,324,843           12,107,256
Federal funds purchased and securities sold under repurchase agreements                          1,324,164            1,138,629
Borrowings from the Federal Home Loan Bank                                                       2,529,390            3,348,242
Other borrowings                                                                                    39,666               73,744
Subordinated long-term debt                                                                        200,000                   --
Other liabilities                                                                                  188,178              136,307
                                                                                              ------------         ------------
        Total liabilities                                                                       16,606,241           16,804,178
                                                                                              ------------         ------------

Company obligated, mandatory redeemable securities of subsidiary trusts                             93,756               98,775
        holding solely parent junior subordinated debentures

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
       149,583,793 shares issued in 2001 and 149,584,159 shares issued in 2000)                      1,496                1,496
Paid-in capital                                                                                    618,681              617,234
Retained earnings                                                                                1,017,313              897,214
Unearned compensation                                                                               (1,102)              (1,354)
Accumulated other comprehensive income (loss)                                                       70,630              (34,487)
Treasury stock, at cost (13,036,785 shares in 2001 and 8,339,556 shares in 2000)                  (246,432)            (149,246)
                                                                                              ------------         ------------
      Total shareholders' equity                                                                 1,460,586            1,330,857
                                                                                              ------------         ------------
                                                                                              $ 18,160,583         $ 18,233,810
                                                                                              ============         ============
</TABLE>

  See accompanying Notes to Consolidated Financial Statements.


                                       3
<PAGE>
BANKNORTH GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data) (Unaudited)


<TABLE>
<CAPTION>
                                                            Three Months Ended              Nine Months Ended
                                                               September 30,                   September 30,
                                                               -------------                   -------------
                                                            2001           2000            2001            2000
                                                            ----           ----            ----            ----
<S>                                                       <C>           <C>             <C>             <C>
Interest and dividend income:
   Interest on loans and leases                           $215,992      $ 228,802       $ 666,321       $ 659,766
   Interest and dividends on securities                     90,133        107,757         282,983         333,240
                                                          --------      ---------       ---------       ---------
     Total interest and dividend income                    306,125        336,559         949,304         993,006

Interest expense:
   Interest on deposits                                     86,524        107,119         286,751         302,978
   Interest on borrowed funds                               47,461         78,727         164,034         230,977
                                                          --------      ---------       ---------       ---------
     Total interest expense                                133,985        185,846         450,785         533,955

     Net interest income                                   172,140        150,713         498,519         459,051
Provision for loan and lease losses                         12,061          6,250          28,510          17,167
                                                          --------      ---------       ---------       ---------
   Net interest income after provision
         for loan and lease losses                         160,079        144,463         470,009         441,884

Noninterest income:
   Deposit services                                         17,167         16,940          53,114          49,277
   Mortgage banking services                                 2,182          6,172           7,193          14,813
   Insurance commissions                                    10,161          6,030          29,371          16,003
   Trust services                                            8,481          8,612          25,971          26,039
   Investment advisory services                              1,869          1,679           5,327           5,115
   Bank-owned life insurance income                          4,769          4,216          13,967          13,481
   Merchant and electronic banking income, net               9,195          7,881          23,657          22,165
   Net securities gains (losses)                               486            (23)          1,290               2
   Losses on securities restructuring                           --             --              --         (15,895)
   Other noninterest income                                  6,241          4,559          17,016          16,122
                                                          --------      ---------       ---------       ---------
                                                            60,551         56,066         176,906         147,122
Noninterest expenses:
   Salaries and employee benefits                           67,148         53,175         191,698         170,461
   Data processing                                           9,768          9,024          27,647          27,060
   Occupancy                                                11,422          9,287          34,304          30,320
   Equipment                                                 8,181          8,010          25,087          23,575
   Distributions on securities of subsidiary trusts          2,338          2,346           7,031           7,040
   Amortization of goodwill and other intangibles            5,384          5,268          16,200          15,669
   Special charges                                              --            414           5,608          43,022
   Other noninterest expenses                               22,747         24,525          70,812          75,250
                                                          --------      ---------       ---------       ---------
                                                           126,988        112,049         378,387         392,397

Income before income tax expense                            93,642         88,480         268,528         196,609
Applicable income tax expense                               31,440         27,890          91,049          67,239
                                                          --------      ---------       ---------       ---------
   Net income before cumulative effect of
      change in accounting principle                        62,202         60,590         177,479         129,370

Cumulative effect of change in accounting principle,
      net of tax                                                --             --            (290)             --
                                                          --------      ---------       ---------       ---------
   Net income                                             $ 62,202      $  60,590       $ 177,189       $ 129,370
                                                          ========      =========       =========       =========

Weighted average shares outstanding:
   Basic                                                   137,014        144,680         138,502         144,468
   Diluted                                                 138,432        145,736         139,791         145,383
Earnings per share:
   Basic                                                  $   0.45      $    0.42       $    1.28       $    0.90
   Diluted                                                    0.45           0.42            1.27            0.89
</TABLE>


See accompanying Notes to Consolidated Financial Statements.


                                       4
<PAGE>
BANKNORTH GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands)
(Unaudited)

<TABLE>
<CAPTION>

                                                                                             Accumulated
                                                                                 Unearned       Other
                                              Par       Paid-in     Retained      Compen-   Comprehensive    Treasury
                                             Value      Capital     Earnings      sation    Income (Loss)      Stock        Total
                                             -----      -------     --------      ------    -------------      -----        -----
<S>                                        <C>         <C>         <C>           <C>        <C>             <C>         <C>
Balances at December 31, 2000              $   1,496   $ 617,234   $   897,214    ($1,354)    ($ 34,487)    ($149,246)  $ 1,330,857

Net income                                        --          --       177,189         --            --            --       177,189
Unrealized gain on securities, net of
   reclassification adjustment                    --          --            --         --       105,804            --       105,804
Unrealized gain on cash flow hedges,
  net of reclassification adjustment              --          --            --         --          (687)           --          (687)
                                                                                                                        -----------
        Comprehensive income                                                                                                282,306
                                                                                                                        -----------

Premium on repurchase of trust preferred
   securities                                     --         (72)           --         --            --            --           (72)

Common stock issued for employee benefit
   plans                                          --         297        (3,109)        --            --        18,286        15,474

Treasury stock purchased                          --          --            --         --            --      (115,758)     (115,758)

Decrease in unearned compensation                 --       1,235            --        252            --            --         1,487

Issuance and distribution of restricted
   stock                                          --          (9)         (128)        --            --           286           149

Payment of fractional shares                      --          (4)           --         --            --            --            (4)

Cash dividends                                    --          --       (53,853)        --            --            --       (53,853)
                                           ---------   ---------   -----------    -------     ---------     ---------   -----------

Balances at September 30, 2001             $   1,496   $ 618,681   $ 1,017,313    ($1,102)    $  70,630     ($246,432)  $ 1,460,586
                                           =========   =========   ===========    =======     =========     =========   ===========


Balances at December 31, 1999              $   1,496   $ 617,523   $   787,238    ($2,751)    ($125,394)    ($ 85,838)  $ 1,192,274

Net income                                        --          --       129,370         --            --            --       129,370
Unrealized losses on securities, net
   of reclassification adjustment                 --          --            --         --        42,494            --        42,494
                                                                                                                        -----------
        Comprehensive income                                                                                                171,864
                                                                                                                        -----------

Common stock issued for employee
   benefit plans                                  --          --        (5,708)        --            --        14,341         8,633

Common stock issued for acquisition                1       1,324            --         --            --            --         1,325

Cancellation of treasury shares
   at acquisition                                 (1)     (2,206)           --         --            --         2,207            --

Treasury stock purchased                          --          --            --         --            --       (12,343)      (12,343)

Decrease in unearned compensation                 --         775            --        321            --            --         1,096

Issuance and distribution of
   restricted stock                               --         (82)         (165)        --            --           370           123

Amortization of restricted
   stock awards                                   --        (390)           --        992            --            --           602

Payment of fractional shares                      --         (18)           --         --            --            --           (18)

Cash dividends                                    --          --       (52,617)        --            --            --       (52,617)
                                           ---------   ---------   -----------    -------     ---------     ---------   -----------

Balances at September 30, 2000             $   1,496   $ 616,926   $   858,118    ($1,438)    ($ 82,900)    ($ 81,263)  $ 1,310,939
                                           =========   =========   ===========    =======     =========     =========   ===========
</TABLE>

                                       5
<PAGE>
BANKNORTH GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

<TABLE>
<CAPTION>

                                                                                              Nine Months Ended September 30,
                                                                                              -------------------------------
                                                                                                   2001               2000
                                                                                                   ----               ----
<S>                                                                                           <C>               <C>
Cash flows from operating activities:
   Net income                                                                                 $   177,189       $    129,370
   Adjustments to reconcile net income to net cash provided by operating activities:
           Provision for loan and lease losses                                                     28,510             17,167
           Depreciation                                                                            22,031             20,466
           Amortization of goodwill and other intangibles                                          16,200             15,669
           Provision for deferred tax expense                                                     (20,196)           (16,726)
           ESOP and restricted stock expense                                                        1,487              1,698
           Issuance of restricted stock units                                                         149                123
           Net (gains) losses realized from sales of securities and consumer loans                 (2,058)            11,135
           Net (gains) losses realized from sales of loans held for sale (a component of
                 mortgage banking services)                                                        (6,378)              (150)
           Earnings from bank owned life insurance                                                (13,669)           (13,481)
           Net decrease in mortgage servicing rights                                               22,785             11,695
           Proceeds from sales of loans held for sale                                             677,150            184,408
           Residential loans originated for sale                                                 (677,844)          (140,824)
           Net decrease (increase) in interest and dividends receivable and other assets           31,689            (39,848)
           Net increase (decrease) in other liabilities                                            51,871              8,181
                                                                                              -----------       ------------
Net cash provided by operating activities                                                         308,916            188,883
                                                                                              -----------       ------------

Cash flows from investing activities:

   Proceeds from sales of securities available for sale                                           500,344            106,220
   Proceeds from maturities and principal repayments of securities available for sale           1,295,718            729,429
   Purchases of securities available for sale                                                  (1,724,070)          (227,834)
   Proceeds from maturities and principal repayments of securities held to maturity                82,427             79,079
   Net (increase) in loans and leases                                                            (113,909)          (931,215)
   Proceeds from sale of loans                                                                     39,303             34,234
   Net additions to premises and equipment                                                        (21,175)           (21,716)
   Proceeds from policy coverage on bank owned life insurance                                       3,690              1,571
                                                                                              -----------       ------------
Net cash provided (used) by investing activities                                                   62,328           (230,232)
                                                                                              -----------       ------------

Cash flows from financing activities:

   Net increase in deposits                                                                       217,587            358,903
   Net increase (decrease) in securities sold under repurchase agreements                         337,538           (435,868)
   Proceeds from Federal Home Loan Bank borrowings                                              5,816,074         11,054,300
   Payments on Federal Home Loan Bank borrowings                                               (6,634,926)       (11,246,094)
   Issuance of subordinated long-term debt                                                        200,000                 --
   Net increase (decrease) in other borrowings                                                    (34,078)           100,052
   Repurchase of securities of subsidiaries trusts                                                 (5,091)                --
   Issuance of stock                                                                               15,474              8,615
   Purchase of treasury stock                                                                    (115,758)           (12,343)
   Dividends paid                                                                                 (53,853)           (52,617)
                                                                                              -----------       ------------
Net cash provided (used) by financing activities                                                 (257,033)          (225,052)
                                                                                              -----------       ------------
Increase (decrease) in cash and cash equivalents                                                  114,211           (266,401)
   Cash and cash equivalents at beginning of period                                               392,989            776,395
                                                                                              -----------       ------------
   Cash and cash equivalents at end of period                                                 $   507,200       $    509,994
                                                                                              ===========       ============

For the nine months ended September 30, 2001 and 2000, interest of $454,379 and
   $535,742 and income taxes of $42,057 and $62,026 were paid, respectively.

</TABLE>

See accompanying Notes to Consolidated Financial Statements.


                                       6
<PAGE>
                     BANKNORTH GROUP, INC. AND SUBSIDIARIES
                               SEPTEMBER 30, 2001
                      (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. The Company
has not changed its accounting and reporting policies from those disclosed in
its 2000 Annual Report, except for the adoption of Statement of Accounting
Standards No. 133, as discussed in Note 4.

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 nine months ended September 30, 2001 are not necessarily
indicative of the results that may be expected for any other interim period or
the entire year ending December 31, 2001. Certain amounts in the prior periods
have been reclassified to conform to the current presentation.

NOTE 2 - TOTAL COMPREHENSIVE INCOME

The components of total comprehensive income for the Company are net income,
unrealized gains (losses) on securities available for sale and gains (losses) on
hedges, net of tax. The following is a reconciliation of comprehensive income
for the nine months ended September 30, 2001 and 2000.

<TABLE>
<CAPTION>

                                                                                        Nine Months Ended
                                                                                           September 30,

                                                                                           -------------
                                                                                       2001            2000
                                                                                       ----            ----
<S>                                                                                 <C>             <C>
Net income                                                                          $ 177,189       $ 129,370
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on available for sale securities:

               Unrealized holding gains (losses) arising during the period            106,643          32,164
  Less:  reclassification adjustment for gains (losses) included in net income            839         (10,330)
                                                                                    ---------       ---------
                                                                                      105,804          42,494
                                                                                    ---------       ---------
Unrealized gains (losses) on cash flow hedges, net of tax
               Unrealized holding losses arising during the period                     (1,457)             --
  Less:  reclassification adjustment for losses included in net income                   (770)             --
                                                                                    ---------       ---------
                                                                                         (687)             --
                                                                                    ---------       ---------

Other comprehensive income, net                                                       105,117          42,494
                                                                                    ---------       ---------
Comprehensive income                                                                $ 282,306       $ 171,864
                                                                                    =========       =========
</TABLE>

NOTE 3 - EARNINGS PER SHARE

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

<TABLE>
<CAPTION>

                                            Three Months Ended           Nine Months Ended
                                                September 30,                September 30,
                                                -------------                -------------
                                             2001          2000          2001          2000
                                             ----          ----          ----          ----
<S>                                        <C>           <C>           <C>           <C>
Net income                                 $ 62,202      $ 60,590      $177,189      $129,370
                                           ========      ========      ========      ========
Weighted average shares outstanding
  Basic                                     137,014       144,680       138,502       144,468
     Effect of dilutive stock options         1,418         1,056         1,289           915
                                           --------      --------      --------      --------
  Diluted                                   138,432       145,736       139,791       145,383
                                           ========      ========      ========      ========
Net income per share:
  Basic                                    $   0.45      $   0.42      $   1.28      $   0.90
  Diluted                                      0.45          0.42          1.27          0.89
</TABLE>

                                       7
<PAGE>
NOTE 4 -  ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which sets accounting and reporting
standards for derivative instruments and hedging activities. The Statement, as
amended by SFAS No. 138, requires the Company to recognize all derivatives on
the balance sheet at fair value. The Company adopted the Statement effective
January 1, 2001 and recognized an after-tax loss from the cumulative effect of
adoption of $290 thousand.

Starting January 1, 2001, the Company recognizes all derivatives on the balance
sheet at fair value. On the date the derivative is entered into, the Company
designates the derivative as either a hedge of a forecasted transaction or of
the variability of cash flows to be received or paid related to a recognized
asset or liability ("cash flow hedge"), a hedge of the fair value of a
recognized asset or liability or of an unrecognized firm commitment ("fair value
hedge") or a "held for trading" ("trading instrument") instrument. The Company
formally documents relationships between hedging instruments and hedged items,
as well as its risk management objective and strategy for undertaking various
hedge transactions. The Company also assesses, both at the hedge's inception and
on an ongoing basis, whether the derivatives that are used in hedging
transactions are highly effective in offsetting changes in cash flows or fair
values of hedged items.

Changes in fair value of a derivative that is highly effective and that
qualifies as a cash flow hedge are recorded in other comprehensive income and
are reclassified into earnings when the forecasted transaction affects earnings.
The Company discontinues hedge accounting when it is determined that the
derivative is no longer effective in offsetting changes in the cash flows of the
hedge item, because it is unlikely that the forecasted transaction will occur,
or management determines that the designation of the derivative as a hedging
instrument is no longer appropriate.

NOTE 5 - COMPLETED ACQUISITIONS

On October 31, 2001, the Company completed its acquisition of Andover Bancorp,
Inc. ("Andover"), a multi-bank holding company headquartered in Andover,
Massachusetts, and MetroWest Bank ("MetroWest"), a Massachusetts-chartered
savings bank headquartered in Framingham, Massachusetts. Andover had total
assets of $1.8 billion and total shareholders' equity of $170 million at
September 30, 2001. Each outstanding share of common stock of Andover was
converted into the right to receive 2.27 shares of the Company's common stock,
plus cash in lieu of any fractional share interests. A maximum of 16.7 million
shares of Company common stock are issuable in connection with the acquisition
of Andover. MetroWest had total assets of $957 million and total shareholders'
equity of $65 million at September 30, 2001. MetroWest shares were purchased for
$11.50 per share and vested stock options were settled at $11.50 per share less
the option exercise price for a total cost of $164.8 million. The acquisitions
were accounted for as purchases in accordance with Financial Accounting
Standards Board No. 141, "Business Combinations." The Company will record
approximately $258 million of goodwill and $52 million of core deposit premiums
(both subject to final purchase accounting adjustments) in connection with these
acquisitions.

                                       8
<PAGE>
BANKNORTH GROUP, INC. AND SUBSIDIARIES

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

SUMMARY

Banknorth Group, Inc. (the "Company") reported consolidated net income of $62.2
million, or $0.45 per diluted share, for the third quarter of 2001 as compared
with $60.6 million, or $0.42 per diluted share, for the third quarter of 2000.
Operating cash diluted earnings per share, which excludes special items and
amortization of goodwill and other intangible assets, was $0.48 and $0.45 for
the quarters ended September 30, 2001 and 2000, respectively.

The Company's operating return on average equity ("ROE") and operating return on
average assets ("ROA") were 17.63% and 1.37%, respectively, for the third
quarter ended September 30, 2001. Operating ROE and operating ROA were 19.49%
and 1.32%, respectively, for the quarter ended September 30, 2000.

Operating results for the third quarter of 2001 improved over the third quarter
of 2000 due to a 14% increase in net interest income, which was partially offset
by expense growth of 13% and increased provisions for loan and lease losses. Net
interest income increased $21.4 million and the net interest margin increased by
57 basis points. This was due largely to a decline in the rates paid on and
declines in the average balance of interest-bearing liabilities, as well as a
change in the mix of earning assets, as average balances of loans grew by 2.5%
while average balance of investment securities declined by 7.7%. The $5.8
million increase in the provision for loan and lease losses over the third
quarter of 2000 is reflective of higher net charge-offs and a slowing economy.
Noninterest income increased by $4.5 million, primarily due to a $4.1 million
increase in insurance commissions, a $1.7 million increase in other noninterest
income and a $1.3 million increase in merchant and electronic banking income,
which were partially offset by a decrease in mortgage banking income of $4.0
million. The increase in noninterest expenses for the third quarter of 2001 was
primarily due to an increase in salaries and benefits expense of $14.0 million,
or 26% and an increase in occupancy expense of $2.1 million, or 23%, which were
partially offset by a decrease of $1.8 million in other noninterest expense. The
efficiency ratio was 53.68% in the third quarter of 2001 compared to 52.85% in
the comparable period last year. For a description of the methodology used by
the Company to calculate the efficiency ratio, see Note 5 to Table 1. Selected
quarterly data, ratios and per share data, both as reported and on an operating
basis, are provided in Table 1.

The Company reported consolidated net income of $177.2 million, or $1.27 per
diluted share, for the nine months ended September 30, 2001, as compared with
$129.4 million, or $0.89 per diluted share, for the nine months ended September
30, 2000. Operating income for the nine months ended September 30, 2001 was
$181.1 million, or $1.30 per diluted share, and operating ROE and operating ROA
for this period were 17.74% and 1.34%, respectively. The Company's operating
income for the nine months ended September 30, 2000 was $172.4 million, or $1.19
per diluted share, and operating ROE and operating ROA were 19.22% and 1.25%,
respectively. The nine months ended September 30, 2001 and 2000 included $5.6
million ($3.7 million net of tax) and $58.9 million ($43.0 million net of tax)
of non-operating items (consisting of special charges and losses on
restructuring the investment portfolio), respectively. (See Table 5 for special
charge activity for the nine months ended September 30, 2001.) Operating results
for the nine months ended September 30, 2001 represent a 9% increase in diluted
earnings per share from the comparable period last year. Net interest income for
the nine months ended September 30, 2001 increased 9% from the same period last
year primarily due to a 37 basis point increase in net interest margin which
also included accelerated accretion of discounts on certain U.S. Government
agency callable securities that were called prior to maturity. The provision for
loan and lease losses for the nine months ended September 30, 2001 increased 66%
over the same period last year due to the slowing economy, higher net charge-off
and loan growth. Noninterest income, excluding losses on securities
restructuring, for the nine months ended September 30, 2001 increased 9%
compared to the same period last year. Noninterest expense, excluding special
charges, increased 7% for the nine months ended September 30, 2001 compared to
the same period last year, primarily due to increases in salaries and benefits
and occupancy expenses.

                                       9
<PAGE>
TABLE 1 - Selected Quarterly Data
(Dollars in thousands, except per share data)

<TABLE>
<CAPTION>

                                               2001        2001       2001        2000        2000          2000         2000
                                              Third       Second      First      Fourth       Third        Second        First
                                              -----       ------      -----      ------       -----        ------        -----
<S>                                         <C>         <C>         <C>        <C>          <C>          <C>          <C>
Net interest income                         $ 172,140   $ 168,065   $ 158,314  $ 153,960    $ 150,713    $ 153,165    $ 155,173
Provision for loan and lease losses            12,061       9,311       7,138      6,651        6,250        5,849        5,068
                                            ---------   ---------   ---------  ---------    ---------    ---------    ---------
Net interest income after loan and
   lease loss provision                       160,079     158,754     151,176    147,309      144,463      147,316      150,105

Noninterest income (1)                         60,065      57,552      57,997     63,630       56,090       56,744       50,181
Net securities gains (losses)                     486          45         759        437          (23)     (15,857)         (13)
Noninterest expenses (excluding
   special charges) (2)                       126,988     124,192     121,598    119,473      111,635      117,730      120,010
Special charges (2)                                --          --       5,608        (15)         414       37,271        5,337
                                            ---------   ---------   ---------  ---------    ---------    ---------    ---------
Income before income taxes                     93,642      92,159      82,726     91,918       88,481       33,202       74,926
Income tax expense                             31,440      32,266      27,343     29,554       27,890       14,323       25,026
                                            ---------   ---------   ---------  ---------    ---------    ---------    ---------
Net income before cumulative effect of
   change in accounting principle              62,202      59,893      55,383     62,364       60,591       18,879       49,900
Cumulative effect of change in accounting
   principle, net of tax                           --          --        (290)        --           --           --           --
                                            ---------   ---------   ---------  ---------    ---------    ---------    ---------
Net income                                  $  62,202   $  59,893   $  55,093  $  62,364    $  60,591    $  18,879    $  49,900
                                            =========   =========   =========  =========    =========    =========    =========

Earnings per share:
Basic                                       $    0.45   $    0.44   $    0.39  $    0.43    $    0.42    $    0.13    $    0.35
Diluted                                          0.45        0.43        0.39       0.43         0.42         0.13         0.34

Operating earnings per share
   (excluding special items) (2):

Basic                                       $    0.45   $    0.44   $    0.42  $    0.43    $    0.42    $    0.40    $    0.37
Diluted                                          0.45        0.43        0.42       0.43         0.42         0.40         0.37

Return on average assets (3)                     1.37%       1.32%       1.24%      1.36%        1.31%        0.41%        1.10%
Return on average equity (3)                    17.63%      17.85%      16.59%     19.16%       19.31%        6.48%       16.75%

Operating ratios:
Return on average assets (excluding
   special items) (3) (4)                        1.37%       1.32%       1.32%      1.35%        1.32%        1.27%        1.17%
Return on average equity (excluding
   special items) (3) (4)                       17.82%      17.85%      17.78%     19.15%       19.49%       19.82%       17.96%

Net interest margin                              4.14%       4.03%       3.84%      3.70%        3.57%        3.67%        3.70%
Noninterest income as a percent of
   total income (1)                             25.87%      25.51%      26.81%     29.24%       27.12%       27.03%       24.44%
Efficiency ratio (5)                            53.68%      54.01%      55.13%     53.83%       52.85%       54.97%       57.30%

Special items, net of related income
   tax effect (4)                           $       0   $       0   $   3,941  ($     38)   $     545    $  38,870    $   3,577
</TABLE>

----------
(1)      Excludes securities transactions.

(2)      Special charges consist of merger charges, asset write-downs and branch
         closing costs.

(3)      Annualized.

(4)      Special items consists of (i) special charges and (ii) losses on
         restructuring the investment portfolio.

(5)      Represents noninterest expenses, excluding distributions on securities
         of subsidiary trusts and special items, as a percentage of net interest
         income and noninterest income, excluding net securities gains and
         losses.

                                       10
<PAGE>
RESULTS OF OPERATIONS

NET INTEREST INCOME

The Company's fully-taxable equivalent net interest income for the third quarter
of 2001 increased $21.7 million compared to the third quarter of 2000 while the
net interest margin increased from 3.57% to 4.14% in the comparable periods.
These increases were primarily due to decreases in the rate paid on
interest-bearing liabilities and the volume of borrowed funds and, to a lesser
extent, an increase in the average amount of loans outstanding. Also benefiting
net interest margin was a $166 million increase in average noninterest-bearing
deposits. The rate decreases were reflective of the Federal Reserve rate cuts
during 2001. Average loans as a percent of average earning assets was 65% and
63% for the quarters ended September 30, 2001 and 2000, respectively. Growth in
average commercial business loans (7%), average consumer loans (5%) and average
commercial real estate mortgages (6%) were offset by a decrease in residential
real estate loans (10%). Average securities decreased for the three months ended
September 30, 2001, as compared to the comparable period in the prior year, due
primarily to the runoff of mortgage-backed securities in conjunction with a
balance sheet deleveraging program achieved through a reduction in borrowings
utilized to acquire, and which are secured by, such securities. As part of its
asset-liability management review, the Company continuously monitors the
investment portfolio and is maintaining the investment security portfolio at
current levels by purchasing securities to replace portfolio run-off.

The Company's fully-taxable equivalent net interest income for the nine months
ended September 30, 2001 increased $40.0 million compared to the nine months
ended September 30, 2000 primarily for the same reasons as the increase during
the three months ended September 30, 2001, as discussed above. The net interest
margin increased from 3.64% for the nine months ended September 30, 2000 to
4.01% for the nine months ended September 30, 2001 primarily due to a 56 basis
point decrease in rates paid on interest-bearing liabilities. Average net
earning assets increased $505.7 million for the nine months ended September 30,
2001 compared to the nine months ended September 30, 2000 primarily due to an
increase in non-interest-bearing deposits and a decrease in the volume of
borrowed funds. Table 2 shows quarterly average balances, net interest income by
category and rates for each of the quarters in 2001 and 2000 and for the nine
months periods ended September 30, 2001 and 2000. Table 3 shows the changes in
fully-taxable equivalent net interest income by category due to changes in rate
and volume. See also "Interest Rate Risk and 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 the Company's 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.


                                       11
<PAGE>
TABLE 2 - Average Balances, Yields and Rates
(Dollars in thousands)

<TABLE>
<CAPTION>

                                                                   2001 Third Quarter                    2001 Second Quarter
                                                         -----------------------------------     -----------------------------------
                                                          Average                    Yield/       Average                   Yield/
                                                          Balance       Interest     Rate (1)     Balance      Interest     Rate (1)
                                                          -------       --------     --------     -------      --------     --------
<S>                                                     <C>             <C>          <C>        <C>            <C>          <C>
Loans and leases (2):
  Residential real estate mortgages                     $ 2,102,988     $ 38,716       7.36%    $ 2,206,518    $ 40,866      7.41%
  Commercial real estate mortgages                        3,121,928       64,802       8.24       3,036,744      64,949      8.58
  Commercial business loans and leases                    2,360,191       44,482       7.48       2,322,572      46,509      8.03
  Consumer loans and leases                               3,359,036       69,027       8.15       3,342,216      70,166      8.42
                                                        -----------     --------                -----------    --------
     Total loans and leases                              10,944,143      217,027       7.88      10,908,050     222,490      8.18
Securities                                                5,815,678       90,657       6.23       5,931,974      95,241      6.42
Federal funds sold and other short-term investments          17,125          131       3.04          48,148         476      3.97
                                                        -----------     --------                -----------    --------
   Total earning assets                                  16,776,946      307,815       7.30      16,888,172     318,207      7.55
                                                                        --------                               --------
Noninterest-earning assets                                1,273,973                               1,264,302
                                                        -----------                             -----------
   Total assets                                         $18,050,919                             $18,152,474
                                                        ===========                             ===========

Interest-bearing deposits:
  Regular savings                                       $ 1,416,784     $  4,391       1.23      $1,405,540      $4,898      1.40
  NOW and money market accounts                           4,166,281       26,114       2.49       4,059,390      28,525      2.82
  Certificates of deposit                                 4,386,194       53,692       4.86       4,484,684      60,086      5.37
  Brokered deposits                                         165,115        2,327       5.59         167,419       2,480      5.94
                                                        -----------     --------                -----------    --------
    Total interest-bearing deposits                      10,134,374       86,524       3.39      10,117,033      95,989      3.81
Borrowed funds                                            4,034,946       47,461       4.63       4,329,605      52,581      4.82
                                                        -----------     --------                -----------    --------
    Total interest-bearing liabilities                   14,169,320      133,985       3.74      14,446,638     148,570      4.11
                                                                        --------                               --------
Non-interest bearing deposits                             2,212,517                               2,101,326
Other liabilities                                           170,672                                 159,955
Securities of subsidiary trusts                              98,720                                  98,775
Shareholders' equity                                      1,399,690                               1,345,780
                                                        -----------                             -----------
   Total liabilities and shareholders' equity           $18,050,919                             $18,152,474
                                                        ===========                             ===========

Net earning assets                                       $2,607,626                             $ 2,441,534
                                                        ===========                             ===========

Net interest income (fully-taxable equivalent)                           173,830                                169,637
Less: fully-taxable equivalent adjustments                                (1,690)                                (1,572)
                                                                        --------                               ---------
   Net interest income                                                  $172,140                               $168,065
                                                                        ========                               =========
Net interest rate spread (fully-taxable equivalent)                                    3.56%                                 3.44%
Net interest margin (fully-taxable equivalent)                                         4.14%                                 4.03%
</TABLE>

----------

(1)      Annualized.

(2)      Loans and leases include loans held for sale.


                                       12

<PAGE>
TABLE 2 - AVERAGE BALANCES, YIELDS AND RATES
(Dollars in thousands)

<TABLE>
<CAPTION>
                                                                 2001 First Quarter                       2000 Fourth Quarter
                                                        --------------------------------------    ----------------------------------
                                                             Average                 Yield/         Average                 Yield/
                                                             Balance      Interest  Rate (1)        Balance      Interest   Rate (1)
                                                             -------      --------  --------        -------      --------   --------
 Loans and leases (2):
 <S>                                                       <C>            <C>        <C>          <C>            <C>        <C>
   Residential real estate mortgages                        $2,285,219     $43,118    7.55%        $2,304,500     $43,340    7.52%
   Commercial real estate mortgages                          2,964,053      64,658    8.85          2,947,644      66,428    8.97
   Commercial business loans and leases                      2,304,625      49,439    8.70          2,263,301      52,852    9.29
   Consumer loans and leases                                 3,373,971      72,604    8.73          3,305,342      73,282    8.82
                                                           -----------    --------                 ----------    --------
      Total loans and leases                                10,927,868     229,819    8.51         10,820,787     235,902    8.68
 Securities                                                  5,819,082      97,939    6.74          6,065,801     102,787    6.77
 Federal funds sold and other short-term investments            20,946         296    5.73             33,591         362    4.28
                                                           -----------    --------                 ----------    --------
    Total earning assets                                    16,767,896     328,054    7.89         16,920,179     339,051    7.99
                                                                          --------                               --------
 Noninterest-earning assets                                  1,307,350                              1,379,667
                                                           -----------                            -----------
    Total assets                                           $18,075,246                            $18,299,846
                                                           ===========                            ===========

 Interest-bearing deposits:
   Regular savings                                          $1,390,834      $5,561    1.62        $ 1,416,785       5,922    1.66
   NOW and money market accounts                             3,969,403      32,539    3.32          3,933,748      35,034    3.54
   Certificates of deposit                                   4,513,295      63,502    5.71          4,522,791      65,289    5.74
   Brokered deposits                                           165,065       2,637    6.48            120,020       2,027    6.72
                                                           -----------    --------                 ----------    --------
     Total interest-bearing deposits                        10,038,597     104,239    4.21          9,993,344     108,272    4.31
 Borrowed funds                                              4,474,160      63,992    5.74          4,720,402      75,049    6.24
                                                           -----------    --------                 ----------    --------
     Total interest-bearing liabilities                     14,512,757     168,231    4.68         14,713,746     183,321    4.93
                                                                          --------                               --------
 Non-interest bearing deposits                               1,966,919                             2,046,837
 Other liabilities                                             150,037                               145,722
 Securities of subsidiary trusts                                98,775                                98,775
 Shareholders' equity                                        1,346,758                             1,294,766
                                                           -----------                            -----------
    Total liabilities and shareholders' equity             $18,075,246                            $18,299,846
                                                           ===========                            ===========
 Net earning assets                                         $2,255,139                             $2,206,433
                                                            ==========                             ==========


 Net interest income (fully-taxable equivalent)                            159,823                                155,730
 Less: fully-taxable equivalent adjustments                                 (1,509)                                (1,770)
                                                                        ----------                               --------
    Net interest income                                                 $  158,314                               $153,960
                                                                        ==========                               ========
Net interest rate spread (fully-taxable equivalent)                                   3.21%                                  3.06%
Net interest margin (fully-taxable equivalent)                                        3.84%                                  3.70%
</TABLE>

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


                                       13
<PAGE>
TABLE 2 - Average Balances, Yields and Rates
(Dollars in thousands)

<TABLE>
<CAPTION>
                                                                  2000 Third Quarter                     2000 Second Quarter
                                                        -----------------------------------        --------------------------------
                                                           Average                   Yield/         Average                 Yield/
                                                           Balance     Interest     Rate (1)        Balance     Interest   Rate (1)
                                                           -------     --------     --------        -------     --------   --------
<S>                                                     <C>            <C>           <C>         <C>             <C>        <C>
Loans and leases (2):
  Residential real estate mortgages                      $2,340,950     $43,370       7.41%       $ 2,336,378     $44,190    7.57%
  Commercial real estate mortgages                        2,935,280      65,740       8.91          2,819,294      62,581    8.93
  Commercial business loans and leases                    2,205,430      51,110       9.22          2,132,627      48,021    9.06
  Consumer loans and leases                               3,193,830      69,489       8.65          3,101,735      66,598    8.64
                                                        -----------     -------                   -----------    --------
     Total loans and leases                              10,675,490     229,709       8.57         10,390,034     221,390    8.56
Securities                                                6,298,451     107,303       6.81          6,478,785     109,892    6.79
Federal funds sold and other short-term investments          63,155         958       6.04             80,250       1,266    6.34
                                                        -----------     -------                   -----------    --------
   Total earning assets                                  17,037,096     337,970       7.91         16,949,069     332,548    7.87
                                                                        -------                                  --------
Noninterest-earning assets                                1,408,636                                 1,398,125
                                                        -----------                               -----------
   Total assets                                         $18,445,732                               $18,347,194
                                                        ===========                               ===========

Interest-bearing deposits:
  Regular savings                                        $1,469,374      $7,643       2.07         $1,545,893       8,037    2.09
  NOW and money market accounts                           3,898,780      34,877       3.56          3,770,025      31,269    3.34
  Certificates of deposit                                 4,529,819      63,160       5.55          4,540,737      59,822    5.30
  Brokered deposits                                          86,953       1,439       6.58            123,670       1,994    6.49
                                                         ----------     -------                    ----------    --------
    Total interest-bearing deposits                       9,984,926     107,119       4.27          9,980,325     101,122    4.08
Borrowed funds                                            4,962,974      78,727       6.31          5,086,715      76,767    6.07
                                                         ----------     -------                  ------------    --------
    Total interest-bearing liabilities                   14,947,900     185,846       4.95         15,067,040     177,889    4.75
                                                                        -------                                  --------
Non-interest bearing deposits                             2,046,112                                 1,875,798
Other liabilities                                           104,804                                   133,627
Securities of subsidiary trusts                              98,775                                    98,775
Shareholders' equity                                      1,248,141                                 1,171,954
                                                        -----------                               -----------
   Total liabilities and shareholders' equity           $18,445,732                               $18,347,194
                                                        ===========                               ===========

Net earning assets                                       $2,089,196                                $1,882,029
                                                         ==========                                ==========

Net interest income (fully-taxable equivalent)                          152,124                                   154,659
Less: fully-taxable equivalent adjustments                               (1,411)                                   (1,494)
                                                                       --------                                  --------
   Net interest income                                                 $150,713                                  $153,165
                                                                       ========                                  ========
Net interest rate spread (fully-taxable equivalent)                                   2.96%                                  3.12%
Net interest margin (fully-taxable equivalent)                                        3.57%                                  3.67%
</TABLE>

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

                                       14
<PAGE>
TABLE 2 - AVERAGE BALANCES, YIELDS AND RATES
(Dollars in thousands)

<TABLE>
<CAPTION>
                                                                    2000 First Quarter
                                                       ---------------------------------------------
                                                                                            Yield/
                                                       Average Balance        Interest      Rate (1)
                                                       ---------------------------------------------
Loans and leases (2):
<S>                                                    <C>                    <C>           <C>
  Residential real estate mortgages                        $2,337,127          $43,536        7.45%
  Commercial real estate mortgages                          2,731,631           60,698        8.94
  Commercial business loans and leases                      1,952,209           43,019        8.86
  Consumer loans and leases                                 3,036,234           64,193        8.50
                                                          -----------         --------
     Total loans and leases                                10,057,201          211,446        8.45
Securities                                                  6,783,530          114,163        6.74
Federal funds sold and other short-term investments            79,032            1,091        5.55
                                                          -----------         --------
   Total earning assets                                    16,919,763          326,700        7.75
Noninterest-earning assets                                  1,393,153         --------
                                                          -----------
   Total assets                                           $18,312,916
                                                          ===========

Interest-bearing deposits:
  Regular savings                                          $1,561,943            8,176        2.11
  NOW and money market accounts                             3,639,746           27,701        3.06
  Certificates of deposit                                   4,505,049           56,716        5.06
  Brokered deposits                                           131,218            2,144        6.57
                                                           ----------         --------
    Total interest-bearing deposits                         9,837,956           94,737        3.87
Borrowed funds                                              5,262,911           75,483        5.77
                                                           ----------         --------
    Total interest-bearing liabilities                     15,100,867          170,220        4.53
                                                                              --------
Non-interest bearing deposits                               1,798,107
Other liabilities                                             117,311
Securities of subsidiary trusts                                98,775
Shareholders' equity                                        1,197,856
                                                          -----------
   Total liabilities and shareholders' equity             $18,312,916
                                                          ===========
Net earning assets                                        $ 1,818,896
                                                          ===========

Net interest income (fully-taxable equivalent)                                 156,480
Less: fully-taxable equivalent adjustments                                      (1,307)
                                                                              --------
   Net interest income                                                        $155,173
                                                                              ========
Net interest rate spread (fully-taxable equivalent)                                           3.22%
Net interest margin (fully-taxable equivalent)                                                3.70%
</TABLE>


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

                                       15
<PAGE>
TABLE 2 - AVERAGE BALANCES, YIELDS AND RATES
(Dollars in thousands)

<TABLE>
<CAPTION>
                                                              Nine Months Ended                        Nine Months Ended
                                                              September 30, 2001                       September 30, 2000
                                                    --------------------------------------      ----------------------------------
                                                                                    Yield/                                  Yield/
                                                     Average Balance    Interest    Rate (1)    Average Balance  Interest  Rate (1)
                                                    --------------------------------------      ----------------------------------
Loans and leases (2):
<S>                                                      <C>            <C>          <C>        <C>             <C>        <C>
  Residential real estate mortgages                       $2,197,574    $122,700     7.44%         $2,332,940   $131,110   7.49%
  Commercial real estate mortgages                         3,041,487     194,409     8.55           2,835,199    189,019   8.91
  Commercial business loans and leases                     2,329,333     140,430     8.06           2,093,598    140,806   9.07
  Consumer loans and leases                                3,358,353     211,797     8.43           3,110,904    200,265   8.60
                                                          ----------     -------                   ----------    -------
     Total loans and leases                               10,926,747     669,336     8.19          10,372,641    661,200   8.53
Securities                                                 5,855,566     283,838     6.47           6,519,446    332,702   6.78
Federal funds sold and other short-term investments           28,725         903     4.21              74,078      3,316   5.98
                                                          ----------    --------                   ----------    -------
   Total earning assets                                   16,811,038     954,077     7.58          16,966,165    997,218   7.84
                                                                        --------                                 -------
Noninterest earning assets                                 1,282,890                                1,391,624
                                                         -----------                              -----------
   Total assets                                          $18,093,928                              $18,357,789
                                                         ===========                              ===========

Interest-bearing deposits:
  Regular savings                                         $1,404,481      14,850     1.41         $ 1,525,531     23,828   2.09
  NOW and money market accounts                            4,065,746      87,178     2.87           3,769,958     93,876   3.33
  Certificates of deposit                                  4,460,926     177,280     5.31           4,520,689    179,697   5.31
  Brokered deposits                                          165,866       7,443     6.00             118,379      5,577   6.29
                                                         -----------    --------                -------------    -------
    Total interest-bearing deposits                       10,097,019     286,751     3.80           9,934,557    302,978   4.07
Borrowed funds                                             4,277,620     164,034     5.08           5,100,917    230,977   6.05
                                                          ----------    --------                -------------    -------
    Total interest-bearing liabilities                    14,374,639     450,785     4.18          15,035,474    533,955   4.74
                                                                        --------                                 -------
Non-interest bearing deposits                              2,094,487                                1,906,997
Other liabilities                                            160,993                                  118,471
Securities of subsidiary trust                                98,757                                   98,775
Shareholders' equity                                       1,365,052                                1,198,072
                                                         -----------                            -------------
   Total liabilities and shareholders' equity            $18,093,928                            $  18,357,789
                                                         ===========                            =============

Net earning assets                                        $2,436,399                            $    1,930,691
                                                          ==========                            ==============

Net interest income (fully-taxable equivalent)                           503,292                                 463,263
Less: fully-taxable equivalent adjustments                                (4,773)                                 (4,212)
                                                                       ---------                                --------
   Net interest income                                                 $ 498,519                                $459,051
                                                                       =========                                ========
Net interest rate spread (fully-taxable equivalent)                                  3.40%                                 3.10%
Net interest margin (fully-taxable equivalent)                                       4.01%                                 3.64%
</TABLE>


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


                                       16
<PAGE>
The following table presents certain information on a fully-taxable equivalent
basis regarding changes in interest income and interest expense of the Company
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)

<TABLE>
<CAPTION>
                                                             Three Months Ended September 30, 2001 vs. 2000
                                                                      Increase (decrease) due to
                                                          ----------------------------------------------------
                                                                                        Rate and       Total
                                                            Volume        Rate         Volume (1)     Change
                                                          ---------------------------------------------------
<S>                                                       <C>             <C>          <C>           <C>
Interest income:
Loans and leases                                               $5,803     ($18,567)         $82      ($12,682)
Securities                                                     (8,287)      (9,208)         849       (16,646)
Federal funds sold and other short-term investments              (701)        (478)         352          (827)
                                                          ---------------------------------------------------
Total interest income                                          (3,185)     (28,253)       1,283       (30,155)
                                                          ---------------------------------------------------

Interest expense:
Interest-bearing deposits
   Regular savings                                               (274)      (3,111)         133        (3,252)
   NOW and money market accounts                                2,400      (10,515)        (648)       (8,763)
   Certificates of deposit                                     (2,009)      (7,878)         419        (9,468)
   Brokered deposits                                            1,296         (217)        (191)          888
                                                          ---------------------------------------------------
Total interest-bearing deposits                                 1,413      (21,721)        (287)      (20,595)
Borrowed funds                                                (14,760)     (21,016)       4,510       (31,266)
                                                          ---------------------------------------------------
Total interest expense                                        (13,347)     (42,737)       4,223       (51,861)

Net interest income (fully taxable equivalent)                $10,162      $14,484      ($2,940)      $21,706
                                                          ===================================================
</TABLE>





<TABLE>
<CAPTION>
                                                             Nine Months Ended September 30, 2001 vs. 2000
                                                                       Increase (decrease) due to
                                                            -------------------------------------------------
                                                                                     Rate and         Total
                                                              Volume       Rate     Volume (1)        Change
                                                            -------------------------------------------------
<S>                                                         <C>           <C>       <C>              <C>
Interest income:
Loans and leases                                                $35,350   ($26,378)       ($836)       $8,136
Securities                                                      (33,666)   (15,116)         (82)      (48,864)
Federal funds sold and other short-term investments              (2,029)      (981)         597        (2,413)
                                                            -------------------------------------------------
Total interest income                                              (345)   (42,475)        (321)      (43,141)
                                                            -------------------------------------------------

Interest expense:
Interest-bearing deposits
   Regular savings                                               (1,892)    (7,759)         673        (8,978)
   NOW and money market accounts                                  7,367    (12,971)      (1,094)       (6,698)
   Certificates of deposit                                       (2,374)         -          (43)       (2,417)
   Brokered deposits                                              2,234       (257)        (111)        1,866
                                                            -------------------------------------------------
Total interest-bearing deposits                                   5,335    (20,987)        (575)      (16,227)
Borrowed funds                                                  (37,255)   (37,008)       7,320       (66,943)
                                                            -------------------------------------------------
Total interest expense                                          (31,920)   (57,995)       6,745       (83,170)

Net interest income (fully taxable equivalent)                  $31,575    $15,520      ($7,066)      $40,029
                                                            =================================================
</TABLE>

----------------------------------------------------------

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

                                       17
<PAGE>
NONINTEREST INCOME

Third quarter noninterest income totaled $60.6 million, an increase of $4.5
million from the third quarter of 2000. This increase was primarily due to
insurance commissions income (up $4.1 million or 69%), merchant and electronic
banking income (up $1.3 million or 17%) and other noninterest income (up $1.7
million or 37%). Noninterest income, excluding securities gains and losses, as a
percent of total revenues was 26% and 27% for the quarters ended September 30,
2001 and 2000, respectively. For the nine months ended September 30, 2001 and
2000, noninterest income, excluding losses on securities restructuring, amounted
to $176.9 million and $163.0 million, respectively. The 9% increase was
primarily due to increases in insurance commissions and deposit services income.

Deposit services income increased by $227 thousand or 1% during the three months
ended September 30, 2001 as compared to the same period in the prior year. The
modest increase in the quarter was affected by a lower level of overdrafts as a
result of lower levels of economic activity surrounding September 11. For the
nine months ended September 30, 2001 and 2000, deposit services income amounted
to $53.1 million and $49.3 million, respectively, an increase of $3.8 million,
or 8%. These increases were primarily attributable to volume-driven increases in
checking accounts and collection of overdraft fees.

Mortgage banking income was $2.2 million and $6.2 million for the quarters ended
September 30, 2001 and 2000, respectively. The decrease from the same quarter of
last year was primarily due to lower servicing income as a result of the sale of
virtually all mortgage servicing rights in the fourth quarter of 2000 and the
first quarter of 2001. The Company sold the servicing rights on $1.8 billion of
loans serviced for others in the fourth quarter of 2000 and $1.6 billion in the
first quarter of 2001. The amount of loans serviced for others was $285.4
million and $3.3 billion at September 30, 2001 and 2000, respectively. For the
nine months ended September 30, 2001 and 2000, mortgage banking income amounted
to $7.2 million and $14.8 million, respectively. The $7.6 million decrease for
the nine months ended September 30, 2001 was primarily due to a $10.8 million
decrease in mortgage servicing revenue, which was partially offset by a $3.2
million increase in mortgage sales income. See Table 4 for a summary of mortgage
banking services income by quarter for 2001 and 2000.

Capitalized mortgage servicing rights amounted to $440 thousand at September 30,
2001, compared to $23.2 million at December 31, 2000. The decrease was due to
the sale of mortgage servicing rights with a carrying value of $22.6 million in
the first quarter of 2001. In the fourth quarter of 2000, after a comprehensive
review of its mortgage banking operations, the Company decided to sell virtually
all of its mortgage servicing rights and to sell mortgage servicing rights on
new loan originations on a flow basis in the future. The Company began sales of
this asset after it determined that it could no longer meet its internal
investment targets because of the relatively small size of its loans serviced
for others portfolio and the volatility due to changes in interest rates
inherent in the mortgage servicing rights asset. See Table 4 for details.

                                       18
<PAGE>
   TABLE 4 - MORTGAGE BANKING SERVICES
      (In thousands)

<TABLE>
<CAPTION>
                                                                    At or for the Three Months Ended
                                                    -----------------------------------------------------------
                                                      9/30/01           6/30/01         3/31/01        12/31/00
                                                   -------------------------------------------------------------

<S>                                                <C>              <C>             <C>              <C>
RESIDENTIAL MORTGAGES SERVICED FOR INVESTORS       $   285,400      $   303,590     $   294,898      $ 1,618,610
                                                   =============================================================


MORTGAGE SERVICING RIGHTS:

   Balance at beginning of period                  $       495      $       491     $    23,225      $    41,029
   Mortgage servicing rights capitalized                    --               --             382            1,845
   Amortization charged against
      mortgage servicing fee income                        (55)               4            (500)            (500)
   Change in impairment reserve                             --               --              --               --
   Mortgage servicing rights sold                           --               --         (22,616)         (19,149)
                                                   -------------------------------------------------------------
   Balance at end of period                        $       440      $       495     $       491      $    23,225
                                                   =============================================================


MORTGAGE BANKING SERVICES INCOME:
   Sales income:
   Residential mortgage sales income               $     1,729      $     1,510     $     2,236      $       478
   Lower of cost or market adjustment -
            Loans held for sale                              5               52             (52)              73
                                                   -------------------------------------------------------------
            Total sales income                           1,734            1,562           2,184              551
                                                   -------------------------------------------------------------

   Servicing income:
   Residential mortgage servicing income, net              448              214             344            2,430
   Change in impairment reserve on mortgage
             servicing rights                               --               --              --               --
   Valuation adjustments - interest rate floor              --               --              --               (6)
   Gain on sale of capitalized mortgage
            servicing rights                                --               --             706            4,176
                                                   -------------------------------------------------------------
            Total servicing income                         448              214           1,050            6,600
                                                   -------------------------------------------------------------


   Total                                           $     2,182      $     1,776     $     3,234      $     7,151
                                                   =============================================================
</TABLE>

<TABLE>
<CAPTION>
                                                          At or for the Three Months Ended
                                                   ---------------------------------------------
                                                      9/30/00        6/30/00            3/31/00
                                                   ---------------------------------------------
<S>                                                <C>              <C>              <C>
RESIDENTIAL MORTGAGES SERVICED FOR INVESTORS       $ 3,332,529      $ 3,832,996      $ 3,993,680
                                                   =============================================

MORTGAGE SERVICING RIGHTS:

   Balance at beginning of period                  $    44,135      $    44,780      $    52,724
   Mortgage servicing rights capitalized                 1,657               69              406
   Amortization charged against

      mortgage servicing fee income                     (2,344)          (2,442)          (3,020)
   Change in impairment reserve                            162            1,728            1,005
   Mortgage servicing rights sold                       (2,581)              --           (6,335)
                                                   ---------------------------------------------


   Balance at end of period                        $    41,029      $    44,135      $    44,780
                                                   =============================================

MORTGAGE BANKING SERVICES INCOME:
   Sales income:
   Residential mortgage sales income               $     1,671      $       318      $       169
   Lower of cost or market adjustment -
            Loans held for sale                            108              (36)              30

                                                   ---------------------------------------------
            Total sales income                           1,779              282              199
                                                   ---------------------------------------------

   Servicing income:
   Residential mortgage servicing income, net            1,590            2,956            1,439
   Change in impairment reserve on mortgage
             servicing rights                              162            1,728            1,005
   Valuation adjustments - interest rate floor             460             (106)            (545)
   Gain on sale of capitalized mortgage
            servicing rights                             2,181              124            1,559
                                                   ---------------------------------------------
            Total servicing income                       4,393            4,702            3,458
                                                   ---------------------------------------------

   Total                                           $     6,172      $     4,984      $     3,657
                                                   =============================================
</TABLE>


<TABLE>
<CAPTION>
                                                                   Nine Months Ended
                                                            -----------------------------------
                                                              9/30/01                  9/30/00
                                                            -----------------------------------
<S>                                                         <C>                       <C>
Mortgage banking services income:
   Sales income:
   Residential mortgage sales income                         $  5,476                    2,158
   Lower of cost or market adjustment -
            Loans held for sale                                     5                      102
                                                             ---------------------------------
            Total sales income                                  5,481                    2,260
                                                             ---------------------------------

   Servicing income:
   Residential mortgage servicing income, net                   1,006                    5,985
   Change in impairment reserve on mortgage
             servicing rights                                      --                    2,895
   Valuation adjustments - interest rate floor                     --                     (191)
   Gain (loss) on sale of capitalized mortgage
            servicing rights                                      706                    3,864
                                                             ---------------------------------
            Total servicing income                              1,712                   12,553
                                                             ---------------------------------

   Total                                                     $  7,193                 $ 14,813
                                                             =================================
</TABLE>


Insurance commissions income was $10.2 million for the third quarter of 2001
compared to $6.0 million for the same period in 2000, an increase of 69%. For
the nine months ended September 30, 2001 and 2000, insurance commissions
amounted to $29.4 million and $16.0 million, respectively, representing an
increase of 84%. The increases in 2001 were primarily attributable to two
insurance agency purchase acquisitions late in the third quarter of 2000.

                                       19
<PAGE>
Trust services income amounted to $8.5 million for the quarter ended September
30, 2001 compared to $8.6 million for the third quarter of 2000, a decrease of
2%. For the nine months ended September 30, 2001 and 2000, trust services income
amounted to $26.0 for each respective period. Assets under management decreased
to $8.4 billion at September 30, 2001 from $9.3 billion at September 30, 2000 as
a result of broad-based declines in the stock markets.

Investment advisory services income increased $190 thousand, or 11%, in the
third quarter of 2001 compared to the third quarter of 2000. For the nine months
ended September 30, 2001 and 2000, investment advisory services income amounted
to $5.3 and $5.1 million, respectively, representing an increase of 4%.
Investment advisory services revenues are commissions earned from the sale of
third party mutual funds, annuities, stocks and bonds.

Bank-owned life insurance ("BOLI") income was $4.8 million for the third quarter
of 2001, compared to $4.2 million for the same period in 2000, an increase of
13%. There were two policy benefits recorded in 2001, one in the second quarter
for $616 thousand and one in the third quarter for $418 thousand. There was a
$1.2 million policy benefit recorded in the first quarter of 2000. Excluding the
policy benefits, BOLI income increased $135 thousand in the third quarter of
2001 compared to the third quarter of 2000 due to higher average levels of BOLI
in 2001. For the third quarter of 2001, the average carrying value of BOLI was
$314 million compared to $301 million for the third quarter of 2000. For the
nine months ended September 30, 2001 and 2000, BOLI income amounted to $14.0
million and $13.5 million, respectively, an increase of 4%. BOLI covers certain
employees of the Company's bank subsidiaries. Most of the Company's BOLI is
invested in the "general account" of quality insurance companies. Standard and
Poors rated all such companies A+ or better at September 30, 2001.

Merchant and electronic banking income was $9.2 million for the third quarter of
2001 compared to $7.9 million for the third quarter of 2000, an increase of 17%.
For the nine months ended September 30, 2001 and 2000, merchant and electronic
banking income amounted to $23.7 million and $22.2 million, respectively, an
increase of 7%. This income represents fees and interchange income generated by
the use of Company-issued debit cards and charges to merchants for processing
credit card transactions.

For the nine months ended September 30, 2000, the Company incurred $15.9 million
in losses on securities restructuring. During the second quarter of 2000, the
Company restructured parts of its securities portfolio by selling $104 million
of securities available for sale, realizing a loss of $15.9 million pre-tax
($10.3 million after-tax). The securities, with a weighted average yield of
5.73%, were primarily perpetual preferred stocks acquired in prior acquisitions,
treasury bonds (remaining maturity greater than 10 years) and below investment
grade debt securities. After the restructuring, the Company no longer holds any
of these types of securities.

Other noninterest income increased $1.7 million, or 37%, for the quarter ended
September 30, 2001 compared to the same quarter last year. The increase in the
third quarter of 2001 was primarily due to higher loan fees of $1.5 million
(including prepayment fees) and included $720 thousand of premium income
recognized on covered call options related to mortgage-backed securities and a
$929 thousand gain on the sale of an equity interest in an ATM network. For the
nine months ended September 30, 2001 and 2000, other income amounted to $17.0
million and $16.1 million, respectively and included $2.7 million of premiums on
covered call options in 2001 and $4.7 million gain on sale of a credit card
portfolio in 2000. No covered call options were outstanding as of September 30,
2001.

NONINTEREST EXPENSE

Noninterest expense, excluding special charges, was $127.0 million and $111.6
million for the quarters ended September 30, 2001 and 2000, respectively,
representing an increase of $15.4 million, or 14%. The increase was primarily
due to salaries and employee benefits expense ($14.0 million) and occupancy
expense ($2.1 million.) The efficiency ratio was 53.68% and 52.85% for the
quarters ended September 30, 2001 and 2000, respectively. For the nine months
ended September 30, 2001 and 2000, noninterest expense, excluding special
charges, amounted to $372.8 million and $349.4 million, respectively, a 7%
increase. The efficiency ratio was 54.25% and 55.03% for the nine months ended
September 30, 2001 and 2000, respectively. For a description of the methodology
used by the Company to calculate the efficiency ratio, see Note 5 to Table 1.

Salaries and benefits expense of $67.1 million for the quarter ended September
30, 2001 increased $14.0 million, or 26%, from the same quarter of last year.
Salaries and benefits expense amounted to $191.7 million and $170.5 million
during the nine months ended September 30, 2001 and 2000, respectively,
representing a $21.2 million increase, or 12%.

                                       20
<PAGE>
The increase was primarily due to increased incentive compensation and
additional employees from two insurance agency purchase acquisitions late in the
third quarter of 2000.

Data processing expense of $9.8 million for the quarter ended September 30, 2001
increased $744 thousand, or 8%, from the same quarter a year ago due to recent
upgrades for information technology. For the nine months ended September 30,
2001 and 2000, data processing expense amounted to $27.6 million and $27.1
million, respectively, a $587 thousand, or 2% increase.

Occupancy expense of $11.4 million during the three months ended September 30,
2001 increased $2.1 million, or 23%, from the same quarter in 2000 due to cost
of new facilities and higher utility expenses. For the nine months ended
September 30, 2001 and 2000, occupancy expense amounted to $34.3 million and
$30.3 million, respectively, a $4.0 million, or 13%, increase. This increase was
primarily due to additional expenses for new facilities and higher utility and
snow removal expenses.

Equipment expense of $8.2 million during the three months ended September 30,
2001 increased $171 thousand, or 2%, from the third quarter of last year. For
the nine months ended September 30, 2001 and 2000, equipment expense amounted to
$25.1 million and $23.6 million, respectively, a $1.5 million, or 6% increase.
These increases were primarily due to depreciation relating to new technology
equipment and software.

Amortization of goodwill and other intangibles was $5.4 million and $5.3 million
for the quarters ended September 30, 2001 and 2000, respectively. For the nine
months ended September 30, 2001 and 2000, amortization of goodwill and other
intangibles amounted to $16.2 million and $15.7 million, respectively. The
slight increases were related to amortization of goodwill recorded in connection
with the acquisition of two insurance agencies during the third quarter of 2000.

During the nine months ended September 30, 2001 and 2000, special charges
amounted to $5.6 million ($3.7 million after tax) and $43.0 million ($32.1
million after tax), respectively. The special charges recorded in 2001 related
to severance packages for executives whose employment was terminated in
connection with the Company's acquisition in May 2000of Banknorth Group, Inc., a
multi-bank holding company headquartered in Vermont, costs to close 10 branches
and write-downs on auto lease residuals. (The Company ceased originating
automobile leases in June 2000.) Included in 2000 special charges were $41.4
million of merger-related expenses and $1.6 million of branch closing expenses
related to the closing of 11 branches.

The following table summarizes activity related to special charges from December
31, 2000 through September 30, 2001.

TABLE 5 - SPECIAL CHARGES
(In thousands)


<TABLE>
<CAPTION>
                                                                                                           Other
                                                            Amount                            Cash        Amounts
                                           Balance at     Included in                       Payments    Applied to       Balance at
                                           12/31/2000       Expense       Reallocations    (Receipts)     Reserve         9/30/2001
                                           ----------       -------       -------------    ----------     -------         ---------
<S>                                        <C>             <C>            <C>              <C>          <C>              <C>
MERGER CHARGES

Severance costs                              $   679         $ 2,329         $     0          $ 2,455     $     0         $   553
Data processing/systems integration              100              --              84              184          --              --
Asset write-downs/facility costs               2,119              --            (707)             798          --             614
Other costs                                      217              --             623              840          --              --
                                             -------         -------         -------          -------     -------         -------
                                             $ 3,115         $ 2,329         $     0          $ 4,277     $     0         $ 1,167
                                             =======         =======         =======          =======     =======         =======

BRANCH CLOSINGS

Severance and salary costs                   $     0         $    47         $     0          $     0     $     0         $    47
Asset write-downs/lease terminations              --           1,585              --              300       1,038             247
Branch decommissioning costs                     170             755              --              322          --             603
                                             -------         -------         -------          -------     -------         -------
                                             $   170         $ 2,387         $     0          $   622     $ 1,038         $   897
                                             =======         =======         =======          =======     =======         =======

OTHER SPECIAL CHARGES

Write-down of auto lease residuals           $     0         $   892         $     0          $     0     $   892         $     0
                                             =======         =======         =======          =======     =======         =======
</TABLE>



                                       21
<PAGE>
Other non-interest expenses decreased by $1.8 million, or 7%, during the three
months ended September 30, 2001 as compared to the comparable period in the
prior year. For the nine months ended September 30, 2001 and 2000, other
noninterest expenses amounted to $70.8 million and $75.3 million, respectively,
a $4.4 million, or 6% decrease. The following table summarizes the principal
components of other noninterest expenses for the periods indicated.

TABLE 6 - OTHER NONINTEREST EXPENSES
(In thousands)

<TABLE>
<CAPTION>
                                         2001         2001          2001          2000          2000         2000          2000
                                         Third       Second         First        Fourth        Third        Second        First
                                        Quarter      Quarter       Quarter       Quarter      Quarter       Quarter      Quarter
                                       ----------   ----------   ------------   ----------    ---------   ------------   ---------
<S>                                    <C>          <C>          <C>            <C>          <C>          <C>            <C>
    Advertising and marketing             $2,582       $3,324         $2,387       $2,647       $2,772         $3,606      $2,985
    Telephone                              2,918        2,853          3,007        3,709        3,473          3,134       2,945
    Office supplies                        2,097        2,506          2,320        2,603        2,436          2,673       2,166
    Postage and freight                    2,039        2,448          2,478        2,252        2,267          2,376       2,470
    Miscellaneous loan costs               1,902        1,699          1,737        1,530        1,545          1,717       2,203
    Deposits and other assessments           825          837            835        1,045        1,110          1,002         961
    Collection and carrying costs
        of non-performing assets             705          482            610         (814)         618            590         746
    Other                                  9,679       10,715          9,825       11,492       10,304         10,672      10,479
                                         -------      -------        -------      -------      -------        -------     -------
    Total                                $22,747      $24,864        $23,199      $24,464      $24,525        $25,770     $24,955
                                         =======      =======        =======      =======      =======        =======     =======
</TABLE>

<TABLE>
<CAPTION>
                                           Nine Months Ended
                                       -----------------------
                                         9/30/01      9/30/00
                                       ----------   ----------
<S>                                    <C>          <C>
    Advertising and marketing             $8,293       $9,363
    Telephone                              8,778        9,552
    Office supplies                        6,923        7,275
    Postage and freight                    6,965        7,113
    Miscellaneous loan costs               5,338        5,465
    Deposits and other assessments         2,497        3,073
    Collection and carrying costs
        of non-performing assets           1,797        1,954
    Other                                 30,221       31,455
                                         -------      -------
    Total                                $70,812      $75,250
                                         =======      =======
</TABLE>


TAXES

The effective tax rate, excluding special charges and losses on securities
restructuring, was 34% and 31% for the quarters ended September 30, 2001 and
2000, respectively and 34% and 33% for the nine months ended September 30, 2001
and 2000, respectively. The increases were due primarily to the inclusion of
amortization on investments in low-income housing tax credit limited
partnerships.

COMPREHENSIVE INCOME

Comprehensive income amounted to $282.3 million and $171.9 million during the
nine months ended September 30, 2001 and 2000, respectively, which were
different from the Company's reported net income during the respective periods
as a result of changes in the amount of unrealized gains and losses on the
Company's portfolio of securities available for sale and, in 2001, unrealized
gains on cash flow hedges. For additional information, see Note 2 to the
Unaudited Consolidated Financial Statements included herein.

The Company's available for sale investment portfolio had unrealized gains
(losses), net of applicable income tax effects, of $71.3 million, ($34.5)
million and ($82.9) million at September 30, 2001, December 31, 2000 and
September 30, 2000, respectively. The improvement related to lower prevailing
interest rates. At September 30, 2001, the net unrealized gains of $109.1
million, before related tax effect, represented 2% of securities available for
sale. The Company attempts to balance the interest rate risk of its assets with
its liabilities (see "Interest Rate Risk and Asset Liability Management").
However, the change in value of its liabilities, which tend to fall in rising
interest rate environments and rise in falling interest rate environments, is
not included in "other comprehensive income."

                                       22
<PAGE>
FINANCIAL CONDITION

LOANS AND LEASES

Total loans and leases (including loans held for sale) averaged $10.9 billion
during the third quarter of 2001, an increase of $269 million or 3% from the
third quarter of 2000. All loan categories increased except for residential real
estate loans. Average loans as a percent of average earning assets were 65%
during the quarter ended September 30, 2001 compared to 63% during the quarter
ended September 30, 2000. This change in balance sheet mix relates both to loan
growth and reductions in the investment portfolio.

Average residential real estate loans (which include mortgage loans held for
sale) of $2.1 billion during the third quarter of 2001 declined $238.0 million
from the third quarter of last year due to increased refinancing activity and
prepayments in a lower interest rate environment. Also, it is currently the
Company's policy to sell most of the residential real estate loans it originates
into the secondary market. Mortgage loans held for sale amounted to $58.2
million and $38.9 million at September 30, 2001 and 2000, respectively, and
$51.1 million at December 31, 2000. The increase in loans held for sale compared
to last year was due primarily to higher origination volumes resulting from
declining interest rates.

Average commercial real estate loans of $3.1 billion increased $187 million, or
6%, from the third quarter of last year. The majority of the increase was in the
Massachusetts market. The average yield on commercial real estate loans during
the third quarter of 2001 was 8.24%, as compared to 8.91% in the third quarter
of 2000.

Commercial business loans and leases averaged $2.4 billion during the third
quarter of 2001, an increase of $155 million, or 7%, over the third quarter of
2000. The largest increases were in Maine and Massachusetts. The yield on
commercial business loans and leases decreased to 7.48% in the third quarter of
2001 from 9.22% in the third quarter of 2000 due to repricing of loans in
response to the Federal Reserve rate cuts and to competition in the marketplace.

Average consumer loans and leases of $3.4 billion during the third quarter of
2001 increased $165 million, or 5%, from the third quarter of 2000. The increase
was primarily in indirect automobile and home equity loans and lines of credit.
The largest increases were in Maine and Massachusetts. The average yield on
consumer loans and leases decreased to 8.15% in the third quarter of 2001 from
8.65% in the third quarter of 2000.

SECURITIES AND OTHER EARNING ASSETS

The Company's securities portfolio averaged $5.8 billion during the third
quarter of 2001, as compared to $6.3 billion in the third quarter of 2000. The
securities portfolio consisted primarily of mortgage-backed securities, most of
which are seasoned 15-year federal agency securities and U.S. Government and
agency securities. Other securities in the portfolio are collateralized mortgage
obligations, which include securitized residential real estate loans held in a
REMIC, and asset-backed securities. The majority of securities available for
sale are rated AAA or equivalently rated. The decrease in the Company's average
securities portfolio during 2001 was due to continued run-off of the
mortgage-backed securities due to prepayments of the underlying mortgages. The
average yield on securities was 6.23% for the quarter ended September 30, 2001
and 6.81% for the quarter ended September 30, 2000. With the exception of the
securitized residential real estate loans held in a REMIC that are classified as
held to maturity and carried at cost, all of the Company's securities are
classified as available for sale and carried at market value. Securities
available for sale had an after-tax unrealized gain of $71.3 million at
September 30, 2001 and an after-tax unrealized loss of $34.5 million at December
31, 2000.

ASSET QUALITY

As shown in Table 7, nonperforming assets were $70.9 million at September 30,
2001, or 0.39% of total assets, compared to $56.9 million or 0.31% of total
assets at September 30, 2000. Total nonperforming loans (excluding residential
real estate loans held for sale) as a percentage of total loans was 0.59%, 0.57%
and 0.46% at September 30, 2001, December 31, 2000 and at September 30, 2000,
respectively. The increase in the quarter ended September 30, 2001 was primarily
in commercial loans and leases ($16.8 million) which is reflective of the slower
economy and its effects on various industries. The Company continues to monitor
asset quality with regular reviews of its portfolio in accordance with its
lending and credit policies.

                                       23
<PAGE>
The Company's residential loan portfolio accounted for 18% of the total loan
portfolio at September 30, 2001, as compared with 21% at December 31, 2000. The
Company's 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 September 30, 2001, 0.41% of the Company's
residential loans were nonperforming, as compared with 0.44% at December 31,
2000 and 0.36% at September 30, 2000.

The Company's commercial real estate loan portfolio accounted for 29% of the
total loan portfolio at September 30, 2001, as compared with 27% at December 31,
2000. Commercial real estate loans consist primarily of loans secured by
income-producing commercial real estate (including office and industrial
buildings), service industry real estate (including hotels and health care
facilities), multi-family (over four units) residential properties and retail
trade real estate (including food stores). These loans generally are secured by
properties located in the New England states and New York, particularly Maine,
Massachusetts, New Hampshire and Vermont. At September 30, 2001, 0.48% of the
Company's commercial real estate loans were nonperforming, as compared with
0.43% at December 31, 2000 and 0.60% at September 30, 2000.

The Company's commercial business loan and lease portfolio accounted for 21% of
the total loan portfolio at September 30, 2001 and December 31, 2000. Commercial
business loans and leases are not concentrated in any particular industry, but
reflect the broad-based economies of Maine, New Hampshire, Massachusetts and, to
a lesser extent, Vermont, New York and Connecticut. The Company's commercial
business loans and leases are generally to small and medium size businesses
located within its geographic market area. The Company generally does not
emphasize the purchase of participations in syndicated commercial loans. At
September 30, 2001, the Company had $194 million of participations in syndicated
commercial loans and commitments to purchase an additional $172 million of such
participations. At September 30, 2001, 1.47% of the Company's commercial
business loans and leases were non-performing, as compared with 1.41% at
December 31, 2000 and 0.78% at September 30, 2000.

The Company's consumer loan and lease portfolio accounted for 31% of the total
loan portfolio at September 30, 2001 and December 31, 2000. The Company has 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). Mobile home loans decreased to $157.0 million at
September 30, 2001 from $161.3 million at December 31, 2000, reflecting the
Company's strategy to emphasize other types of lending. In June 2000, the
Company ceased originating automobile leases and, as a result, the auto lease
portfolio continues to decline. Automobile lease receivables totaled $46.3
million, $81.6 million and $98.2 million at September 30, 2001, December 31,
2000 and September 30, 2000, respectively. At September 30, 2001 and December
31, 2000, 0.19% of the Company's consumer loans and leases were nonperforming,
as compared with 0.17% at September 30, 2000.

At September 30, 2001, the Company had $6.1 million of accruing loans which were
90 days or more delinquent, as compared to $6.0 million of such loans at
December 31, 2000 and $8.2 million at September 30, 2000. In light of the
slowing economy, the Company is continuing to monitor the delinquencies to
minimize deterioration in the portfolio.

                                       24
<PAGE>
TABLE 7 - NONPERFORMING ASSETS
(Dollars in thousands)

<TABLE>
<CAPTION>
                                                                  9/30/01        6/30/01       3/31/01
                                                                  ------------------------------------
<S>                                                               <C>           <C>           <C>
Nonaccrual loans:
Residential real estate loans                                     $ 8,222       $ 9,590       $10,575
Commercial real estate loans                                       15,145        12,550        13,205
Commercial business loans and leases                               34,220        39,208        32,233
Consumer loans and leases                                           6,380         5,795         5,611
                                                                  -----------------------------------

Total nonaccrual loans                                             63,967        67,143        61,624
Total troubled debt restructurings                                     --            --            --
                                                                  -----------------------------------
  Total nonperforming loans                                        63,967        67,143        61,624
                                                                  -----------------------------------

Other nonperforming assets:
Other real estate owned, net of related reserves                    4,468         4,508         4,310
Repossessions, net of related reserves                              2,428         1,618         1,935
                                                                  -----------------------------------
  Total other nonperforming assets                                  6,896         6,126         6,245
                                                                  -----------------------------------

Total nonperforming assets                                        $70,863       $73,269       $67,869
                                                                  ===================================


Accruing loans which are 90 days overdue                          $ 6,055       $ 5,799       $ 7,664
                                                                  ===================================

Total nonperforming loans as a percentage of total loans (1)         0.59%         0.62%         0.57%
Total nonperforming assets as a percentage of total assets           0.39%         0.40%         0.37%
Total nonperforming assets as a percentage of  total loans
   (1) and total other nonperforming assets                          0.65%         0.67%         0.63%
</TABLE>




<TABLE>
<CAPTION>
                                                                 12/31/00       9/30/00         6/30/00      3/31/00
                                                                 ---------------------------------------------------
Nonaccrual loans:
<S>                                                              <C>           <C>           <C>           <C>
Residential real estate loans                                     $ 9,894       $ 8,258       $ 9,405       $14,204
Commercial real estate loans                                       12,155        17,212        18,270        15,621
Commercial business loans and leases                               32,583        17,396        16,570        19,818
Consumer loans and leases                                           6,329         5,650         5,110         4,861
                                                                  -------------------------------------------------

Total nonaccrual loans                                             60,961        48,516        49,355        54,504
Total troubled debt restructurings                                    673           704           731         1,027
                                                                  -------------------------------------------------

  Total nonperforming loans                                        61,634        49,220        50,086        55,531
                                                                  -------------------------------------------------

Other nonperforming assets:
Other real estate owned, net of related reserves                    4,074         6,432         8,419         9,027
Repossessions, net of related reserves                              1,424         1,246         2,125         2,792
                                                                  -------------------------------------------------

  Total other nonperforming assets                                  5,498         7,678        10,544        11,819
                                                                  -------------------------------------------------

Total nonperforming assets                                        $67,132       $56,898       $60,630       $67,350
                                                                  =================================================


Accruing loans which are 90 days overdue                          $ 5,973       $ 8,195       $ 7,211       $ 7,914
                                                                  =================================================

Total nonperforming loans as a percentage of total loans (1)         0.57%         0.46%         0.48%         0.54%
Total nonperforming assets as a percentage of total assets           0.37%         0.31%         0.33%         0.37%
Total nonperforming assets as a percentage of  total loans
   (1) and total other nonperforming assets                          0.62%         0.53%         0.58%         0.66%
</TABLE>



   ---------------------------------------------------------
   (1) Total loans excludes residential real estate loans held for sale.

PROVISION/ALLOWANCE FOR LOAN AND LEASE LOSSES

The Company provided $12.1 million and $6.3 million for loan and lease losses in
the quarters ended September 30, 2001 and 2000, respectively, and $28.5 million
and $17.2 million for the nine months ended September 30, 2001 and 2000,
respectively. As shown in Table 8, net charge-offs for the third quarter of 2001
were $8.8 million, or 0.32% of average loans outstanding, compared to $5.8
million, or 0.22% of average loans outstanding, for the third quarter of 2000.
The increased charge-offs during the quarter ended September 30, 2001 in the
commercial loans and lease portfolio were primarily attributable to two credits.
The increases in the provision for loan and lease losses for the three and nine
months ended September 30, 2001 reflect higher levels of net charge-offs,
nonperforming loans and classified loans. Increases in the provision reflect
higher charge-offs, the downward movement in the internal risk classifications
as well as the economic slowdown and the uncertain economic climate. At
September 30, 2001, the allowance for loan and lease losses amounted to $158.5
million or 1.45% of total portfolio loans and leases, as compared to $156.9
million or 1.46% at September 30, 2000. The ratio of the allowance for loan and
lease losses to nonperforming loans was 248% at September 30, 2001 and 319% at
September 30, 2000.

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

Provisions for loan 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 the Company will not have to change its
provisions for loan and lease losses in subsequent periods. Changing economic
and business conditions in the Company's market areas, particularly northern New
England, fluctuations in local markets for real estate, future changes in
nonperforming asset trends, large movements in market-based interest rates or
other reasons could affect the Company's future provisions for loan and lease
losses.

                                       25
<PAGE>
    TABLE 8 - ALLOWANCE FOR LOAN AND LEASE LOSSES
    (Dollars in thousands)


<TABLE>
<CAPTION>
                                                               2001 Third      2001 Second        2001 First        2000 Fourth
                                                                 Quarter         Quarter            Quarter            Quarter
                                                             ------------------------------------------------------------------
<S>                                                          <C>               <C>               <C>               <C>
Allowance at beginning of period                             $   155,303       $   153,621       $   153,550       $   156,867

Charge-offs:
Real estate mortgages                                                743               724               790               963
Commercial business loans and leases                               6,154             4,864             3,774             4,639
Consumer loans and leases                                          5,529             4,706             4,463             6,312
                                                             -----------------------------------------------------------------
  Total loans charged off                                         12,426            10,294             9,027            11,914
                                                             -----------------------------------------------------------------

Recoveries:
Real estate mortgages                                                 72               349               138               324
Commercial business loans and leases                               2,649             1,524               890               576
Consumer loans and leases                                            875               792               932             1,046
                                                             -----------------------------------------------------------------
  Total loans recovered                                            3,596             2,665             1,960             1,946
                                                             -----------------------------------------------------------------
Net charge-offs                                                    8,830             7,629             7,067             9,968

Additions charged to operating expenses                           12,061             9,311             7,138             6,651
                                                             -----------------------------------------------------------------
Allowance at end of period                                   $   158,534       $   155,303       $   153,621       $   153,550
                                                             =================================================================

Average loans and leases outstanding
   during the period (1)                                     $10,869,870       $10,816,524       $10,880,534       $10,771,843
                                                             =================================================================

Ratio of net charge-offs to average loans and
   leases outstanding during the period, annualized (1)             0.32%             0.28%             0.26%             0.37%
Ratio of allowance to total loans and leases
   at end of period (1)                                             1.45%             1.43%             1.43%             1.42%
Ratio of allowance to nonperforming loans
   at end of period                                                  248%              231%              249%              249%
Ratio of net charge-offs as a percent of
    average outstanding loans, annualized (1):
             Real estate mortgages                                 0.052%            0.029%            0.051%            0.049%
             Commercial business loans and leases                  0.589%            0.577%            0.508%            0.714%
             Consumer loans and leases                             0.550%            0.470%            0.424%            0.634%
</TABLE>

<TABLE>
<CAPTION>
                                                               2000 Third       2000 Second     2000 First
                                                                Quarter           Quarter         Quarter
                                                             -----------------------------------------------
<S>                                                          <C>               <C>               <C>
Allowance at beginning of period                             $   156,464       $   155,078       $   155,048

Charge-offs:
Real estate mortgages                                              1,989               894             1,425
Commercial business loans and leases                                 807             1,519               759
Consumer loans and leases                                          5,046             4,382             5,956
                                                             -----------------------------------------------
  Total loans charged off                                          7,842             6,795             8,140
                                                             -----------------------------------------------

Recoveries:
Real estate mortgages                                                707               409               983
Commercial business loans and leases                                 440               619               667
Consumer loans and leases                                            848             1,304             1,452
                                                             -----------------------------------------------
  Total loans recovered                                            1,995             2,332             3,102
                                                             -----------------------------------------------
Net charge-offs                                                    5,847             4,463             5,038

Additions charged to operating expenses                            6,250             5,849             5,068
                                                             -----------------------------------------------
Allowance at end of period                                   $   156,867       $   156,464       $   155,078
                                                             ===============================================

Average loans and leases outstanding
   during the period (1)                                     $10,648,267       $10,371,568       $10,010,690
                                                             ===============================================


Ratio of net charge-offs to average loans and
   leases outstanding during the period, annualized (1)             0.22%             0.17%             0.20%
Ratio of allowance to total loans and leases
   at end of period (1)                                             1.46%             1.49%             1.52%
Ratio of allowance to nonperforming loans
   at end of period                                                  319%              312%              279%
Ratio of net charge-offs as a percent of
    average outstanding loans, annualized (1):
             Real estate mortgages                                 0.097%            0.038%            0.035%
             Commercial business loans and leases                  0.066%            0.170%            0.019%
             Consumer loans and leases                             0.523%            0.399%            0.596%
</TABLE>



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


                                       26
<PAGE>
DEPOSITS

Total deposits averaged $12.3 billion during the third quarter of 2001, an
increase of $316 million from the third quarter of 2000. The increases in
deposits were in NOW and money market accounts and non-interest bearing
deposits. The ratio of loans to deposits was 88% and 90% at September 30, 2001
and December 31, 2000, respectively.

Average non-interest bearing deposits of $2.2 billion during the third quarter
of 2001 increased $166.4 million or 8% from the third quarter of 2000. The
increase in non-interest bearing deposits reflect strong growth in commercial,
government and personal accounts.

Average interest-bearing deposits, excluding brokered deposits, of $10.0 billion
during the third quarter of 2001 increased $71 million from the third quarter of
2000 primarily due to increases in NOW and money market accounts. The average
rates paid on NOW and money market accounts decreased 107 basis points from
3.56% in the third quarter of 2000 to 2.49% in the third quarter of 2001 due
largely to lower prevailing interest rates. The average rates paid on all
deposit types decreased by 88 basis points from 4.27% in the third quarter of
2000 to 3.39% in the third quarter of 2001, reflecting a continuation of the
decline in prevailing interest rates since the fourth quarter of 2000.

OTHER FUNDING SOURCES

The Company's primary sources of funding, other than deposits, are advances from
Federal Home Loan Banks ("FHLB") and securities sold under repurchase
agreements. The Company also borrows funds under the U.S. Treasury's Note Option
Treasury, tax and loan program and by overnight borrowings from other banks as
needed. Average borrowed funds for the third quarter of 2001 were $4.0 billion,
a decrease of $928 million from the third quarter of 2000. Borrowing needs
declined as a result of increased average deposit levels and a reduction in the
securities portfolio.

Average FHLB borrowings for the third quarter of 2001 were $2.3 billion, which
decreased $1.6 billion or 42% from the third quarter of 2000. 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 5.05% during the quarter ended September
30, 2001 as compared to 6.56% for the comparable period last year. The 151 basis
point decrease was due to the Federal Reserve rate cuts during 2001. At
September 30, 2001, the Company's FHLB borrowings amounted to $2.6 billion and
its additional borrowing capacity from the FHLB was $1.7 billion.

Average balances for securities sold under repurchase agreements were $1.3
billion and $922.6 million for the quarters ended September 30, 2001 and 2000,
respectively, an increase of $339.2 million. These borrowings, with a cost of
3.61% for the quarter ended September 30, 2001, are secured by mortgage-backed
securities and U.S. Government obligations.

On June 22, 2001, one of the Company's wholly-owned subsidiaries, First
Massachusetts Bank, NA, issued $200 million of 7.625% subordinated notes due in
2011. The proceeds were used to reduce other short-term indebtedness. The notes
qualify as Tier 2 capital.

RISK MANAGEMENT

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

    The Board has established the overall strategic direction of the Company. It
approves the overall risk policies of the Company and oversees the overall risk
management process for the Company. The Board has delegated authority to three
Board Committees, consisting of Audit, Board Risk Management and Asset Review
Committees, and has charged

                                       27
<PAGE>
each Committee with overseeing key risks that are relative to their committees.
The Board Risk Management Committee has the ultimate oversight of the seven
applicable risks for the Company.

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 Company's Board of Directors (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
activities of the Company. The ALCO also reviews and approves all major risk
relating to 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.

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. The Company has no trading operations and thus is 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 the Company is 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, the Company's primary source of
revenue. This risk arises directly from the Company's core banking activities -
lending and deposit gathering. 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 premiums paid on securities, (v) the amount of
unrealized gains and losses on securities available for sale and (vi) the fair
value of the Company's saleable assets and derivatives and the resultant ability
to realize gains.

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

    The Company quantifies and measures 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 the Company's
deposit and loan customers. The most material assumption relates to the
prepayment of mortgage assets (including mortgage loans and mortgage-backed
securities). 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 management's efforts to measure interest rate risk is the
uncertainty of the maturity, repricing and/or runoff of some of the Company's
assets and liabilities.

    To cope with these uncertainties, management gives careful attention to its
assumptions. For example, many of the Company's 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 management believes it has
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 loans, assumptions are derived from
published dealer median prepayment estimates for comparable mortgage loans.

         The Company manages the interest-rate risk inherent in its core banking
operations primarily using on-balance sheet instruments that sometimes contain
embedded options, mainly fixed-rate portfolio securities and borrowed fund
maturities. From time to time the Company may use certain hedging strategies
which include the use of derivative financial instruments. The primary objective
of the Company's hedging strategies is to reduce net interest rate exposure
arising from the Company's asset and liability structure. As of January 1, 2001,
the Company recognizes all derivatives

                                       28
<PAGE>
on the balance sheet at fair value. The Company may use a variety of derivatives
as part of its interest rate risk management strategy. The Company's primary use
of derivatives is to hedge the sale of mortgage loans held for sale. The Company
typically uses forward mortgage sales commitments and mortgage-backed securities
options to modify its forward mortgage commitments.

    The Company's policy on interest-rate risk simulation specifies that if
interest rates were to shift gradually up or down 200 basis points, estimated
net interest income for the subsequent 12 months should decline by less than 5%.
As shown in the following table, the Company was in compliance with this limit
at September 30, 2001 and December 31, 2000.

<TABLE>
<CAPTION>
                        200 Basis Point    100 Basis Point     100 Basis Point    200 Basis Point
                        Rate Decrease      Rate Decrease       Rate Increase      Rate Increase
                        -------------      -------------       -------------      -------------
<S>                     <C>                <C>                 <C>                <C>
September 30, 2001         (4.33%)            (2.13%)             1.50%              1.93%
                           -----              -----               ----               ----

December 31, 2000           0.70%              0.51%             (1.46%)            (3.18%)
                           -----              -----               ----               ----
</TABLE>

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, the simulated increase in interest
income would be more than the simulated increase in interest expense. It should
be emphasized, however, that the results are dependent on material assumptions
such as those discussed above.

    Substantially all of the Company's remaining mortgage servicing rights were
sold in January 2001. Mortgage servicing rights associated with current loan
originations are sold on a flow basis shortly after the mortgages are sold. As a
result, future earnings exposure to the value of mortgage servicing rights is
not expected to be material.

    The most significant factors affecting market risk exposure of net interest
income during the nine months ended September 30, 2001 has been (i) the
direction of interest rates, (ii) changes in the shape of the U.S. Government
securities and interest rate swap yield curves, (iii) changes in the composition
and prepayment speeds of mortgage assets (iv) changes in the borrowings
portfolio structure, (v) reduction of deposit interest expense, and (vi)
extension of the assumed lives of core non-maturity deposits.

    The Company's 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.

                                       29
<PAGE>
LIQUIDITY

Parent Company

On a parent-only basis at September 30, 2001, the Company's debt service
requirements consisted primarily of junior subordinated debentures issued to two
subsidiaries: $103 million to Peoples Heritage Capital Trust I and $31 million
to Banknorth Capital Trust I, in connection with the issuance of 9.06% Capital
Securities due 2027 and 10.52% Capital Securities due 2027, respectively. The
principal sources of funds for the Company to meet parent-only obligations are
dividends from its banking subsidiaries, which are subject to regulatory
limitations, income from the securities portfolio and borrowings, including
draws on a $60 million unsecured line of credit which is renewable every 364
days and, if used, carries interest at 3 month LIBOR plus 0.75%. The Company did
not draw on the line during the quarter ended September 30, 2001. The average
balance outstanding on the line during the nine months ended September 30, 2001
was $1.7 million.

Banking Subsidiaries

For banking subsidiaries of the Company, liquidity represents the ability to
fund asset growth or accommodate deposit withdrawals. Liquidity risk is the
danger that the banks 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, the banks have 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.

The Company continually monitors and forecasts its liquidity position. There are
several interdependent methods used by the Company 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 September 30, 2001, the banks 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
22% of deposits. The Company's current policy minimum is 10% of deposits.

Also as of September 30, 2001, the banks had in the aggregate "potentially
volatile funds" of $1.5 billion. These are funds that might flow out of the
banks 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 September 30, 2001, the ratio of "immediately accessible liquidity" to
"potentially volatile funds" was 183%, versus a policy minimum of 100%.

In addition to the liquidity sources discussed above, management believes that
its consumer loan portfolio provides a significant amount of contingent
liquidity that could be accessed in a reasonable time period through sale or
securitization. The banks also have significant untapped access to the national
brokered deposit market. Both of these sources are contemplated as secondary
liquidity in the Company's contingent funding plan. Management believes that the
level of liquidity is sufficient to meet current and future funding
requirements.

CAPITAL

At September 30, 2001, shareholders' equity amounted to $1.5 billion. In
addition, through subsidiary trusts, the Company had outstanding at such date
$93.8 million of capital securities which mature in 2027 and qualify as Tier 1
Capital. In June, 2001, one of the Company's wholly-owned subsidiaries, First
Massachusetts Bank, NA, issued $200 million of 7.625% subordinated notes due in
2011 which qualify as Tier 2 capital.

                                       30
<PAGE>
The Company paid a $0.13 per share dividend on its Common Stock during the first
two quarters of 2001. In October 2001, the Company's Board of Directors approved
a $0.135 dividend and authorized an increase in its share repurchase program of
5 million shares. In January 2001, the Company authorized an 8,000,000 share
repurchase program to be purchased from time to time in open market transactions
as market conditions warrant. In the nine months ended September 30, 2001, the
Company purchased 5.7 million shares at an average price of $20.29 per share, or
a total cost of $115.8 million.

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

   TABLE 9 - REGULATORY CAPITAL REQUIREMENTS
   (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                               For Capital Adequacy
                                                                Actual                 Purposes                       Excess
                                                       ---------------------   -----------------------     -------------------------
                                                          Amount       Ratio      Amount        Ratio         Amount         Ratio
                                                       ----------      -----    ----------    --------      ---------       -------
As of September 30, 2001:
<S>                                                    <C>             <C>       <C>             <C>       <C>              <C>
Total capital (to risk weighted assets)                $1,669,730      13.28%    1,006,011       8.00%     $  663,719       5.28%
Tier 1 capital (to risk weighted assets)                1,312,541      10.44%      503,006       4.00%        809,535       6.44%
Tier 1 leverage capital ratio (to average assets)       1,312,541       7.35%      714,274       4.00%        598,267       3.35%

As of December 31, 2000:

Total capital (to risk weighted assets)                 1,428,814      11.81%      967,752       8.00%        461,062       3.81%
Tier 1 capital (to risk weighted assets)                1,277,574      10.56%      483,876       4.00%        793,698       6.56%
Tier 1 leverage capital  (to average assets)            1,277,574       7.02%      727,852       4.00%        549,722       3.02%
</TABLE>


Net risk weighted assets were $12.6 billion and $12.1 billion at September 30,
2001 and December 31, 2000, respectively.

The Company's banking subsidiaries are also subject to federal regulatory
capital requirements. At September 30, 2001, each of the Company's depository
institutions was deemed to be "well capitalized" under the regulations of the
applicable federal banking agency and in compliance with applicable capital
requirements.

                                       31
<PAGE>
IMPACT OF NEW ACCOUNTING STANDARDS

In August, 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-lived Assets." SFAS No. 144 provides additional implementation
guidance and supersedes SFAS No. 121, "Accounting for the Impairment of
Long-lived Assets and for Long-lived Assets to be Disposed Of." It is effective
for financial statements issued for fiscal years beginning after December 15,
2001. The Company has not yet determined the impact of implementing this
statement to its financial condition or results of operations.

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." SFAS 143 applies to legal obligations associated with the
retirement of long-lived assets that result from the acquisition, construction,
development and (or) the normal operation of a long-lived asset. It is effective
for financial statements issued for fiscal years beginning after June 15, 2002.
The Company has not yet determined the impact of implementing this statement to
its financial condition or results of operations.

In June 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS No.
142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires the use of
purchase method of accounting for all business combinations initiated after June
30, 2001, thereby eliminating the use of the pooling-of-interests method. It
also provides new criteria that determine whether an acquired intangible asset
should be recognized separately from goodwill. Under SFAS No. 142, goodwill is
no longer amortized, but instead is tested for impairment on a regular basis and
upon the occurrence of certain triggering events. This statement is effective
for fiscal years beginning after December 15, 2001. The Company will first
perform the required impairment tests of goodwill and indefinite lived
intangible assets as of January 1, 2002, and as a result the Company has not yet
determined what effect the results of these tests will have on the Company's
operations and financial position. At September 30, 2001, the Company had $163.8
million of goodwill; goodwill amortization expense was $15.3 million for the
nine months ended September 30, 2001.

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 the Company's 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. Actual results could differ materially from those set
forth in forward-looking statements due to a variety of factors, including, but
not limited to, those related to the economic environment, particularly in the
market areas in which the Company operates, competitive products and pricing,
fiscal and monetary policies of the U.S. Government, changes in government
regulations affecting financial institutions, including regulatory fees and
capital requirements, changes in prevailing interest rates, acquisitions and the
integration of acquired businesses, credit risk management, asset/liability
management, the financial and securities markets and the availability of and
costs associated with sources of liquidity.

The Company does not undertake, and specifically disclaims 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.

                                       32
<PAGE>
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

         The Company is involved in routine legal proceedings occurring in the
         ordinary course of business which in the aggregate are believed by
         management to be immaterial to the financial condition and results of
         operations of the Company.

Item 2.  Changes in Securities and use of proceeds - not applicable.

Item 3.  Defaults Upon Senior Securities - not applicable.

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

Item 5.  Other Information - not applicable.

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

        (a) The Company filed a Current Report on Form 8-K/A on July 25, 2001.

                                   SIGNATURES

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

                                          BANKNORTH GROUP, INC.


Date:     November 14, 2001               By:     /s/ William J. Ryan
                                                  -------------------
                                                  William J. Ryan
                                                  Chairman, President and
                                                  Chief Executive Officer



Date:     November 14, 2001               By:     /s/ Peter J. Verrill
                                                  --------------------
                                                  Peter J. Verrill
                                                  Executive Vice President,
                                                  Chief Operating Officer and
                                                  Chief Financial Officer



Date:     November 14, 2001               By:     /s/ Stephen J. Boyle
                                                  --------------------
                                                  Stephen J. Boyle
                                                  Executive Vice President and
                                                  Controller
                                                  (principal accounting officer)

                                       33