##### Table of Contents



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, 2002

OR



| | [   ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | 
| | ----- | ---------------------------------------------------------------------------------------- | 

Commission File Number: 001-31251



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, 2002 is:



|Common stock, par
 value $.01 per share |  | 147,848,007   | 
|--------------------------------------- |  | ------------- | 
|                                        |  |               | 
|(Class)                                 |  | (Outstanding) | 

Available on the Web @ www.banknorth.com

1



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TABLE OF CONTENTS



|                                                                                                       |                                                                                       |                                                            |  |  |  |  |  | 
|------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------- | ---------------------------------------------------------- |  |  |  |  |  | 
|                                                                                                       |                                                                                       | CONSOLIDATED BALANCE SHEETS                               
|                                                                                                       |                                                                                       | CONSOLIDATED STATEMENTS OF INCOME                         
|                                                                                                       |                                                                                       | CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
|                                                                                                       |                                                                                       | CONSOLIDATED STATEMENTS OF CASH FLOWS                     
|                                                                                                       |                                                                                       | Notes to Consolidated Financial Statements                
|                                                                                                       | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                                                                                       | Item 3. Quantitative and Qualitative Disclosures about Market Risk                   
|                                                                                                       | Item 4. Controls and Procedures                                                      
|Part II - Other Information                                                                           
|                                                                                                       | Item 1. Legal Proceedings                                                            
|                                                                                                       | Changes in Securities and Use of Proceeds                                            
|                                                                                                       | Item 3. Defaults Upon Senior Securities                                              
|                                                                                                       | Item 4. Submission of Matters to a Vote of Security Holders                          
|                                                                                                       | Item 5. Other Information                                                            
|                                                                                                       | Item 6. Exhibits and Reports on Form 8-K                                             
|SIGNATURES                                                                                            
|PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
|PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 CERTIFICATION OF CHIEF FINANCIAL OFFICER    
|EXHIBIT INDEX                                                                                         
|EX-99.1 Cert. of Principal Executive Officer                                                          
|EX-99.2 Cert. of Principal Financial Officer                                                          



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##### Table of Contents



INDEX
BANKNORTH GROUP, INC. AND SUBSIDIARIES



|         |                                                           |                                                                                                             | PAGE
|-------- | --------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------- | ----
|         |                                                           |                                                                                                             |     
|PART I.  | FINANCIAL INFORMATION                                     |                                                                                                            
|         | Item 1.                                                   | Financial Statements                                                                                        |     
|         |                                                           | Consolidated Balance Sheets
 September 30, 2002 and December 31, 2001                                       |     
|         |                                                           | Consolidated Statements of
 Income  Three and nine months
 ended September 30, 2002 and 2001               |     
|         |                                                           | Consolidated Statements of Changes in
 Shareholders Equity  Nine months ended September 30, 2002 and 2001 |     
|         |                                                           | Consolidated Statements of
 Cash Flows  Nine months ended September 30, 2002 and 2001                      |     
|         |                                                           | Notes to Consolidated Financial
 Statements                                                                 |     
|         | Item 2.                                                   | Managements Discussion and Analysis of Financial
 Condition and Results of Operations                      |     
|         | Item 3.                                                   | Quantitative and Qualitative Disclosures
 about Market Risk                                                 |     
|         | Item 4.                                                   | Controls and Procedures                                                                                     |     
|PART II. | OTHER INFORMATION                                         |                                                                                                             |     
|         | Item 1.                                                   | Legal proceedings                                                                                           |     
|         | Item 2.                                                   | Changes in securities and use of
 proceeds                                                                  |     
|         | Item 3.                                                   | Defaults upon senior securities                                                                             |     
|         | Item 4.                                                   | Submission of matters to a vote of security
 holders                                                        |     
|         | Item 5.                                                   | Other information                                                                                           |     
|         | Item 6.                                                   | Exhibits and reports on Form 8-K                                                                            |     
|         | Signatures                                                |                                                                                                             | 45  
|         | Section 302 Certification of the
 Chief Executive Officer |                                                                                                             | 46  
|         | Section 302 Certification of
 the Chief Financial Officer |                                                                                                             | 47  
|         | Exhibits                                                  |                                                                                                             | 48  

2



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##### Table of Contents






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



|                                                                                                                                                   | September 30, 2002 |   | December 31, 2001
|-------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------ | - | -----------------
|                                                                                                                                                   |                    |   |                  
|Assets                                                                                                                                             | (Unaudited)        |   |                  
|Cash and due from banks                                                                                                                            |                    | $ | 633,455          
|Federal funds sold and other short term investments                                                                                                |                    |   | 5,883            
|Securities available for sale, at market value                                                                                                     |                    |   | 6,483,010        
|Securities held to maturity (fair value of $258,007 and $340,737 at September
 30, 2002 and December 31, 2001, respectively)                       |                    |   | 253,131          
|Loans held for sale                                                                                                                                |                    |   | 76,399           
|Loans and leases:                                                                                                                                  |                    |   |                  
|Residential real estate mortgages                                                                                                                  |                    |   | 2,646,432        
|Commercial real estate mortgages                                                                                                                   |                    |   | 4,426,120        
|Commercial business loans and leases                                                                                                               |                    |   | 2,872,191        
|Consumer loans and leases                                                                                                                          |                    |   | 3,786,794        
|                                                                                                                                                   |                    |   |                  
|Total loans and leases                                                                                                                             |                    |   | 13,731,537       
|Less: Allowance for loan and lease losses                                                                                                          |                    |   | 201,689          
|                                                                                                                                                   |                    |   |                  
|Net loans and leases                                                                                                                               |                    |   | 13,529,848       
|                                                                                                                                                   |                    |   |                  
|Premises and equipment, net                                                                                                                        |                    |   | 266,170          
|Goodwill                                                                                                                                           |                    |   | 569,814          
|Identifiable intangible assets                                                                                                                     |                    |   | 31,595           
|Mortgage servicing rights                                                                                                                          |                    |   | 5,202            
|Bank-owned life insurance                                                                                                                          |                    |   | 374,880          
|Other assets                                                                                                                                       |                    |   | 316,753          
|                                                                                                                                                   |                    |   |                  
|Total assets                                                                                                                                       |                    | $ | 22,546,140       
|                                                                                                                                                   |                    |   |                  
|Liabilities and Shareholders Equity                                                                                                               |                    |   |                  
|Deposits:                                                                                                                                          |                    |   |                  
|Savings accounts                                                                                                                                   |                    | $ | 1,835,688        
|Money market access and NOW accounts                                                                                                               |                    |   | 5,769,357        
|Certificates of deposit                                                                                                                            |                    |   | 4,749,210        
|Brokered deposits                                                                                                                                  |                    |   | 32,532           
|Demand deposits                                                                                                                                    |                    |   | 2,855,122        
|                                                                                                                                                   |                    |   |                  
|Total deposits                                                                                                                                     |                    |   | 15,241,909       
|Federal funds purchased and securities sold under repurchase
 agreements                                                                           |                    |   | 2,081,269        
|Borrowings from the Federal Home Loan Bank                                                                                                         |                    |   | 2,482,180        
|Other borrowings                                                                                                                                   |                    |   | 103,030          
|Subordinated long-term debt                                                                                                                        |                    |   | 200,000          
|Company obligated, mandatorily redeemable securities
 of subsidiary trusts holding solely parent junior subordinated debentures                    |                    |   | 295,056          
|Other liabilities                                                                                                                                  |                    |   | 218,537          
|                                                                                                                                                   |                    |   |                  
|Total liabilities                                                                                                                                  |                    |   | 20,621,981       
|                                                                                                                                                   |                    |   |                  
|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, 166,175,991
 shares issued in 2002 and 165,123,674 shares issued in 2001) |                    |   | 1,662            
|Paid-in capital                                                                                                                                    |                    |   | 982,086          
|Retained earnings                                                                                                                                  |                    |   | 1,214,430        
|Unearned compensation                                                                                                                              |                    |   | (138             
|Treasury stock, at cost (18,238,998 shares in 2002 and 13,903,074 shares
 in 2001)                                                                 |                    |   | (380,527         
|Accumulated other comprehensive income                                                                                                             |                    |   | 106,646          
|                                                                                                                                                   |                    |   |                  
|Total shareholders equity                                                                                                                         |                    |   | 1,924,159        
|                                                                                                                                                   |                    |   |                  
|Total liabilities and shareholders equity                                                                                                         |                    | $ | 22,546,140       
|                                                                                                                                                   |                    |   |                  

See accompanying Notes to Consolidated
 Financial Statements.

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##### Table of Contents






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



|                                                                       |  | Three Months Ended |         | Nine Months Ended
|---------------------------------------------------------------------- |  | ------------------ | ------- | -----------------
|                                                                       |  | September 30,      |         | September 30,    
|                                                                       |  |                    |         |                  
|                                                                       |  |                    | 2002    |                  
|                                                                       |  |                    |         |                  
|Interest and dividend income:                                          |  |                    |         |                  
|Interest and fees on loans and leases                                  |  | $                  | 221,534 |                  
|Interest and dividends on securities                                   |  |                    | 91,622  |                  
|                                                                       |  |                    |         |                  
|Total interest and dividend income                                     |  |                    | 313,156 |                  
|                                                                       |  |                    |         |                  
|Interest expense:                                                      |  |                    |         |                  
|Interest on deposits                                                   |  |                    | 62,335  |                  
|Interest on borrowed funds                                             |  |                    | 49,825  |                  
|                                                                       |  |                    |         |                  
|Total interest expense                                                 |  |                    | 112,160 |                  
|                                                                       |  |                    |         |                  
|Net interest income                                                    |  |                    | 200,996 |                  
|Provision for loan and lease losses                                    |  |                    | 10,829  |                  
|                                                                       |  |                    |         |                  
|Net interest income after provision for loan and lease losses          |  |                    | 190,167 |                  
|                                                                       |  |                    |         |                  
|Noninterest income:                                                    |  |                    |         |                  
|Deposit services                                                       |  |                    | 20,816  |                  
|Mortgage banking services                                              |  |                    | (455    | )                
|Trust and investment management services                               |  |                    | 7,791   |                  
|Investment planning services                                           |  |                    | 2,770   |                  
|Insurance brokerage commissions                                        |  |                    | 11,670  |                  
|Bank-owned life insurance                                              |  |                    | 5,107   |                  
|Merchant and electronic banking income, net                            |  |                    | 10,196  |                  
|Loan fee income                                                        |  |                    | 5,206   |                  
|Net securities gains                                                   |  |                    | 208     |                  
|Other noninterest income                                               |  |                    | 2,196   |                  
|                                                                       |  |                    |         |                  
|                                                                       |  |                    | 65,505  |                  
|                                                                       |  |                    |         |                  
|Noninterest expenses:                                                  |  |                    |         |                  
|Salaries and employee benefits                                         |  |                    | 79,718  |                  
|Data processing                                                        |  |                    | 9,763   |                  
|Occupancy                                                              |  |                    | 12,715  |                  
|Equipment                                                              |  |                    | 9,986   |                  
|Amortization of goodwill                                               |  |                    |        |                  
|Amortization of identifiable intangible assets                         |  |                    | 1,684   |                  
|Special charges                                                        |  |                    | 2,168   |                  
|Other noninterest expenses                                             |  |                    | 25,543  |                  
|                                                                       |  |                    |         |                  
|                                                                       |  |                    | 141,577 |                  
|                                                                       |  |                    |         |                  
|Income before income tax expense                                       |  |                    | 114,095 |                  
|Applicable income tax expense                                          |  |                    | 37,233  |                  
|                                                                       |  |                    |         |                  
|Net income before cumulative effect of change in accounting
 principle |  |                    | 76,862  |                  
|Cumulative effect of change in accounting principle, net
 of tax       |  |                    |        |                  
|                                                                       |  |                    |         |                  
|Net income                                                             |  | $                  | 76,862  |                  
|                                                                       |  |                    |         |                  
|Basic earnings per share:                                              |  |                    |         |                  
|Net income before cumulative effect of accounting change               |  | $                  | 0.52    |                  
|Cumulative effect of change in accounting principle, net of tax        |  |                    |        |                  
|                                                                       |  |                    |         |                  
|Net income                                                             |  | $                  | 0.52    |                  
|                                                                       |  |                    |         |                  
|Diluted earnings per share:                                            |  |                    |         |                  
|Net income before cumulative effect of accounting change               |  | $                  | 0.51    |                  
|Cumulative effect of change in accounting principle, net of tax        |  |                    |        |                  
|                                                                       |  |                    |         |                  
|Net income                                                             |  | $                  | 0.51    |                  
|                                                                       |  |                    |         |                  
|Weighted average shares outstanding:                                   |  |                    |         |                  
|Basic                                                                  |  |                    | 148,099 |                  
|Diluted                                                                |  |                    | 149,662 |                  

See accompanying Notes to Consolidated
 Financial Statements.

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##### Table of Contents






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



|                                                                                               |  | CommonStock |       | Paid-inCapital |  | RetainedEarnings |         | UnearnedCompensation |  | TreasuryStock |           | AccumulatedOtherComprehensiveIncome (Loss) |  | Total
|---------------------------------------------------------------------------------------------- |  | ----------- | ----- | -------------- |  | ---------------- | ------- | -------------------- |  | ------------- | --------- | ------------------------------------------ |  | -----
|                                                                                               |  |             |       |                |  |                  |         |                      |  |               |           |                                            |  |      
|Balances at December 31, 2001                                                                  |  | $           | 1,651 |                |  | $                | 958,764 |                      |  | $             | 1,056,678 |                                            |  | $    
|Net income                                                                                     |  |             |      |                |  |                  |        |                      |  |               | 221,500   |                                            |  |      
|Unrealized gain on available for sale securities, net of tax and
 reclassification adjustment  |  |             |      |                |  |                  |        |                      |  |               |          |                                            |  |      
|Unrealized loss on cash flow hedges, net of tax and
 reclassification adjustment               |  |             |      |                |  |                  |        |                      |  |               |          |                                            |  |      
|                                                                                               |  |             |       |                |  |                  |         |                      |  |               |           |                                            |  |      
|Comprehensive income                                                                           |  |             |       |                |  |                  |         |                      |  |               |           |                                            |  |      
|                                                                                               |  |             |       |                |  |                  |         |                      |  |               |           |                                            |  |      
|Issuance of stock for acquisitions                                                             |  |             | 11    |                |  |                  | 25,810  |                      |  |               |          |                                            |  |      
|Treasury stock issued for employee benefit plans                                               |  |             |      |                |  |                  | (6,853  | )                    |  |               |          |                                            |  |      
|Treasury stock purchased                                                                       |  |             |      |                |  |                  |        |                      |  |               |          |                                            |  |      
|Issuance and distribution of restricted stock                                                  |  |             |      |                |  |                  | (893    | )                    |  |               |          |                                            |  |      
|Decrease in unearned compensation-ESOP                                                         |  |             |      |                |  |                  | 5,300   |                      |  |               |          |                                            |  |      
|Cash in lieu of fractional shares                                                              |  |             |      |                |  |                  | (42     | )                    |  |               |          |                                            |  |      
|Cash dividends                                                                                 |  |             |      |                |  |                  |        |                      |  |               | (63,748   | )                                          |  |      
|                                                                                               |  |             |       |                |  |                  |         |                      |  |               |           |                                            |  |      
|Balances at September 30, 2002                                                                 |  | $           | 1,662 |                |  | $                | 982,086 |                      |  | $             | 1,214,430 |                                            |  | $    
|                                                                                               |  |             |       |                |  |                  |         |                      |  |               |           |                                            |  |      
|Balances at December 31, 2000                                                                  |  | $           | 1,496 |                |  | $                | 617,234 |                      |  | $             | 897,214   |                                            |  | $    
|Net income                                                                                     |  |             |      |                |  |                  |        |                      |  |               | 177,189   |                                            |  |      
|Unrealized gain on available for sales securities, net of tax and
 reclassification adjustment |  |             |      |                |  |                  |        |                      |  |               |          |                                            |  |      
|Unrealized gain on cash flow hedges, net of tax and reclassification
 adjustment               |  |             |      |                |  |                  |        |                      |  |               |          |                                            |  |      
|                                                                                               |  |             |       |                |  |                  |         |                      |  |               |           |                                            |  |      
|Comprehensive income                                                                           |  |             |       |                |  |                  |         |                      |  |               |           |                                            |  |      
|                                                                                               |  |             |       |                |  |                  |         |                      |  |               |           |                                            |  |      
|Premium on repurchase of trust preferred securities                                            |  |             |      |                |  |                  | (72     | )                    |  |               |          |                                            |  |      
|Treasury stock issued for employee benefit plans                                               |  |             |      |                |  |                  | 297     |                      |  |               | (3,109    | )                                          |  |      
|Treasury stock purchased                                                                       |  |             |      |                |  |                  |        |                      |  |               |          |                                            |  |      
|Issuance and distribution of restricted stock                                                  |  |             |      |                |  |                  | (9      | )                    |  |               | (128      | )                                          |  |      
|Decrease in unearned compensation-ESOP                                                         |  |             |      |                |  |                  | 1,235   |                      |  |               |          |                                            |  |      
|Cash in lieu of fractional shares                                                              |  |             |      |                |  |                  | (4      | )                    |  |               |          |                                            |  |      
|Cash dividends                                                                                 |  |             |      |                |  |                  |        |                      |  |               | (53,853   | )                                          |  |      
|                                                                                               |  |             |       |                |  |                  |         |                      |  |               |           |                                            |  |      
|Balances at September 30, 2001                                                                 |  | $           | 1,496 |                |  | $                | 618,681 |                      |  | $             | 1,017,313 |                                            |  | $    
|                                                                                               |  |             |       |                |  |                  |         |                      |  |               |           |                                            |  |      

See accompanying Notes to Consolidated
 Financial Statements.

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##### Table of Contents






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



|                                                                                                   |  | Nine Months Ended September 30,
|-------------------------------------------------------------------------------------------------- |  | -------------------------------
|                                                                                                   |  |                                
|                                                                                                   |  | 2002                           
|                                                                                                   |  |                                
|Cash flows from operating activities:                                                              |  |                                
|Net income                                                                                         |  | $                              
|Adjustments to reconcile net income to net cash provided by operating activities:                  |  |                                
|Provision for loan and lease losses                                                                |  |                                
|Depreciation                                                                                       |  |                                
|Amortization of goodwill and other intangibles                                                     |  |                                
|Provision for deferred tax expense                                                                 |  |                                
|ESOP and restricted stock expense                                                                  |  |                                
|Issuance of restricted stock units                                                                 |  |                                
|Net (gains) realized from sales of securities and consumer loans                                   |  |                                
|Net (gains) realized from sales
 of loans held for sale (a component of mortgage banking services) |  |                                
|Earnings from bank owned life insurance                                                            |  |                                
|Net decrease in mortgage servicing rights                                                          |  |                                
|Proceeds from sales of loans held for sale                                                         |  |                                
|Residential loans originated for sale                                                              |  |                                
|Net (increase) decrease in interest and dividends receivable and other assets                      |  |                                
|Net increase in other liabilities                                                                  |  |                                
|                                                                                                   |  |                                
|Net cash provided by operating activities                                                          |  |                                
|                                                                                                   |  |                                
|Cash flows from investing activities:                                                              |  |                                
|Proceeds from sales of securities available for sale                                               |  |                                
|Proceeds from maturities and principal repayments of securities available for sale                 |  |                                
|Purchases of securities available for sale                                                         |  |                                
|Proceeds from maturities and principal repayments of securities held to maturity                   |  |                                
|Net (increase) in loans and leases                                                                 |  |                                
|Proceeds from sale of loans                                                                        |  |                                
|Net additions to premises and equipment                                                            |  |                                
|Purchases of bank owned life insurance                                                             |  |                                
|Proceeds from death claim on bank owned life insurance                                             |  |                                
|Payment for acquisitions, net of cash acquired                                                     |  |                                
|                                                                                                   |  |                                
|Net cash (used) provided by investing activities                                                   |  |                                
|                                                                                                   |  |                                
|Cash flows from financing activities:                                                              |  |                                
|Net increase in deposits                                                                           |  |                                
|Net increase in securities sold under repurchase agreements                                        |  |                                
|Proceeds from Federal Home Loan Bank borrowings                                                    |  |                                
|Payments on Federal Home Loan Bank borrowings                                                      |  |                                
|Net increase in other borrowings                                                                   |  |                                
|Issuance of subordinated long-term debt                                                            |  |                                
|Issuance of securities of subsidiary trusts, net                                                   |  |                                
|Issuance of stock                                                                                  |  |                                
|Purchase of treasury stock                                                                         |  |                                
|Dividends paid                                                                                     |  |                                
|                                                                                                   |  |                                
|Net cash provided (used) by financing activities                                                   |  |                                
|                                                                                                   |  |                                
|Increase (decrease) in cash and cash equivalents                                                   |  |                                
|Cash and cash equivalents at beginning of period                                                   |  |                                
|                                                                                                   |  |                                
|Cash and cash equivalents at end of period                                                         |  | $                              
|                                                                                                   |  |                                
|                                                                                                   |  |                                



See
 accompanying Notes to Consolidated Financial Statements.


6



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##### Table of Contents






BANKNORTH GROUP, INC.
 AND SUBSIDIARIESNotes to Consolidated Financial StatementsSeptember
 30, 2002(In thousands, except per share data) (Unaudited)

Note 1  Basis of Presentation

The accompanying unaudited consolidated
 financial statements have been prepared in accordance with accounting principles
 generally accepted in the United States of America and predominant practices within
 the banking industry. Banknorth Group, Inc. (Banknorth) has not changed
 its accounting and reporting policies from those disclosed in its 2001 Annual Report,
 except for the adoption of Statement of Financial Accounting Standards (SFAS)
 No. 142, Goodwill and Other Intangible Assets and SFAS No. 147,
 Acquisitions of Certain Financial Institutions, an amendment of SFAS Statements
 Nos. 72 and 144 and FASB Interpretation No. 9, each as discussed in Note 2,
 and SFAS No. 144, Accounting for the Impairment or Disposal of Long-lived
 Assets, as discussed in Note 7. There have been no significant changes in
 the methods or assumptions used in the accounting policies which require material
 estimates and assumptions.

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

In the opinion of management, all adjustments
 (consisting of normal recurring accruals) necessary for a fair presentation of the
 consolidated financial statements have been included. The results of operations
 and other data for the three months and nine months ended September 30, 2002 are
 not necessarily indicative of the results that may be expected for any other interim
 period or the entire year ending December 31, 2002. Certain amounts in the prior
 periods have been reclassified to conform to the current presentation.

Note 2  Goodwill and Other Intangible
 Assets

Banknorth adopted the provisions of SFAS
 No. 142 effective January 1, 2002. As of the date of adoption, we had unamortized
 goodwill totaling $409.3 million, and unamortized identifiable intangible assets
 totaling $57.3 million, all of which were subject to the transition provisions of
 SFAS No. 141, Business Combinations and SFAS No. 142. Banknorth has
 completed the transitional impairment test on goodwill assets and has concluded
 that the amount of recorded goodwill was not impaired as of January 1, 2002. Banknorth
 does not currently have any other indefinite-lived intangible assets recorded in
 the consolidated balance sheet. No material reclassifications or adjustments to
 the useful lives of finite-lived intangible assets were made as a result of adopting
 the new standards. At September 30, 2002, Banknorth had $31.6 million in unamortized
 identifiable intangible assets consisting of core deposit intangibles, customer
 lists and other intangibles.

In October 2002, the Financial Accounting
 Standards Board (FASB) issued SFAS No. 147, Acquisitions of Certain
 Financial Institutions, an amendment of SFAS Nos. 72 and 144 and FASB Interpretation
 No. 9. SFAS No. 147 amends SFAS No. 72 to exclude from its scope most acquisitions
 of financial institutions and to require that such transactions be accounted for
 in accordance with SFAS No. 141 and, under certain circumstances, previously recognized
 SFAS No. 72 intangible assets be reclassified as goodwill. SFAS No. 147 also amends
 SFAS No. 144 to include within its applicability long-term customer-relationship
 intangible assets of financial institutions. Banknorth has adopted SFAS No. 147
 effective September 30, 2002 and has reclassified $34.7 million of SFAS No. 72 intangible
 assets to goodwill in accordance with SFAS No. 142. As required, the provisions
 of the statement have been applied retroactively to January 1, 2002 and $3.5 million
 of previously recorded amortization expense for the six months ended June 30, 2002
 has been reversed.

7



---



##### Table of Contents



The following table shows the amount of
 goodwill and SFAS No. 72 goodwill that would have been amortized prior to adoption
 of SFAS No. 142 and SFAS No. 147, and the related after-tax and per share amounts:



|                             | Goodwill Amortization |   | Amortization of SFAS 72 Intangibles |  | TotalPer DilutedShare
|---------------------------- | --------------------- | - | ----------------------------------- |  | ---------------------
|                             |                       |   |                                     | 
|                             | Pre-tax               |   | After-tax                           |  | Per share            
|                             |                       |   |                                     |  |                      
|First Quarter - 2002         |                       | $ | 2,762                               |  |                      
|Second Quarter - 2002        |                       |   | 2,762                               |  |                      
|Third Quarter - 2002         |                       |   | 2,762                               |  |                      
|                             |                       |   |                                     |  |                      
|Nine months ended 9/30/02    |                       |   | 8,286                               |  |                      
|Fourth Quarter - 2002        |                       |   | 2,762                               |  |                      
|                             |                       |   |                                     |  |                      
|Twelve months ended 12/31/02 |                       | $ | 11,048                              |  |                      
|                             |                       |   |                                     |  |                      

The changes in the carrying amount of goodwill
 and identifiable intangible assets for the nine months ended September 30, 2002
 follows:



|                                            | Goodwill |         | Core DepositIntangibles |  | OtherIdentifiableIntangibles |        | TotalIdentifiableIntangibles
|------------------------------------------- | -------- | ------- | ----------------------- |  | ---------------------------- | ------ | ----------------------------
|                                            |          |         |                         |  |                              |        |                             
|Balance, December 31, 2001                  | $        | 409,340 |                         |  | $                            | 21,321 |                             
|Recorded during the year                    |          | 124,202 |                         |  |                              | 9,879  |                             
|Reclassification under SFAS No. 147         |          | 34,696  |                         |  |                              |       |                             
|Other reclassification                      |          | 2,214   |                         |  |                              | (2,214 | )                           
|Amortization expense                        |          |        |                         |  |                              | (3,889 | )                           
|Impairment recognized                       |          |        |                         |  |                              |       |                             
|Adjustment of purchase accounting estimates |          | (638    | )                       |  |                              |       |                             
|                                            |          |         |                         |  |                              |        |                             
|Balance, September 30, 2002                 | $        | 569,814 |                         |  | $                            | 25,097 |                             
|                                            |          |         |                         |  |                              |        |                             
|Estimated Annual Amortization Expense:      |          |         |                         |  |                              |        |                             
|2002                                        |          |        |                         |  | $                            | 5,486  |                             
|2003                                        |          |        |                         |  |                              | 3,124  |                             
|2004                                        |          |        |                         |  |                              | 2,540  |                             
|2005                                        |          |        |                         |  |                              | 2,511  |                             
|2006                                        |          |        |                         |  |                              | 2,511  |                             

The components of identifiable intangible
 assets follows:



|                                | September 30, 2002  
|------------------------------- | --------------------
|                                |                     
|                                | Gross CarryingAmount
|                                |                     
|Identifiable intangible assets: |                     
|Core deposit intangibles        |                     
|Other identifiable intangibles  |                     
|                                |                     
|Total                           |                     
|                                |                     

8



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##### Table of Contents



The following table sets forth the reconcilement
 of net income and earnings per share excluding goodwill and SFAS No. 72 intangible
 amortization for the three and nine months ended September 30, 2002 and 2001.



|                                    | Three Months EndedSeptember 30, |   | Nine Months EndedSeptember 30,
|----------------------------------- | ------------------------------- | - | ------------------------------
|                                    |                                 |   |                               
|                                    | 2002                            |   | 2001                          
|                                    |                                 |   |                               
|Reported net income                 |                                 | $ | 76,862                        
|Add back:                           |                                 |   |                               
|Goodwill amortization               |                                 |   |                              
|SFAS No. 72 Intangible amortization |                                 |   |                              
|                                    |                                 |   |                               
|Adjusted net income                 |                                 | $ | 76,862                        
|                                    |                                 |   |                               
|Basic earnings per share:           |                                 |   |                               
|Reported net income                 |                                 | $ | 0.52                          
|Add back:                           |                                 |   |                               
|Goodwill amortization               |                                 |   |                              
|SFAS No. 72 Intangible amortization |                                 |   |                              
|                                    |                                 |   |                               
|Adjusted net income                 |                                 | $ | 0.52                          
|                                    |                                 |   |                               
|Diluted earnings per share:         |                                 |   |                               
|Reported net income                 |                                 | $ | 0.51                          
|Add back:                           |                                 |   |                               
|Goodwill amortization               |                                 |   |                              
|SFAS No. 72 Intangible amortization |                                 |   |                              
|                                    |                                 |   |                               
|Adjusted net income                 |                                 | $ | 0.51                          
|                                    |                                 |   |                               

Note 3  Capital Trust Securities

The following is a summary of the capital
 trust securities outstanding as of September 30, 2002:



|Name                             | IssuanceDate |  | Amount |         | StatedRate |       | MaturityDate
|-------------------------------- | ------------ |  | ------ | ------- | ---------- | ----- | ------------
|                                 |              |  |        |         |            |       |             
|Peoples Heritage Capital Trust I | 1/31/1997    |  | $      | 61,556  |            | 9.06  | %           
|Banknorth Capital Trust I        | 5/1/1997     |  |        | 30,000  |            | 10.52 | %           
|Ipswich Statutory Trust I        | 2/22/2001    |  |        | 3,500   |            | 10.20 | %           
|Banknorth Capital Trust II       | 2/22/2002    |  |        | 200,000 |            | 8.00  | %           
|                                 |              |  |        |         |            |       |             
|                                 |              |  | $      | 295,056 |            |       |             
|                                 |              |  |        |         |            |       |             

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

In connection with the acquisition of Ipswich
 Bancshares, Inc. on July 26, 2002, Banknorth assumed the obligations of Ipswich
 under Ipswichs outstanding 10.20% capital securities, of which $3.5 million
 was outstanding at September 30, 2002.

9



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##### Table of Contents



Note 4  Share Repurchase Programs

During the nine months ended September 30,
 2002, Banknorth repurchased 6.2 million shares of its outstanding common stock at
 an average price of $24.29. At September 30, 2002, there were a total of 7.4 million
 shares remaining under existing repurchase authorizations.

Note 5  Comprehensive Income

The components of comprehensive income for
 Banknorth are net income, unrealized gains (losses) on securities available for
 sale and unrealized gains (losses) on cash flow hedges, net of tax. The following
 is a reconciliation of comprehensive income for the nine months ended September
 30, 2002 and 2001.



|                                                                     | Nine Months EndedSeptember 30,
|-------------------------------------------------------------------- | ------------------------------
|                                                                     |                               
|                                                                     | 2002                          
|                                                                     |                               
|Net income                                                           | $                             
|Other comprehensive income (loss), net of tax:                       |                               
|Unrealized gains (losses)
 on available for sale securities:         |                               
|Unrealized holding gains arising during the period                   |                               
|Less: reclassification adjustment
 for gains included in net income  |                               
|                                                                     |                               
|                                                                     |                               
|                                                                     |                               
|Unrealized gains (losses) on cash flow hedges:                       |                               
|Unrealized holding
 losses arising during the period                 |                               
|Less: reclassification
 adjustment for losses included in net income |                               
|                                                                     |                               
|                                                                     |                               
|                                                                     |                               
|Other comprehensive income, net                                      |                               
|                                                                     |                               
|Comprehensive income                                                 | $                             
|                                                                     |                               

Note 6  Earnings Per Share

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



|                                                                 | Three Months EndedSeptember 30, |         | Nine Months EndedSeptember 30,
|---------------------------------------------------------------- | ------------------------------- | ------- | ------------------------------
|                                                                 |                                 |         |                               
|                                                                 | 2002                            |         | 2001                          
|                                                                 |                                 |         |                               
|Net income before cumulative effect of
 accounting change        | $                               | 76,862  |                               
|Cumulative effect of change in accounting
 principle, net of tax |                                 |        |                               
|                                                                 |                                 |         |                               
|Net income                                                       | $                               | 76,862  |                               
|                                                                 |                                 |         |                               
|Weighted average basic common shares outstanding                 |                                 | 148,099 |                               
|Effect of dilutive stock options                                 |                                 | 1,563   |                               
|                                                                 |                                 |         |                               
|Weighted average diluted common
 shares outstanding              |                                 | 149,662 |                               
|                                                                 |                                 |         |                               
|Basic earnings per share:                                        |                                 |         |                               
|Net income before cumulative
 effect of accounting change        | $                               | 0.52    |                               
|Cumulative effect of change
 in accounting principle, net of tax |                                 |        |                               
|                                                                 |                                 |         |                               
|Net income                                                       | $                               | 0.52    |                               
|                                                                 |                                 |         |                               
|Diluted earnings per share:                                      |                                 |         |                               
|Net income before cumulative
 effect of accounting change        | $                               | 0.51    |                               
|Cumulative effect of change
 in accounting principle, net of tax |                                 |        |                               
|                                                                 |                                 |         |                               
|Net income                                                       | $                               | 0.51    |                               
|                                                                 |                                 |         |                               

10



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##### Table of Contents



Note 7  Adoption
 of New Accounting Standards

In August 2001, the FASB issued
 SFAS No. 144, Accounting for the Impairment or Disposal of Long-lived Assets.
 SFAS No. 144 provides additional implementation guidance and supersedes SFAS No. 121,
 Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to
 be Disposed Of, among other things. It is effective for financial statements
 issued for fiscal years beginning after December 15, 2001. SFAS No. 144 was adopted
 on January 1, 2002 with no impact on our financial condition or results of operations.
 SFAS No. 144 has been amended by SFAS No. 147 to include long-term customer relationship
 intangible assets within its scope (see note 2).

Note 8  Acquisitions

On July 2, 2002, Banknorth acquired
 Community Insurance Agencies, Inc. (Community) in exchange for approximately
 213,000 shares of Company common stock. Community, which is headquartered in South Glens
 Falls, New York, has 57 employees and had $24 million of premiums in 2001, which generated
 $4.1 million in insurance brokerage commissions. Community is managed by Banknorth Insurance
 Group, the insurance agency division of Banknorth, NA. Goodwill of $5.5 million and
 identifiable intangible assets of $2.2 million were recorded in connection with the
 Community acquisition.

On July 26, 2002, Banknorth completed its
 acquisition of Massachusetts-based Ipswich Bancshares, Inc. (Ipswich) for total
 consideration of $19.9 million in cash (representing $20.50 per share) and $20.0 million of
 Banknorth common stock (representing 842,157 shares of Banknorth common stock.). Ipswich had
 $318.0 million in assets and $13.9 million in shareholders equity at the date of acquisition.
 Goodwill of $22.3 million and identifiable intangible assets of $4.8 million were recorded in
 connection with the Ipswich acquisition.

On August 31, 2002, Banknorth
 completed its acquisition of Bancorp Connecticut, Inc. (Bancorp) for total
 consideration of $161.2 million in cash (including $7.0 million paid by Bancorp in
 consideration for the cancellation of Bancorp stock options) representing $28 per share.
 Bancorp had total assets of $661.7 million and shareholders equity of $61.4 million at
 the date of acquisition. Bancorp is the parent company of Southington Savings Bank. Bancorp
 was merged into Banknorth and Southington Savings Bank was merged into Banknorth, NA. Goodwill
 of $96.4 million and identifiable intangible assets of $8.7 million were recorded in connection
 with the Bancorp acquisition.

The following table summarizes the
 estimated fair value of the assets acquired and liabilities assumed for Ipswich
 and Bancorp at the date of acquisition. The Company expects that some adjustments
 of the estimated fair values assigned to the assets acquired and liabilities assumed
 at the acquisition dates will be recorded in the fourth quarter, although such
 adjustments are not expected to be material.



|Assets:                        |  |   |           | 
|------------------------------ |  | - | --------- | 
|Investments                    |  | $ | 273,769   | 
|Loans held for sale            |  |   | 1,377     | 
|Loans and leases, net          |  |   | 546,305   | 
|Premises and equipment         |  |   | 7,242     | 
|Mortgage servicing rights      |  |   | 252       | 
|Goodwill and other intangibles |  |   | 132,176   | 
|Other assets                   |  |   | 160,903   | 
|                               |  |   |           | 
|Total assets acquired          |  |   | 1,122,024 | 
|                               |  |   |           | 
|Deposits                       |  |   | 672,830   | 
|Borrowings                     |  |   | 232,628   | 
|Other liabilities              |  |   | 22,308    | 
|                               |  |   |           | 
|Total liabilities assumed      |  |   | 927,766   | 
|                               |  |   |           | 
|Net assets acquired            |  | $ | 194,258   | 
|                               |  |   |           | 

11



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##### Table of Contents



Special charges related to the Ipswich
 and Bancorp merger recorded by Ipswich and Bancorp totaled $11.5 million ($8.5 million
 after-tax) and by Banknorth totaled $2.6 million ($1.7 million after-tax). The
 special charges recorded by Ipswich and Bancorp increased the goodwill recorded
 by Banknorth in connection with the transaction.

Note 9  Pending Acquisitions

On August 8, 2002, Banknorth announced that
 it had entered into an agreement to acquire Massachusetts-based Warren Bancorp,
 Inc. (Warren), parent company of Warren Five Cents Savings Bank. Warren
 had $480.4 million in assets and $45.5 million in shareholders equity at
 September 30, 2002. Under terms of the agreement, each outstanding share of common
 stock of Warren will be converted into the right to receive $15.75 in cash or a
 number of whole shares of Banknorth common stock determined by dividing $15.75 by
 the average closing prices of the Banknorth common stock during a specified period
 preceding the merger, plus cash in lieu of any fractional share interest, subject
 to election and allocation procedures which are intended to ensure that 50% of the
 outstanding shares of Warren common stock will be converted into the right to receive
 Banknorth common stock and 50% of the outstanding Warren common stock will be converted
 into cash. The agreement has been approved by the Banknorth and Warren boards of
 directors. Consummation of the merger is subject to the approval of Warren shareholders
 and the receipt of all required regulatory approvals and other customary closing
 conditions. The acquisition is expected to be completed by the end of the year.

On August 22, 2002, Banknorth announced
 that it had entered into an agreement to acquire Connecticut-based American Financial
 Holdings, Inc (American), parent company of American Savings Bank.
 American had $2.9 billion of consolidated assets and $430.7 million of shareholders
 equity at September 30, 2002. Under terms of the agreement, each outstanding
 share of common stock of American will be converted into the right to receive $32.00
 in cash or 1.22 shares of Banknorth common stock, plus cash in lieu of any fractional
 share interest, subject to election and allocation procedures which are intended
 to ensure that 50% of the outstanding shares of American common stock will be converted
 into the right to receive Banknorth common stock and 50% of the outstanding American
 common stock will be converted into cash. The agreement has been approved by the
 Banknorth and American boards of directors. Consummation of the merger is subject
 to the approval of American shareholders and the receipt of all required regulatory
 approvals and other customary closing conditions. The acquisition is expected to
 be completed in the first quarter of 2003.

Note 10  State Tax Assessment

Notices to assess tax plus interest for
 the years 1999, 2000 and 2001 have been received from the Massachusetts Department
 of Revenue (DOR) by certain banks that we have acquired. To Banknorths
 knowledge, the Bank is one of approximately 40 banking institutions in Massachusetts
 that have received notices of this type. The notices relate to Massachusetts banks
 which have been acquired by Banknorth through July 2002 and had a real estate investment
 trust (REIT) in their corporate structure. The DOR contends that dividend
 distributions from a REIT to a parent company are fully taxable in Massachusetts.
 Banknorth disagrees with the position of the DOR and contends that Massachusetts
 law provides for a 95% dividends-received deduction. Banknorth has appealed the
 assessment. Should the DOR prevail, the potential aggregate assessment of tax for
 1999, 2000 and 2001 is approximately $4.5 million, net of Federal benefit, exclusive
 of interest and penalties. Such tax assessment would be accounted for as an adjustment
 to the purchase price for the acquisition of these banks and would increase goodwill.

12



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##### Table of Contents



BANKNORTH GROUP, INC. AND SUBSIDIARIES




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

Overview

Banknorths financial statements for
 the three and nine month periods ended September 30, 2002 reflect the acquisitions
 of Community Insurance Agencies, Inc. (Community), which closed on July
 2, 2002, Ipswich Bancshares, Inc. (Ipswich), which closed on July 26,
 2002, and Bancorp Connecticut, Inc.(Bancorp), which closed on August
 31, 2002, from their dates of acquisition. In addition, the financial statements
 reflect the acquisitions of Andover Bancorp, Inc. (Andover) and MetroWest
 Bank (MetroWest), both of which closed on October 31, 2001. Because
 these mergers were accounted for under the purchase method of accounting, periods
 prior to the purchase dates have not been restated. The 2001 acquisitions of Andover
 and MetroWest increased Banknorths total assets by approximately $2.7 billion,
 or 15%, while the 2002 acquisitions of Community, Ipswich and Bancorp increased
 total assets by $1 billion, or 5%. The operational conversions of the Andover and
 MetroWest systems were completed in the first quarter of 2002; related personnel
 and expense reductions were also substantially completed in the first quarter of
 2002. The operational conversion of Ipswich was completed in July 2002 and the
 Bancorp conversion was completed in October 2002.

SUMMARY

We reported consolidated net income of $76.9
 million, or $0.51 per diluted share, for the third quarter of 2002 as compared with
 $62.2 million, or $0.45 per diluted share, for the third quarter of 2001, an increase
 of 24% over the prior year quarterly earnings. Results for the current quarter
 were diminished by the effect of special charges, which consist of merger-related
 charges, charter consolidation costs, certain asset write-downs and branch closing
 costs while 2001 included goodwill amortization which ceased January 1, 2002 under
 new accounting rules. Special charges totaled $1.4 million (after-tax), or $.01
 per diluted share for the three months ended September 30, 2002. There were no
 special charges in the third quarter of 2001. Goodwill amortization totaled $2.1
 million (after-tax), or $.02 per diluted share for the three months ended September
 30, 2001. There was no goodwill amortization in the third quarter of 2002.

Annualized return on average equity (ROE)
 and return on average assets (ROA) were 16.25% and 1.40%, respectively
 for the quarter ended September 30, 2002 and were 17.63% and 1.37%, respectively,
 for the comparable quarter last year.

Annualized cash return on average equity
 excluding special items (Cash ROE) and cash return on average assets
 excluding special items (Cash ROA) were 23.40% and 1.49%, respectively,
 for the quarter ended September 30, 2002 and were 21.57% and 1.48%, respectively,
 for the comparable quarter one year ago. Cash ROE and Cash ROA exclude the after-tax
 effect of special charges and the amortization of goodwill and intangible assets.

Results for the third quarter of 2002 improved
 over the third quarter of 2001 due primarily to increased net interest income tempered
 by higher expenses; credit quality remained strong. Net interest income increased
 by 18% as a result of purchase acquisitions and, to a lesser extent, internal growth.
 The net interest margin for the quarter-ended September 30, 2002 decreased by 5
 basis points from the third quarter last year due to a decline in interest rates.
 Non-interest expenses increased by 14% due in large part to the 2001 and 2002 purchase
 acquisitions. The cash efficiency ratio was 51.72% in the third quarter of 2002
 compared to 51.88% in the comparable period last year. For a description of the
 methodology we use to calculate the cash efficiency ratio, see Notes 4 and 6 to
 Table 1. Selected quarterly data, ratios and per share data are provided in Table
 1.

For the nine months ended September 30,
 2002, we reported consolidated net income of $221.5 million, or $1.48 per diluted
 share, as compared with $177.2 million, or $1.27 per diluted share, for the same
 period in the prior year. Results in each period were diminished by the effect
 of special charges which totaled $7.4 million (after-tax), or $.05 per diluted share,
 for the nine months ended September 30, 2002 and $3.6 million (after-tax), or $.03
 per diluted share, for the nine months ended September 30, 2001.

13



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##### Table of Contents



(See Table 5 for
 special charge detail for the nine months ended September 30, 2002 and 2001). During
 the nine months ended September 30, 2001 we recorded goodwill amortization of $6.3
 million (after-tax), or $.04 per diluted share. Under new accounting rules, there
 was no goodwill amortization in 2002. Net interest income for the nine months ended
 September 30, 2002 increased 21% from the same period last year primarily due to
 a 20 basis point increase in net interest margin and the acquisitions in 2001 and
 2002. The provision for loan and lease losses for the nine months ended September
 30, 2002 increased 17% over the same period last year primarily due to higher net
 charge-offs and increased loans outstanding. Noninterest income for the nine months
 ended September 30, 2002 increased 7% compared to the same period last year while
 noninterest expense increased 13%. Excluding special charges and goodwill amortization,
 noninterest expenses increased 15% for the nine months ended September 30, 2002
 compared to the same period last year.

Annualized ROE and ROA were 16.46% and 1.41%,
 respectively, for the nine months ended September 30, 2002 and were 17.35% and 1.31%,
 respectively, for the comparable period last year.

Annualized Cash ROE and Cash ROA were 23.77%
 and 1.52%, respectively, for the nine months ended September 30, 2002 and were 21.93%
 and 1.45%, respectively, for the comparable period last year. Cash ROE and Cash
 ROA exclude the after-tax effect of special charges and the amortization of goodwill
 and intangible assets.

14



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##### Table of Contents



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



|                                                                                              |  | 2002  |         | 2001  
|--------------------------------------------------------------------------------------------- |  | ----- | ------- | ------
|                                                                                              |  |       |         |       
|                                                                                              |  | Third |         | Second
|                                                                                              |  |       |         |       
|Net interest income                                                                           |  | $     | 200,996 |       
|Provision for loan and lease losses                                                           |  |       | 10,829  |       
|                                                                                              |  |       |         |       
|Net interest income after loan and lease loss provision                                       |  |       | 190,167 |       
|Noninterest income (1)                                                                        |  |       | 65,296  |       
|Net securities gains                                                                          |  |       | 208     |       
|Noninterest expenses (excluding special charges) (2)                                          |  |       | 139,409 |       
|Special charges (2)                                                                           |  |       | 2,168   |       
|                                                                                              |  |       |         |       
|Income before income taxes                                                                    |  |       | 114,094 |       
|Income tax expense                                                                            |  |       | 37,232  |       
|                                                                                              |  |       |         |       
|Net income before extraordinary item and
 cumulative effect of change in accounting principle |  |       | 76,862  |       
|Extraordinary item-early extinguishment of debt, net of tax                                   |  |       |        |       
|Cumulative effect of change in accounting principle, net of tax                               |  |       |        |       
|                                                                                              |  |       |         |       
|Net income                                                                                    |  | $     | 76,862  |       
|                                                                                              |  |       |         |       
|Basic earnings per share:                                                                     |  |       |         |       
|Net income before extraordinary item
 and cumulative effect of change in accounting principle |  | $     | 0.52    |       
|Extraordinary item-early extinguishment of debt, net of tax                                   |  |       |        |       
|Cumulative effect of change in accounting principle,
 net of tax                              |  |       |        |       
|                                                                                              |  |       |         |       
|                                                                                              |  | $     | 0.52    |       
|                                                                                              |  |       |         |       
|Diluted earnings per share:                                                                   |  |       |         |       
|Net income before extraordinary item and
 cumulative effect of change in accounting principle |  | $     | 0.51    |       
|Extraordinary item-early extinguishment of debt, net of tax                                   |  |       |        |       
|Cumulative effect of change in accounting
 principle, net of tax                              |  |       |        |       
|                                                                                              |  |       |         |       
|                                                                                              |  | $     | 0.51    |       
|                                                                                              |  |       |         |       
|Return on average assets (3)                                                                  |  |       | 1.40    | %     
|Return on average equity (3)                                                                  |  |       | 16.25   | %     
|Net interest margin (fully-taxable equivalent) (3)                                            |  |       | 4.03    | %     
|Noninterest income as a percent of total income (1)                                           |  |       | 24.52   | %     
|Efficiency ratio (3) (4)                                                                      |  |       | 53.17   | %     
|Data excluding special items (2) (5):                                                         |  |       |         |       
|Net income                                                                                    |  | $     | 76,862  |       
|Add: Special charges, net of tax                                                              |  |       | 1,409   |       
|Extraordinary item - early extinguishment of
 debt, net of tax                                |  |       |        |       
|Cumulative effect of change in accounting
 principle, net of tax                              |  |       |        |       
|                                                                                              |  |       |         |       
|Net income excluding special items                                                            |  | $     | 78,271  |       
|                                                                                              |  |       |         |       
|Ratios excluding special items (2) (3) (5):                                                   |  |       |         |       
|Return on average assets                                                                      |  |       | 1.42    | %     
|Return on average equity                                                                      |  |       | 16.55   | %     
|Efficiency ratio (4)                                                                          |  |       | 52.35   | %     
|Cash return on average assets (6)                                                             |  |       | 1.49    | %     
|Cash return on average equity (6)                                                             |  |       | 23.40   | %     
|Cash efficiency ratio (4) (6)                                                                 |  |       | 51.72   | %     

|   
|---
|   
|   
|(1)
|   
|(2)
|   
|(3)
|   
|(4)
|   
|(5)
|   
|(6)

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##### Table of Contents



CRITICAL ACCOUNTING POLICIES

Accounting policies involving significant
 judgments and assumptions by management, which have, or could have, a material impact
 on the carrying value of certain assets and impact income, are considered critical
 accounting policies. Banknorth considers the following to be its critical accounting
 policies: allowance for loan and lease losses, accounting for acquisitions and the
 related review of goodwill and intangible assets for impairment, deferred income
 taxes, capitalized costs of software developed for internal use. There have been
 no significant changes in the methods or assumptions used in the accounting policies
 that require material estimates and assumptions.

Allowance for loan and lease losses

Arriving at an appropriate level of allowance
 for loan and lease losses necessarily involves a high degree of judgment. The ongoing
 evaluation process includes a formal analysis of the allowance each quarter, which
 considers, among other factors, the character and size of the loan portfolio, business
 and economic conditions, loan growth, delinquency trends, nonperforming loans trends,
 charge-off experience, portfolio migration data and other asset quality factors.
 Banknorth evaluates specific loan status reports on certain commercial and commercial
 real estate loans rated substandard or worse in excess of a specified
 dollar amount. Estimated reserves for each of these credits is determined by reviewing
 current collateral value, financial information, cash flow, payment history and
 trends and other relevant facts surrounding the particular credit. Provisions for
 losses on the remaining commercial and commercial real estate loans are based on
 pools of similar loans using a combination of historical loss experience and migration
 analysis, which considers the probability of a loan moving from one risk rating
 category to another over the passage of time, transition matrix and qualitative
 adjustments. For the residential real estate and consumer loan portfolios, the
 range of reserves is calculated by applying historical charge-off and recovery experience
 to the current outstanding balance in each loan category, with consideration given
 to loan growth over the preceding twelve months. Although management uses available
 information to establish the appropriate level of the allowance for loan and lease
 losses, future additions to the allowance may be necessary based on estimates that
 are susceptible to change as a result of changes in economic conditions and other
 factors. In addition, various regulatory agencies, as an integral part of their
 examination process, periodically review Banknorths allowance for loan and
 lease losses. Such agencies may require Banknorth to recognize adjustments to the
 allowance based on their judgments about information available to them at the time
 of their examination.

Accounting for Acquisitions and Review of
 Goodwill/Intangible Assets

Banknorths growth in business, profitability
 and market share over the past several years has been enhanced significantly by
 mergers and acquisitions. Banknorths acquisition strategy has historically
 utilized both the pooling-of-interest and purchase business combinations methods
 of accounting. Effective July 1, 2001, Banknorth adopted SFAS No. 141, Business
 Combinations, which allows only use of the purchase method of accounting.
 For acquisitions under the purchase method, Banknorth is required to record assets
 acquired and liabilities assumed at their fair value, which in many instances involves
 estimates based on third party, internal or other valuation techniques. These estimates
 also include the establishment of various reserves based on planned facilities dispositions
 and employee benefit-related considerations, among other acquisition-related items.
 In addition, purchase acquisitions typically result in goodwill or other intangible
 assets, which are subject to ongoing periodic impairment tests. Goodwill is evaluated
 for impairment using several fair value techniques including, market capitalization,
 discounted future cash flows, and multiples of revenues/earnings. The valuation
 techniques contain estimates such as discount rate, projected future
cash flows and time period in their calculations.
 Furthermore, the determination of which intangible assets have finite lives is
 subjective, as is the determination of the amortization period for such intangible
 assets.

16



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##### Table of Contents



Deferred Income Taxes

Banknorth uses the asset and liability method
 of accounting for income taxes. Under this method, deferred tax assets and liabilities
 are recognized for the future tax consequences attributable to differences between
 the financial statement carrying amounts of existing assets and liabilities and
 their respective tax bases. If current available information raises doubt as to
 the realization of the deferred tax assets, a valuation allowance is established.
 Deferred tax assets and liabilities are measured using enacted tax rates expected
 to apply to taxable income in the years in which those temporary differences are
 expected to be recovered or settled. Management exercises significant judgment
 in evaluating the amount and timing of recognition of the resulting tax liabilities
 and assets, including projections of future taxable income. These judgments and
 estimates are reviewed on a continual basis as regulatory and business factors change.

Capitalized Costs of Software Developed
 for Internal Use

Internally developed software costs, such
 as those related to software licenses, programming, testing, configuration and integration,
 are capitalized and included in furniture, fixtures and equipment. Included in
 the capitalized costs are those costs related to both Banknorth personnel and third
 party consultants involved in the development and installation. Once placed in
 service, the capitalized asset is amortized on a straight-line basis over its estimated
 useful life, not to exceed seven years. Capitalized costs of software developed
 for internal use are reviewed on an ongoing basis for compliance with accounting
 standards. In addition, management periodically reviews capitalized costs for impairment.
 Significant judgment is exercised in these impairment reviews including the periodic
 evaluation of the cost/benefit analyses of software projects under development and
 in the determination of the remaining useful life of completed software projects.

RESULTS OF OPERATIONS

Net Interest Income

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

Fully-taxable equivalent net interest income
 for the third quarter of 2002 increased $30.8 million, or 18%, compared to the third
 quarter of 2001. This increase was primarily attributable to increases in the volume
 of interest-earning assets and interest-bearing liabilities. Average earning assets
 increased $3.3 billion for the three months ended September 30, 2002 compared to
 the same period in the prior year, primarily as a result of acquisitions. Average loans and leases increased by
 $2.5 billion, or 23%, compared to the third quarter of 2001 due primarily to acquisitions
 and, to a lesser extent, internal loan growth. Average
 loans as a percent of average earning assets was 67% and 65% for the quarters ended
 September 30, 2002 and 2001, respectively. Net interest margin, which represents
 fully-taxable equivalent net interest income as a percentage of interest-earning
 assets, decreased from 4.08% to 4.03% during the three months ended September 30,
 2001 and 2002, respectively, reflecting changes in market rates
during the period. Interest rate spread, which represents the difference between the yield
 earned on our interest-earning assets and the rate paid on our interest-bearing
 liabilities, increased from 3.51% to 3.64% on a fully-taxable equivalent basis during
 the three months ended September 30, 2001 and 2002, respectively, primarily due
 to a 118 basis point decrease in rates paid on interest-bearing liabilities compared
 to a 105 basis point decrease in interest rates earned on interest-earning assets.

17



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##### Table of Contents



Our fully-taxable equivalent net interest
 income for the nine months ended September 30, 2002 increased $104.5 million compared
 to the nine months ended September 30, 2001. The net interest margin increased
 from 3.94% for the nine months ended September 30, 2001 to 4.14% for the nine months
 ended September 30, 2002, and the fully-taxable equivalent interest rate spread
 increased from 3.35% to 3.75% during the nine months ended September 30, 2001 and
 2002, respectively, primarily due to a 155 basis point decrease in rates paid on
 interest-bearing liabilities compared to a 115 basis point decrease in interest
 rates earned on interest-earning assets. Average net earning assets increased $484.6
 million for the nine months ended September 30, 2002 compared to the nine months
 ended September 30, 2001 due primarily to acquisitions. Table 2 shows quarterly
 average balances, net interest income by category and rates for each of the quarters
 in 2002 and 2001 and for the nine months ended September 30, 2002 and 2001. Table
 3 shows the changes in fully-taxable equivalent net interest income by category
 due to changes in rate and volume. See also Asset-Liability Management
 below.

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

18



---



##### Table of Contents



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



|                                                    |  | 2002 Third Quarter |            | 2002 Second Quarter
|--------------------------------------------------- |  | ------------------ | ---------- | -------------------
|                                                    |  |                    |            |                    
|                                                    |  | Average Balance    |            | Interest           
|                                                    |  |                    |            |                    
|Loans and leases (2):                               |  |                    |            |                    
|Residential real estate mortgages                   |  | $                  | 2,657,333  |                    
|Commercial real estate mortgages                    |  |                    | 4,347,508  |                    
|Commercial business loans and leases                |  |                    | 2,754,430  |                    
|Consumer loans and leases                           |  |                    | 3,662,187  |                    
|                                                    |  |                    |            |                    
|Total loans and leases                              |  |                    | 13,421,458 |                    
|Investment securities                               |  |                    | 6,487,448  |                    
|Federal funds sold and other short-term investments |  |                    | 118,281    |                    
|                                                    |  |                    |            |                    
|Total earning assets                                |  |                    | 20,027,187 |                    
|                                                    |  |                    |            |                    
|Noninterest-earning assets                          |  |                    | 1,770,564  |                    
|                                                    |  |                    |            |                    
|Total assets                                        |  | $                  | 21,797,751 |                    
|                                                    |  |                    |            |                    
|Interest-bearing deposits:                          |  |                    |            |                    
|Regular savings                                     |  | $                  | 1,773,402  |                    
|NOW and money market accounts                       |  |                    | 5,608,231  |                    
|Certificates of deposit                             |  |                    | 4,736,817  |                    
|Brokered deposits                                   |  |                    | 37,000     |                    
|                                                    |  |                    |            |                    
|Total interest-bearing deposits                     |  |                    | 12,155,450 |                    
|Borrowed funds                                      |  |                    | 4,885,461  |                    
|                                                    |  |                    |            |                    
|Total interest-bearing liabilities                  |  |                    | 17,040,911 |                    
|                                                    |  |                    |            |                    
|Non-interest bearing deposits                       |  |                    | 2,684,263  |                    
|Other liabilities                                   |  |                    | 196,573    |                    
|Shareholders equity                                |  |                    | 1,876,004  |                    
|                                                    |  |                    |            |                    
|Total liabilities and shareholders equity          |  | $                  | 21,797,751 |                    
|                                                    |  |                    |            |                    
|Net earning assets                                  |  | $                  | 2,986,276  |                    
|                                                    |  |                    |            |                    
|Net interest income (fully-taxable equivalent)      |  |                    |            |                    
|Less: fully-taxable equivalent adjustments          |  |                    |            |                    
|                                                    |  |                    |            |                    
|Net interest income                                 |  |                    |            |                    
|                                                    |  |                    |            |                    
|Net interest rate spread (fully-taxable equivalent) |  |                    |            |                    
|Net interest margin (fully-taxable equivalent)      |  |                    |            |                    
|                                                   
|                                                   
|(1) Annualized.                                    
|                                                   
|(2) Loans and leases include
 loans held for sale. 

19



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##### Table of Contents



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



|                                                    | 2002 First Quarter |            | 2001 Fourth Quarter
|--------------------------------------------------- | ------------------ | ---------- | -------------------
|                                                    |                    |            |                    
|                                                    | Average Balance    |            | Interest           
|                                                    |                    |            |                    
|Loans and leases (2):                               |                    |            |                    
|Residential real estate mortgages                   | $                  | 2,675,415  |                    
|Commercial real estate mortgages                    |                    | 4,101,873  |                    
|Commercial business loans and leases                |                    | 2,464,378  |                    
|Consumer loans and leases                           |                    | 3,539,213  |                    
|                                                    |                    |            |                    
|Total loans and leases                              |                    | 12,780,879 |                    
|Investment securities                               |                    | 5,943,057  |                    
|Federal funds sold and other short-term investments |                    | 72,107     |                    
|                                                    |                    |            |                    
|Total earning assets                                |                    | 18,796,043 |                    
|                                                    |                    |            |                    
|Noninterest-earning assets                          |                    | 1,671,783  |                    
|                                                    |                    |            |                    
|Total assets                                        | $                  | 20,467,826 |                    
|                                                    |                    |            |                    
|Interest-bearing deposits:                          |                    |            |                    
|Regular savings                                     | $                  | 1,646,822  |                    
|NOW and money market accounts                       |                    | 5,099,310  |                    
|Certificates of deposit                             |                    | 4,762,399  |                    
|Brokered deposits                                   |                    | 63,594     |                    
|                                                    |                    |            |                    
|Total interest-bearing deposits                     |                    | 11,572,125 |                    
|Borrowed funds                                      |                    | 4,511,945  |                    
|                                                    |                    |            |                    
|Total interest-bearing liabilities                  |                    | 16,084,070 |                    
|                                                    |                    |            |                    
|Non-interest bearing deposits                       |                    | 2,446,539  |                    
|Other liabilities                                   |                    | 171,449    |                    
|Shareholders equity                                |                    | 1,765,768  |                    
|                                                    |                    |            |                    
|Total liabilities and shareholders equity          | $                  | 20,467,826 |                    
|                                                    |                    |            |                    
|Net earning assets                                  | $                  | 2,711,973  |                    
|                                                    |                    |            |                    
|Net interest income (fully-taxable equivalent)      |                    |            |                    
|Less: fully-taxable equivalent adjustments          |                    |            |                    
|                                                    |                    |            |                    
|Net interest income                                 |                    |            |                    
|                                                    |                    |            |                    
|Net interest rate spread (fully-taxable equivalent) |                    |            |                    
|Net interest margin (fully-taxable equivalent)      |                    |            |                    



---

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

20



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



|                                                    | 2001 Third Quarter |            | 2001 Second Quarter
|--------------------------------------------------- | ------------------ | ---------- | -------------------
|                                                    |                    |            |                    
|                                                    | Average Balance    |            | Interest           
|                                                    |                    |            |                    
|Loans and leases (2):                               |                    |            |                    
|Residential real estate mortgages                   | $                  | 2,102,988  |                    
|Commercial real estate mortgages                    |                    | 3,121,928  |                    
|Commercial business loans and leases                |                    | 2,360,191  |                    
|Consumer loans and leases                           |                    | 3,359,036  |                    
|                                                    |                    |            |                    
|Total loans and leases                              |                    | 10,944,143 |                    
|Investment securities                               |                    | 5,815,678  |                    
|Federal funds sold and other short-term investments |                    | 17,125     |                    
|                                                    |                    |            |                    
|Total earning assets                                |                    | 16,776,946 |                    
|                                                    |                    |            |                    
|Noninterest-earning assets                          |                    | 1,273,973  |                    
|                                                    |                    |            |                    
|Total assets                                        | $                  | 18,050,919 |                    
|                                                    |                    |            |                    
|Interest-bearing deposits:                          |                    |            |                    
|Regular savings                                     | $                  | 1,416,784  |                    
|NOW and money market accounts                       |                    | 4,166,281  |                    
|Certificates of deposit                             |                    | 4,386,194  |                    
|Brokered deposits                                   |                    | 165,115    |                    
|                                                    |                    |            |                    
|Total interest-bearing deposits                     |                    | 10,134,374 |                    
|Borrowed funds                                      |                    | 4,133,666  |                    
|                                                    |                    |            |                    
|Total interest-bearing liabilities                  |                    | 14,268,040 |                    
|                                                    |                    |            |                    
|Non-interest bearing deposits                       |                    | 2,212,517  |                    
|Other liabilities                                   |                    | 170,672    |                    
|Shareholders equity                                |                    | 1,399,690  |                    
|                                                    |                    |            |                    
|Total liabilities and shareholders equity          | $                  | 18,050,919 |                    
|                                                    |                    |            |                    
|Net earning assets                                  | $                  | 2,508,906  |                    
|                                                    |                    |            |                    
|Net interest income (fully-taxable equivalent)      |                    |            |                    
|Less: fully-taxable equivalent adjustments          |                    |            |                    
|                                                    |                    |            |                    
|Net interest income                                 |                    |            |                    
|                                                    |                    |            |                    
|Net interest rate spread (fully-taxable equivalent) |                    |            |                    
|Net interest margin (fully-taxable equivalent)      |                    |            |                    



---

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

21



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##### Table of Contents



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

|                                                    | 2001 First Quarter
|--------------------------------------------------- | ------------------
|                                                    |                   
|                                                    |                   
|                                                    | Average Balance   
|                                                    |                   
|Loans and leases (2):                               |                   
|Residential real estate mortgages                   | $                 
|Commercial real estate mortgages                    |                   
|Commercial business loans and leases                |                   
|Consumer loans and leases                           |                   
|                                                    |                   
|Total loans and leases                              |                   
|Investment securities                               |                   
|Federal funds sold and other short-term investments |                   
|                                                    |                   
|Total earning assets                                |                   
|                                                    |                   
|Noninterest-earning assets                          |                   
|                                                    |                   
|Total assets                                        | $                 
|                                                    |                   
|Interest-bearing deposits:                          |                   
|Regular savings                                     | $                 
|NOW and money market accounts                       |                   
|Certificates of deposit                             |                   
|Brokered deposits                                   |                   
|                                                    |                   
|Total interest-bearing deposits                     |                   
|Borrowed funds                                      |                   
|                                                    |                   
|Total interest-bearing liabilities                  |                   
|                                                    |                   
|Non-interest bearing deposits                       |                   
|Other liabilities                                   |                   
|Shareholders equity                                |                   
|                                                    |                   
|Total liabilities and shareholders equity          | $                 
|                                                    |                   
|Net earning assets                                  | $                 
|                                                    |                   
|Net interest income (fully-taxable equivalent)      |                   
|Less: fully-taxable equivalent adjustments          |                   
|                                                    |                   
|Net interest income                                 |                   
|                                                    |                   
|Net interest rate spread (fully-taxable equivalent) |                   
|Net interest margin (fully-taxable equivalent)      |                   
|                                                    |                   
|                                                    |                   
|(1) Annualized.                                     |                   
|                                                   
|(2) Loans and leases include loans held for sale.   |                   

22



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

|                                                    | Nine Months Ended  |            |          |  |          |         | Nine Months Ended  |  |          |      |         
|--------------------------------------------------- | ------------------ | ---------- | -------- |  | -------- | ------- | ------------------ |  | -------- | ---- | --------
|                                                    | September 30, 2002 |            |          |  |          |         | September 30, 2001 |  |          |      |         
|                                                    |                    |            |          |  |          |         |                   
|                                                    |                    |            |          |  |          |         |                    |  | Yield/   |      |         
|                                                    | Average Balance    |            | Interest |  | Rate (1) |         | Average Balance    |  | Interest |      | Rate (1)
|                                                    |                    |            |          |  |          |         |                    |  |          |      |         
|Loans and leases (2):                               |                    |            |          |  |          |         |                    |  |          |      |         
|Residential real estate mortgages                   | $                  | 2,634,050  |          |  | $        | 135,417 |                    |  |          | 6.85 | %       
|Commercial real estate mortgages                    |                    | 4,222,861  |          |  |          | 222,281 |                    |  |          | 7.04 |         
|Commercial business loans and leases                |                    | 2,605,746  |          |  |          | 118,320 |                    |  |          | 6.07 |         
|Consumer loans and leases                           |                    | 3,577,483  |          |  |          | 188,734 |                    |  |          | 7.05 |         
|                                                    |                    |            |          |  |          |         |                    |  |          |      |         
|Total loans and leases                              |                    | 13,040,140 |          |  |          | 664,752 |                    |  |          | 6.81 |         
|Securities                                          |                    | 6,237,668  |          |  |          | 266,617 |                    |  |          | 5.70 |         
|Federal funds sold and other short-term investments |                    | 72,133     |          |  |          | 977     |                    |  |          | 1.81 |         
|                                                    |                    |            |          |  |          |         |                    |  |          |      |         
|Total earning assets                                |                    | 19,349,941 |          |  |          | 932,346 |                    |  |          | 6.43 |         
|                                                    |                    |            |          |  |          |         |                    |  |          |      |         
|Noninterest earning assets                          |                    | 1,711,159  |          |  |          |         |                    |  |          |      |         
|                                                    |                    |            |          |  |          |         |                    |  |          |      |         
|Total assets                                        | $                  | 21,061,100 |          |  |          |         |                    |  |          |      |         
|                                                    |                    |            |          |  |          |         |                    |  |          |      |         
|Interest-bearing deposits:                          |                    |            |          |  |          |         |                    |  |          |      |         
|Regular savings                                     | $                  | 1,712,748  |          |  |          | 12,232  |                    |  |          | 0.95 |         
|NOW and money market accounts                       |                    | 5,319,602  |          |  |          | 60,441  |                    |  |          | 1.52 |         
|Certificates of deposit                             |                    | 4,716,914  |          |  |          | 115,274 |                    |  |          | 3.27 |         
|Brokered deposits                                   |                    | 50,348     |          |  |          | 696     |                    |  |          | 1.85 |         
|                                                    |                    |            |          |  |          |         |                    |  |          |      |         
|Total interest-bearing deposits                     |                    | 11,799,612 |          |  |          | 188,643 |                    |  |          | 2.14 |         
|Borrowed funds                                      |                    | 4,728,125  |          |  |          | 142,951 |                    |  |          | 4.04 |         
|                                                    |                    |            |          |  |          |         |                    |  |          |      |         
|Total interest-bearing liabilities                  |                    | 16,527,737 |          |  |          | 331,594 |                    |  |          | 2.68 |         
|                                                    |                    |            |          |  |          |         |                    |  |          |      |         
|Non-interest bearing deposits                       |                    | 2,551,397  |          |  |          |         |                    |  |          |      |         
|Other liabilities                                   |                    | 182,536    |          |  |          |         |                    |  |          |      |         
|Shareholders equity                                |                    | 1,799,430  |          |  |          |         |                    |  |          |      |         
|                                                    |                    |            |          |  |          |         |                    |  |          |      |         
|Total liabilities and shareholders equity          | $                  | 21,061,100 |          |  |          |         |                    |  |          |      |         
|                                                    |                    |            |          |  |          |         |                    |  |          |      |         
|Net earning assets                                  | $                  | 2,822,204  |          |  |          |         |                    |  |          |      |         
|                                                    |                    |            |          |  |          |         |                    |  |          |      |         
|Net interest income (fully-taxable equivalent)      |                    |            |          |  |          | 600,752 |                    |  |          |      |         
|Less: fully-taxable equivalent adjustments          |                    |            |          |  |          | (3,797  | )                  |  |          |      |         
|                                                    |                    |            |          |  |          |         |                    |  |          |      |         
|Net interest income                                 |                    |            |          |  | $        | 596,955 |                    |  |          |      |         
|                                                    |                    |            |          |  |          |         |                    |  |          |      |         
|Net interest rate spread (fully-taxable equivalent) |                    |            |          |  |          |         |                    |  |          | 3.75 | %       
|Net interest margin (fully-taxable equivalent)      |                    |            |          |  |          |         |                    |  |          | 4.14 | %       
|                                                    |                    |            |          |  |          |         |                    |  |          |      |         
|                                                    |                    |            |          |  |          |         |                    |  |          |      |         
|(1) Annualized.                                     |                    |            |          |  |          |         |                    |  |          |      |         
|                                                    |                    |            |          |  |          |         |                    |  |          |      |         
|(2) Loans and leases include loans held for sale.   |                    |            |          |  |          |         |                    |  |          |      |         

23



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##### Table of Contents



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

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

|                                                                                                             | Three Months Ended September 30, 2002 vs. 2001 |        | Nine Months Ended September 30, 2002 vs. 2001
|------------------------------------------------------------------------------------------------------------ | ---------------------------------------------- | ------ | ---------------------------------------------
|                                                                                                             | Increase (decrease) due to                     |        | Increase (decrease) due to                   
|                                                                                                             |                                                |        |                                              
|                                                                                                             |                                                |        |                                              
|                                                                                                             | Volume (1)                                     |        | Rate                                         
|                                                                                                             |                                                |        |                                              
|Interest income:                                                                                             |                                                |        |                                              
|Loans and leases                                                                                             | $                                              | 49,204 |                                              
|Securities                                                                                                   |                                                | 10,549 |                                              
|Federal funds sold and other short-term investments                                                          |                                                | 775    |                                              
|                                                                                                             |                                                |        |                                              
|Total interest income                                                                                        |                                                | 60,528 |                                              
|                                                                                                             |                                                |        |                                              
|Interest expense:                                                                                            |                                                |        |                                              
|Interest-bearing deposits                                                                                    |                                                |        |                                              
|Regular savings                                                                                              |                                                | 1,106  |                                              
|NOW and money market accounts                                                                                |                                                | 9,050  |                                              
|Certificates of deposit                                                                                      |                                                | 4,295  |                                              
|Brokered deposits                                                                                            |                                                | (1,805 | )                                            
|                                                                                                             |                                                |        |                                              
|Total interest-bearing deposits                                                                              |                                                | 12,646 |                                              
|Borrowed funds                                                                                               |                                                | 9,077  |                                              
|                                                                                                             |                                                |        |                                              
|Total interest expense                                                                                       |                                                | 21,723 |                                              
|                                                                                                             |                                                |        |                                              
|Net interest income (fully taxable equivalent)                                                               | $                                              | 38,805 |                                              
|                                                                                                             |                                                |        |                                              
|                                                                                                             |                                                |        |                                              
|(1)  Volume increases include the effects of the acquisitions
 of Andover and MetroWest on October 31, 2001,
|Ipswich on July 26, 2002 and
 Bancorp on August 31, 2002.                                                   
|                                                                                                            
|(2)  Includes changes in interest income
 and expense not due solely to volume or rate changes.             

24



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##### Table of Contents



Noninterest Income

Third quarter noninterest income totaled $65.5 million, an increase of $5.0 million, or
 8%, from the third quarter of 2001. Noninterest income for the nine months ended
 September 30, 2002 totaled $190.1 million, a 7% increase from the same period of 2001.
 These increases were primarily due to increases in deposit services income, loan fee
 income, insurance brokerage commissions, merchant and electronic banking income and
 investment planning services income. These increases were partially offset by lower
 income from mortgage banking services and trust and investment management services.
 Noninterest income, excluding securities gains and losses, as a percent of total income
 was 25% and 26% for the quarters ended September 30, 2002 and 2001, respectively.

Deposit services income increased by $3.6 million, or 21%, during the three months ended
 September 30, 2002 as compared to the same period in the prior year, and by $6.6 million,
 or 12%, during the nine months ended September 30, 2002, as compared to the same period
 in the prior year. For the nine months ended September 30, 2002 and 2001, deposit
 services income amounted to $59.7 million and $53.1 million, respectively. These
 increases were primarily attributable to volume and fee increases in checking account and
 overdraft fees, which were due in part to the acquisitions in the fourth quarter of 2001
 and the third quarter of 2002.

Mortgage banking services income declined by $2.6 million from the third quarter of 2001
 to the third quarter of 2002 due to increased mortgage servicing rights amortization and
 impairment and, to a lesser extent, declines in residential mortgage sales income and
 residential mortgage servicing income. Amortization expense on capitalized mortgage
 servicing rights was $925 thousand for the third quarter of 2002 compared to $55 thousand
 for the quarter ended September 30, 2001. In addition, a $1.7 million impairment charge
 was recorded in the third quarter of 2002 related to increasing prepayment speeds on the
 underlying loans. This amortization expense and charge were primarily attributable to
 $8.8 million of mortgage servicing rights acquired in connection with our acquisition of
 Andover in the fourth quarter of 2001. Mortgage loan originations remained strong in the
 third quarter of 2002, as loan refinancings continued in the favorable rate environment.
 For the nine months ended September 30, 2002 and 2001, mortgage banking services income
 amounted to $1.7 million and $7.2 million, respectively, a decline of $5.5 million. The
 decline was due to higher amortization/impairment charges on mortgage servicing rights
 ($3.3 million), a $1.1 million gain on sale of $39 million of portfolio loans in the
 first quarter of 2001 and a decline in the amount of new production sold ($527 million of
 loans sold in the nine months ended September 30, 2002 compared to $671 million of loans
 sold in the nine months ended September 30, 2001) as we retained certain loans in
 portfolio during 2002. The amount of loans serviced for others was
$747.3 million,
 $964.0 million and $285.4 million at September 30, 2002, December 31, 2001 and September
 30, 2001, respectively. Capitalized mortgage servicing rights amounted to $5.2 million at
 September 30, 2002, $8.5 million at December 31, 2001 and $0.4 million at September 30,
 2001. The increase in mortgage servicing rights from September 30, 2001 to December 31,
 2001 was due to the servicing rights acquired in connection with the acquisition of
 Andover, as discussed above. See Table 4 for a summary of mortgage banking services
 income by quarter for 2002 and 2001.

25



---



##### Table of Contents



TABLE 4 - Mortgage Banking Services(In thousands)

|                                                                   | At or for the Three Months Ended
|------------------------------------------------------------------ | --------------------------------
|                                                                   |                                 
|                                                                   | 9/30/2002                       
|                                                                   |                                 
|Residential mortgages serviced for investors                       | $                               
|                                                                   |                                 
|Mortgage servicing rights:                                         |                                 
|Balance at beginning of period                                     | $                               
|Mortgage servicing rights capitalized                              |                                 
|Mortgage servicing rights acquired through purchase acquisitions   |                                 
|Amortization charged against residential mortgage servicing income |                                 
|Valuation adjustments                                              |                                 
|Mortgage servicing rights sold                                     |                                 
|                                                                   |                                 
|Balance at end of period                                           | $                               
|                                                                   |                                 
|Mortgage banking services income:                                  |                                 
|Residential mortgage sales income                                  | $                               
|Residential mortgage servicing income, net                         |                                 
|Valuation adjustments                                              |                                 
|Gain on sale of capitalized mortgage servicing rights              |                                 
|                                                                   |                                 
|Total                                                              | $                               
|                                                                   |                                 
|Residential mortgage loans originations:                           | $                               
|                                                                   |                                 
|Residential mortgage loans sold:                                   | $                               
|                                                                   |                                 
|                                                                   | Nine Months Ended               
|                                                                   |                                 
|                                                                   | 9/30/2002                       
|                                                                   |                                 
|Mortgage banking services income:                                  |                                 
|Residential mortgage sales income                                  | $                               
|Residential mortgage servicing income, net                         |                                 
|Valuation adjustments                                              |                                 
|Gain on sale of capitalized mortgage servicing rights              |                                 
|                                                                   |                                 
|Total                                                              | $                               
|                                                                   |                                 
|Residential mortgage loans originations:                           | $                               
|                                                                   |                                 
|Residential mortgage loans sold:                                   | $                               
|                                                                   |                                 

Trust and investment management services income amounted to $7.8 million for the quarter ended September 30,
2002 compared to $8.5 million for the third quarter of 2001, a decrease of 8%. For the nine months ended
September 30, 2002 and 2001, trust and investment management services income amounted to $24.6 million and
$26.0 million, respectively, a decrease of 5%. Assets under management decreased to $7.8 billion at September 30,
2002 from $8.4 billion at September 30, 2001 as a result of broad-based declines in the stock markets.

Investment planning services income in the third quarter of 2002 amounted to $2.8 million compared to $1.9 million
in the third quarter of 2001, an increase of $901 thousand, or 48%. For the nine months ended September 30, 2002
and 2001, investment planning services income amounted to $8.5 million and $5.3 million, respectively, an increase
of 59%. These increases were primarily attributable to higher sales of fixed annuities.

26



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##### Table of Contents



Insurance brokerage commissions income
 amounted to $11.7 million for the third quarter of 2002 compared to $10.2 million
 for the same period in 2001, an increase of 15%. For the nine months ended September
 30, 2002 and 2001, insurance brokerage commissions income amounted to $31.9 million
 and $29.4 million, respectively, an increase of $2.5 million, or 8.6%. These increases
 were primarily attributable to the acquisition of Community in the third quarter
 of 2002.

Bank-owned life insurance (BOLI)
 income represents life insurance on the lives of certain employees of Banknorth
 and its subsidiaries. Most of the BOLI is invested in the general account
 of quality insurance companies. Standard and Poors rated all such companies
 AA or better at September 30, 2002. We purchased $40 million of BOLI in the first
 quarter of 2002. The BOLI investment provides a means to finance increasing employee
 benefit costs. BOLI income was $5.1 million for the third quarter of 2002, compared
 to $4.8 million for the same period in 2001, an increase of 7%. For the nine months
 ended September 30, 2002 and 2001, BOLI income amounted to $14.5 million and $14.0
 million, respectively, an increase of $510 thousand, or 3.7%. For the third quarter
 of 2002, the average carrying value of BOLI was $371.6 million compared to $313.5
 million for the third quarter of 2001. BOLI represented 21.73% of capital and reserves
 at September 30, 2002.

Merchant and electronic banking income was
 $10.2 million for the third quarter of 2002 compared to $9.2 million for the third
 quarter of 2001, an increase of 11%. For the nine months ended September 30, 2002
 and 2001, merchant and electronic banking income amounted to $27.6 million and $23.7
 million, respectively, an increase of 17%. This income represents fees and interchange
 income generated by the use of ATM and debit cards issued by us and charges to merchants
 for credit card transactions processed, net of third-party costs directly attributable
 to handling these transactions. The increases were due primarily to increases in
 the volume of transactions processed.

Loan fee income was $5.2 million for the
 third quarter of 2002 compared to $4.0 million for the third quarter of 2001, an
 increase of $1.2 million, or 29%. For the nine months ended September 30, 2002
 and 2001, loan fee income amounted to $15.7 million and $9.7 million, respectively,
 an increase of $6.0 million, or 62%. Loan fee income includes early payoff charges,
 letter of credit fees, late charges and other loan related fees. The increases
 in loan fee income in 2002 were primarily due to increased volumes, refinancing
 activities and acquisitions.

Net securities gains amounted to $208 thousand
 and $486 thousand during the quarters ended September 30, 2002 and 2001, respectively.
 For the nine months ended September 30, 2002 and 2001, net securities gains amounted
 to $578 thousand and $1.3 million, respectively. Gains from the sale of securities
 are subject to market and economic conditions and, as a result, there can be no
 assurance that gains reported in prior periods will be achieved in the future.

Other noninterest income amounted to $2.2
 million for each of the quarters ended September 30, 2002 and 2001. For the nine
 months ended September 30, 2002 and 2001, other noninterest income amounted to $5.3
 million and $7.3 million, respectively. The decline was primarily due to losses
 on small business limited partnership investments, which were partially offset by
 increases in income on covered call options.

Noninterest Expense

Noninterest expense was $141.6 million and
 $124.6 million for the quarters ended September 30, 2002 and 2001, respectively,
 which represented an increase of $17.0 million, or 14%. Approximately $12.5 million
 of this increase related to purchase acquisitions. The increase was primarily due
 to salaries and employee benefits expense ($12.6 million), equipment expense ($1.8
 million), occupancy expense ($1.3 million), special charges ($2.2 million) and other
 noninterest expense ($2.8 million), which were partially offset by a decrease in
 goodwill amortization expense of $3.0 million. The cash efficiency ratio was 51.72%
 and 51.88% for the quarters ended September 30, 2002 and 2001, respectively. For
 a description of the methodology we used to calculate the cash efficiency ratio,
 see Note 5 to Table 1. For the nine months ended September 30, 2002 and 2001, noninterest
 expense amounted to $421.3 million and $371.3 million, respectively, an increase
 of $50.0 million, or 13%. The increase was primarily due to additional expenses
 from the acquisitions in the fourth quarter of 2001 and the third quarter of 2002
 and increased incentive compensation. Results in the third quarter of 2002 included
 Banknorths adoption of Statement of Financial Accounting Standards Board (SFAS)
 No. 147, Acquisition of Certain Financial Institutions, an
 amendment of FASB Statements No. 72 and 144 and FASB Interpretation No. 9
 on September 30, 2002 retroactively to January 1, 2002. The previously recorded
 amortization expense during the six months ended June 30, 2002 has been

27



---



##### Table of Contents



reversed.
 The adoption of SFAS No. 147 resulted in a quarterly impact of $1.1 million on
 net income, or $.008 per diluted share and a $2.3 million or $.016 per diluted share
 for the nine months ended September 30, 2002.

Salaries and benefits expense of $79.7
 million for the quarter ended September 30, 2002 increased $12.6 million, or 19%,
 from the same quarter of last year. For the nine months ended September 30, 2002
 and 2001, salaries and benefits expense amounted to $230.8 million and $191.7 million,
 respectively, a 20% increase. These increases were primarily due to additional
 employees from the acquisitions of Andover and MetroWest in the fourth quarter of
 2001 and Ipswich and Bancorp in the third quarter of 2002 and increased benefit
 costs. The total number of full-time equivalent employees was approximately 6,450
 at September 30, 2002 compared to 5,540 at September 30, 2001. Pension expense under
 the defined benefit pension plan (which is included in salaries and benefits expense)
 was $2.6 million and $845 thousand for the nine months ended September 30, 2002
 and 2001, respectively. An important component in the determination of pension
 expense next year will be the fair value of assets in the pension plan at the end
 of the year. The fair value of plan assets as of September 30, 2002 was $116.7
 million as compared to $140.4 million at December 31, 2001. The year-to-date return
 on plan assets was minus 13%, primarily due to broad-based declines in the stock
 markets. It is not possible to determine whether the fair value of plan assets
 will increase, decrease, or stay the same by the next measurement date (December
 31, 2002).

Data processing expense of $9.8 million
 for the quarter ended September 30, 2002 was essentially the same as the comparable
 quarter last year. Beginning in July 2002, check processing was
insourced and the primary costs are now recorded in salaries and benefits. Previously a third-party
 vendor handled check processing and their charges were recorded as data processing
 costs. Increased spending on technology investments and vendor rate
increases offset
 this reduction in data processing costs. For the nine months ended September 30,
 2002 and 2001, data processing expense amounted to $30.2 million and $27.6 million,
 respectively. Continued investments in information technology, increased transaction
 volume and vendor rate increases related to the acquisitions contributed to the
 increase.

Occupancy expense of $12.7 million during
 the three months ended September 30, 2002 increased $1.3 million, or 11%, from the
 same quarter in 2001 due to the cost of additional facilities related to acquisitions.
 For the nine months ended September 30, 2002 and 2001, occupancy expense amounted
 to $38.0 million and $34.3 million respectively, an 11% increase.

Equipment expense of $10.0 million during
 the three months ended September 30, 2002 increased $1.8 million, or 22%, from the
 third quarter of last year. For the nine months ended September 30, 2002 and 2001,
 equipment expense amounted to $29.6 million and $25.1 million, respectively, an
 increase of 18%. These increases were primarily due to depreciation relating to
 new technology equipment and software (eg. e-commerce).

Amortization of goodwill was $0 and $3.0
 million for the quarters ended September 30, 2002 and 2001, respectively. Amortization
 of goodwill amounted to $9.0 million for the nine months ended September 30, 2001
 while there was no amortization expense in 2002. In accordance with SFAS No. 142,
 we discontinued the amortization of goodwill effective January 1, 2002. Banknorth
 adopted SFAS No. 147 effective September 30, 2002. SFAS No. 147 requires that unidentifiable
 intangible assets related to branch acquisitions which meet the definition of the
 acquisition of a business be recorded as goodwill and therefore not be amortized
 but be subject to impairment reviews. SFAS No. 147 amends SFAS No. 72, which previously
 required that these unidentifiable intangibles be amortized over a term not to exceed
 the estimated remaining life of the long-term interest-bearing assets acquired.
 Banknorth had two branch acquisitions that were covered by the provisions of SFAS
 No. 147, with a total of $34.7 million of unidentifiable intangible assets remaining
 as of December 31, 2001. In accordance with SFAS No. 147, Banknorth applied the
 provisions of SFAS No. 147 retroactively to January 1, 2002, reversed $3.5 million
 of amortization recorded in the six months ended June 30, 2002 ($1.7 million per
 quarter) and reclassified the $34.7 million intangible assets to goodwill.

During the three months ended September
 30, 2002, special charges totaled $2.2 million ($1.4 million after-tax) and were
 primarily related to merger-related expenses and costs related to consolidating
 the charters of our eight national bank subsidiaries and a trust subsidiary to a
 single national bank charter effective January 1, 2002. There were no special charges
 recorded in the third quarter of 2001. Special charges for the nine months ended
 September 30, 2002 and 2001 amounted to $11.4 million ($7.4 million after-tax) and
 $5.6 million ($3.6 million after-tax),

28



---



##### Table of Contents



respectively. The following table summarizes
 special charges for the three and nine months ended September 30, 2002 and 2001.

TABLE - 5 Special
 Charges(In thousands)



|                                                | Three Months EndedSeptember 30, |       | Nine Months EndedSeptember 30,
|----------------------------------------------- | ------------------------------- | ----- | ------------------------------
|                                                |                                 |       |                               
|                                                | 2002                            |       | 2001                          
|                                                |                                 |       |                               
|Andover/MetroWest Merger Charges                |                                 |       |                               
|Severance costs (1)                             | $                               | 0     |                               
|Data processing/systems integration             |                                 | 90    |                               
|Other costs (1)                                 |                                 | 63    |                               
|                                                |                                 |       |                               
|                                                |                                 | 153   |                               
|                                                |                                 |       |                               
|Ipswich Merger Charges                          |                                 |       |                               
|Severance costs (1)                             |                                 | 62    |                               
|Data processing/systems integration             |                                 | 587   |                               
|Other costs                                     |                                 | 523   |                               
|                                                |                                 |       |                               
|                                                |                                 | 1,172 |                               
|                                                |                                 |       |                               
|Bancorp Merger Charges                          |                                 |       |                               
|Data processing/systems integration             |                                 | 38    |                               
|Other costs                                     |                                 | 694   |                               
|                                                |                                 |       |                               
|                                                |                                 | 732   |                               
|                                                |                                 |       |                               
|Warren Merger Charges                           |                                 |       |                               
|Other costs                                     |                                 | 5     |                               
|                                                |                                 |       |                               
|                                                |                                 | 5     |                               
|                                                |                                 |       |                               
|American Merger Charges                         |                                 |       |                               
|Other costs                                     |                                 | 1     |                               
|                                                |                                 |       |                               
|                                                |                                 | 1     |                               
|                                                |                                 |       |                               
|Banknorth Group, Inc. (Vermont)
 Merger Charges |                                 |       |                               
|Severance costs                                 |                                 |      |                               
|Asset write-downs/facility costs                |                                 |      |                               
|Reversal of prior accruals                      |                                 | (125  | )                             
|Gain on regulatory-mandated branch sales        |                                 |      |                               
|                                                |                                 |       |                               
|                                                |                                 | (125  | )                             
|                                                |                                 |       |                               
|Charter Consolidation Costs                     |                                 |       |                               
|Severance costs                                 |                                 |      |                               
|Branch signage                                  |                                 | 143   |                               
|Customer notices                                |                                 | 24    |                               
|Forms and documents                             |                                 | 2     |                               
|Other costs                                     |                                 | 1     |                               
|                                                |                                 |       |                               
|                                                |                                 | 170   |                               
|                                                |                                 |       |                               
|Branch closings                                 |                                 |       |                               
|Severance costs                                 |                                 |      |                               
|Asset write-downs/lease terminations            |                                 | 44    |                               
|Branch decommissioning costs                    |                                 | 16    |                               
|Reversal of prior accruals                      |                                 |      |                               
|                                                |                                 |       |                               
|                                                |                                 | 60    |                               
|                                                |                                 |       |                               
|Other Special Charges                           |                                 |       |                               
|Write-down of auto lease residuals              |                                 |      |                               
|                                                |                                 |       |                               
|                                                |                                 |      |                               
|                                                |                                 |       |                               
|Total Special Charges                           | $                               | 2,168 |                               
|                                                |                                 |       |                               




(1) Includes reversal of
 prior accruals.


29



---



##### Table of Contents



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

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

|                                       | Balance12/31/01 |   | Accruedat Acquisition |  | SpecialCharges |   | CashPayments |  | Non-cash WriteDowns
 and OtherAdjustments |   | Balance9/30/02
|-------------------------------------- | --------------- | - | --------------------- |  | -------------- | - | ------------ |  | ----------------------------------------- | - | --------------
|                                       |                 |   |                       |  |                |   |              |  |                                           |   |               
|Andover / MetroWest Merger             |                 | $ | 11,207                |  |                | $ | 0            |  |                                           | $ | 5,698         
|Ipswich Merger                         |                 |   |                      |  |                |   | 1,791        |  |                                           |   | 1,807         
|Bancorp Merger                         |                 |   |                      |  |                |   | 4,413        |  |                                           |   | 811           
|Warren Merger                          |                 |   |                      |  |                |   |             |  |                                           |   | 5             
|American Merger                        |                 |   |                      |  |                |   |             |  |                                           |   | 1             
|Banknorth Group, Inc. (Vermont) Merger |                 |   | 330                   |  |                |   |             |  |                                           |   | (574          
|Charter Consolidation                  |                 |   |                      |  |                |   |             |  |                                           |   | 3,422         
|Branch Closings                        |                 |   | 296                   |  |                |   |             |  |                                           |   | 93            
|Other                                  |                 |   |                      |  |                |   |             |  |                                           |   |              
|                                       |                 |   |                       |  |                |   |              |  |                                           |   |               
|Total                                  |                 | $ | 11,833                |  |                | $ | 6,204        |  |                                           | $ | 11,263        
|                                       |                 |   |                       |  |                |   |              |  |                                           |   |               

Other non-interest expenses increased by
 $2.8 million, or 12%, during the three months ended September 30, 2002 as compared
 to the comparable period in the prior year. During the nine months ended September
 30, 2002 and 2001, other noninterest expenses amounted to $76.8 million and $70.8
 million, respectively, an increase of $6.1 million or 9%. The following table summarizes
 the principal components of other noninterest expenses for the periods indicated.

TABLE 7 - Other Noninterest
 Expenses(In thousands)

|                                                       | 2002               |        | 2001         
|------------------------------------------------------ | ------------------ | ------ | -------------
|                                                       |                    |        |              
|                                                       | ThirdQuarter       |        | SecondQuarter
|                                                       |                    |        |              
|Advertising and marketing                              | $                  | 4,301  |              
|Telephone                                              |                    | 3,276  |              
|Office supplies                                        |                    | 2,726  |              
|Postage and freight                                    |                    | 2,402  |              
|Miscellaneous loan costs                               |                    | 239    |              
|Deposits and other assessments                         |                    | 969    |              
|Collection and carrying costs of non-performing assets |                    | 662    |              
|Other                                                  |                    | 10,968 |              
|                                                       |                    |        |              
|Total                                                  | $                  | 25,543 |              
|                                                       |                    |        |              
|                                                       | Nine Months
 Ended |        |              
|                                                       |                    |        |              
|                                                       | 9/30/2002          |        | 9/30/2001    
|                                                       |                    |        |              
|Advertising and marketing                              | $                  | 12,515 |              
|Telephone                                              |                    | 9,797  |              
|Office supplies                                        |                    | 8,142  |              
|Postage and freight                                    |                    | 7,217  |              
|Miscellaneous loan costs                               |                    | 3,112  |              
|Deposits and other assessments                         |                    | 2,669  |              
|Collection and carrying costs of non-performing assets |                    | 2,118  |              
|Other                                                  |                    | 31,267 |              
|                                                       |                    |        |              
|Total                                                  | $                  | 76,837 |              
|                                                       |                    |        |              

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##### Table of Contents



Taxes

The effective tax rate was 33% and 34%
 for the quarters and nine months ended September 30, 2002 and 2001, respectively.

Cumulative Effect of Accounting Change

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

Stock Option Accounting

Banknorth
 currently accounts for employee stock options using the intrinsic value method.
 Under the intrinsic value method, no compensation cost is recognized related to
 options if the exercise price of the option is greater than or equal to the fair
 market value of the underlying stock on the date of grant. Under an alternative
 method, the fair value method, the cost of the option is estimated using
 an option valuation model and recognized as compensation expense over the vesting
 period of the option. Any change from the intrinsic value method to the fair value
 method of accounting for stock options is required to be applied prospectively for
 options granted after the date of change in method which must be as of the beginning
 of a fiscal year. Banknorth generally awards stock options annually with a grant
 date in October. On October 22, 2002, Banknorth granted options to purchase approximately
 3.5 million shares of Banknorth common stock. In 2001, Banknorth
 granted options to purchase 3.2 million shares of Banknorth common stock with a
 weighted average fair value of $6.10 using the Black-Scholes option pricing model;
 these options vest ratably over a 3-year period. Had Banknorth adopted the fair
 value method of accounting for stock options effective as of January 1, 2001, the
 options granted in 2001 would have resulted in compensation expense (after tax effect)
 of $0.9 million in 2001, $4.2 million in 2002, $4.2 million in 2003, and $3.3 million
 in 2004. Assuming stock options were issued annually after October 31, 2001, the
 after-tax compensation expense attributable to stock options would continue to increase
 annually through 2004 and then level off. The accounting standard-setters are contemplating
 additional disclosure requirements and alternatives to the transition requirements
 with respect to the adoption of the fair market value method. Banknorth has not
 yet determined if it will change from the intrinsic value method to the fair value
 method of accounting for employee stock options.

Comprehensive Income

Comprehensive income amounted to $287.6
 million and $282.3 million during the nine months ended September 30, 2002 and 2001,
 respectively, which were different from our reported net income during the respective
 periods as a result of changes in the amount of unrealized gains and losses on our
 portfolio of securities available for sale and on our derivative contracts (primarily
 forward sales commitments) that are accounted for as cash flow hedges. For additional
 information, see Note 5 to the Unaudited Consolidated Financial Statements included
 herein.

Our available for sale investment portfolio
 had unrealized gains (losses), net of applicable income tax effects, of $108.2 million,
 $40.3 million and $70.2 million at September 30, 2002, December 31, 2001 and September
 30, 2001, respectively. At September 30, 2002, the net unrealized gains of $166.5
 million, before related tax effect, represented 3% of securities available for sale.
 We attempt to balance the interest rate risk of assets with liabilities (see Interest
 Rate Risk and Asset Liability Management). However, the change in value of
 our liabilities, which tends to fall in rising interest rate environments and rise
 in falling interest rate environments, is not included in other comprehensive
 income.

31



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##### Table of Contents



FINANCIAL CONDITION

Our consolidated total assets amounted
 to $22.5 billion and $21.1 billion at September 30, 2002 and December 31, 2001,
 respectively. Total average assets were $21.8 billion and $21.1 billion for the
 three and nine months ended September 30, 2002, respectively, compared to $18.1
 billion for the each of the comparable periods in 2001; these increases were largely
 due to the acquisitions in the fourth quarter of 2001, which added $2.7 billion
 in assets and the acquisitions in the third quarter of 2002, which added $1.0 billion
 in assets. Shareholders equity totaled $1.9 billion at September 30, 2002
 and $1.8 billion at December 31, 2001.

Securities and Other Earning Assets

The securities portfolio averaged $6.5
 billion during the third quarter of 2002, as compared to $5.8 billion in the third
 quarter of 2001. The securities portfolio consists 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 included securitized residential real estate loans held
 in a REMIC, and asset-backed securities. The majority of securities available for
 sale were rated AAA or equivalently rated. The average yield on securities was
 5.64% for the quarter ended September 30, 2002 and 6.23% for the quarter ended September
 30, 2001. With the exception of securitized residential real estate loans held
 in a REMIC that were classified as held to maturity and carried at cost, all of
 our securities are classified as available for sale and carried at market value.
 Securities available for sale had an after-tax unrealized gain of $108.2 million
 and $40.3 million at September 30, 2002 and December 31, 2001, respectively. The
 increase was primarily due to lower prevailing long-term rates at September 30,
 2002.

Loans and Leases

Total loans and leases (including loans
 held for sale) averaged $13.4 billion during the third quarter of 2002, an increase
 of $2.5 billion, or 23%, from the third quarter of 2001. This increase was primarily
 attributable to the acquisition of $1.9 billion of loans and leases (average of
 approximately $1.7 billion) in connection with the acquisitions of Andover and MetroWest
 in the fourth quarter of 2001 and $546 million (average of approximately $247 million)
 from the acquisitions in the third quarter of 2002 . Average loans as a percent
 of average earning assets was 67% during the quarter ended September 30, 2002 compared
 to 65% during the quarter ended September 30, 2001.

Average residential real estate loans
 (which include mortgage loans held for sale) of $2.7 billion during the third quarter
 of 2002 increased $554 million from the third quarter of last year. Excluding acquisitions,
 average residential loans decreased $368 million as a result of increased refinancing
 activity and prepayments in a lower interest rate environment. Mortgage loans held
 for sale amounted to $76.4 million and $58.2 million at September 30, 2002 and 2001,
 respectively, and $117.7 million at December 31, 2001. We are currently selling
 substantially all of the conforming fixed-rate loans we originate.

Average commercial real estate loans
 of $4.4 billion increased $1.2 billion, or 39%, from the third quarter of last year.
 Excluding acquisitions, average commercial real estate loans increased $546 million.
 The majority of the increase was in the Massachusetts market. The average yield
 on commercial real estate loans during the second quarter of 2002 was 6.86%, as
 compared to 8.24% in the third quarter of 2001, a decrease of 138 basis points.
 The lower yield reflects the effect of the Federal Reserve Board rate cuts in 2001
 on variable-rate loans as well as fixed-rate loans which have refinanced at lower
 rates.

Commercial business loans and leases
 averaged $2.8 billion during the third quarter of 2002, an increase of $394 million,
 or 17%, over the third quarter of 2001. Excluding acquisitions, average commercial
 business loans and leases increased $236 million. The largest increases were in
 Massachusetts, Maine and New York. The yield on commercial business loans and leases
 decreased to 5.81% in the third quarter of 2002 from 7.48% in the third quarter
 of 2001 due to repricing of variable-rate loans in response to Federal Reserve Board
 rate cuts and to competition for new loans.

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Average consumer loans and leases of
 $3.7 billion during the third quarter of 2002 increased $303 million, or 9%, from
 the third quarter of 2001. Acquisitions accounted for approximately $201 million
 (or 6 %) of the increase while internal loan growth accounted for approximately
 $102 million (or 3%) of the increase. Although the internal increase is relatively
 modest, origination levels have been offset by significant prepayment activity as
 proceeds of mortgage loans refinancings have been used to pay down consumer loans.
 The average yield on consumer loans and leases decreased to 6.78% in the third
 quarter of 2002 from 8.15% in the third quarter of 2001, which also reflected the
 Federal Reserve Board rate cuts in 2001.

Asset Quality

Nonperforming assets consist of nonperforming
 loans (which do not include accruing loans 90 days or more overdue), other real
 estate owned, repossessed assets and certain securities available for sale. As
 shown in Table 8, nonperforming assets were $68.8 million at September 30, 2002,
 or 0.31% of total assets, compared to $81.2 million, or 0.39% of total assets, at
 December 31, 2001 and to $70.9 million, or 0.39% of total assets, at September 30,
 2001. Total nonperforming loans as a percentage of total loans (excluding residential
 real estate loans held for sale) was 0.47%, 0.59% and 0.59% at September 30, 2002,
 December 31, 2001 and September 30, 2001, respectively. We continue to focus on
 asset quality issues and allocate significant resources to the key asset quality
 control functions of credit administration and loan review. We maintain an internal
 rating system that provides a mechanism to regularly monitor the credit quality
 of our loan portfolio.

Residential real estate loans accounted
 for 19% of the total loan portfolio at September 30, 2002, as compared with 21%
 at December 31, 2001. Residential loans are generally secured by single-family
 homes (one to four units) and have a maximum loan to value ratio of 80%, unless
 they are protected by mortgage insurance. At September 30, 2002, 0.25% of the residential
 loans were nonperforming, as compared with 0.32% at December 31, 2001 and 0.41%
 at September 30, 2001.

Commercial real estate loans accounted
 for 32% of the total loan portfolio at September 30, 2002 and December 31, 2001.
 Commercial real estate loans consist primarily of loans secured by income-producing
 commercial real estate (including office and industrial buildings), service industry
 real estate (including hotels and health care facilities), multi-family (over four
 units) residential properties and retail trade real estate (including food stores).
 These loans generally are secured by properties located in the New England states
 and upstate New York. At September 30, 2002, 0.38% of the commercial real estate
 loans were nonperforming, as compared with 0.42% at December 31, 2001 and 0.48%
 at September 30, 2001.

Commercial business loans and leases
 accounted for 21% of the total loan portfolio at September 30, 2002 and 19% at December
 31, 2001. Commercial business loans and leases are not concentrated in any particular
 industry, but reflect the broad-based economies of New England and upstate New York.
 Commercial loans consist primarily of loans secured by various equipment, machinery
 and other corporate assets, as well as loans to provide working capital to businesses
 in the form of lines of credit. Our commercial business loans and leases are generally
 to small and medium size businesses located within our geographic market area.
 We generally do not emphasize the purchase of participations in syndicated commercial
 loans. At September 30, 2002, we had $245 million of participations in syndicated
 commercial loans and commitments to purchase an additional $252 million of such
 participations. At September 30, 2002, total syndicated commercial loans and commitments
 represented 3.6% of total loans. At September 30, 2002, 1.15% of commercial business
 loans and leases were non-performing, as compared with 1.64% at December 31, 2001
 and 1.47% at September 30, 2001.

Consumer loans and leases accounted for
 28% of the total loan portfolio at September 30, 2002 and 28% at December 31, 2001.
 We have a diversified consumer loan and lease portfolio which includes home equity,
 automobile, mobile home, boat and recreational vehicles and education loans, as
 well as loans to finance certain medical /dental procedures (vision, dental and
 orthodontia fee plan loans). At September 30, 2002, 38% of consumer loans and
 leases were home equity loans while 39 % of consumer loans and leases were automobile
 loans. At September 30, 2002, 0.22% of our consumer loans and leases were nonperforming,
 as compared with 0.27% at December 31, 2001 and 0.19% at September 30, 2001.

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At September 30, 2002, we had $2.4 million
 of accruing loans which were 90 days or more delinquent, as compared to $6.2 million
 of such loans at December 31, 2001 and $6.1 million at September 30, 2001. The
 decrease was due to a reduction in delinquent consumer loans, particularly guaranteed
 student loans and fee plan loans.

At September 30, 2002, we had a total
 of $251.5 million of commercial real estate mortgages and commercial business loans
 and leases classified as substandard or lower on our risk-rating system as compared
 to $216.9 million at December 31, 2002. Included in these amounts at September
 30, 2002 and December 31, 2001, were $49.8 million and $57.5 million of nonperforming
 commercial business and commercial real estate loans, respectively. In our opinion,
 the remaining $201.7 million of commercial real estate mortgages and commercial business
 loans and leases classified as substandard at September 30, 2002 evidence one or
 more weaknesses or potential weakness and, depending on the regional economy and
 other factors, may become nonperforming assets in future periods. These loans are
 net of previously established specific reserves that have resulted in charge-offs,
 but not general reserves that have been established based on our internal rating
 of such loans and evaluation of the adequacy of our allowance for loan and lease
 losses.

TABLE 8 - Nonperforming Assets(Dollars in thousands)

|                                                                                                               | 9/30/2002 |        | 6/30/2002 |  | 3/31/2002 |        | 12/31/2001 |  | 9/30/2001 |        | 6/30/2001 |  | 3/31/2001
|-------------------------------------------------------------------------------------------------------------- | --------- | ------ | --------- |  | --------- | ------ | ---------- |  | --------- | ------ | --------- |  | ---------
|                                                                                                               |           |        |           |  |           |        |            |  |           |        |           |  |          
|Nonaccrual loans and leases:                                                                                   |           |        |           |  |           |        |            |  |           |        |           |  |          
|Residential real estate loans                                                                                  | $         | 6,733  |           |  | $         | 7,075  |            |  | $         | 7,689  |           |  | $        
|Commercial real estate loans                                                                                   |           | 16,762 |           |  |           | 20,254 |            |  |           | 20,812 |           |  |          
|Commercial business loans and leases                                                                           |           | 33,014 |           |  |           | 33,573 |            |  |           | 34,481 |           |  |          
|Consumer loans and leases                                                                                      |           | 8,364  |           |  |           | 6,008  |            |  |           | 8,183  |           |  |          
|                                                                                                               |           |        |           |  |           |        |            |  |           |        |           |  |          
|Total nonaccrual loans and leases                                                                              |           | 64,873 |           |  |           | 66,910 |            |  |           | 71,165 |           |  |          
|Total troubled debt restructurings                                                                             |           |       |           |  |           |       |            |  |           |       |           |  |          
|                                                                                                               |           |        |           |  |           |        |            |  |           |        |           |  |          
|Total nonperforming loans and leases                                                                           |           | 64,873 |           |  |           | 66,910 |            |  |           | 71,165 |           |  |          
|                                                                                                               |           |        |           |  |           |        |            |  |           |        |           |  |          
|Other nonperforming assets:                                                                                    |           |        |           |  |           |        |            |  |           |        |           |  |          
|Other real estate owned, net of related reserves                                                               |           | 92     |           |  |           | 1,212  |            |  |           | 1,262  |           |  |          
|Repossessions, net of related reserves                                                                         |           | 3,807  |           |  |           | 1,964  |            |  |           | 2,251  |           |  |          
|Securities available for sale                                                                                  |           | 0      |           |  |           | 2,104  |            |  |           | 2,104  |           |  |          
|                                                                                                               |           |        |           |  |           |        |            |  |           |        |           |  |          
|Total other nonperforming assets                                                                               |           | 3,899  |           |  |           | 5,280  |            |  |           | 5,617  |           |  |          
|                                                                                                               |           |        |           |  |           |        |            |  |           |        |           |  |          
|Total nonperforming assets                                                                                     | $         | 68,772 |           |  | $         | 72,190 |            |  | $         | 76,782 |           |  | $        
|                                                                                                               |           |        |           |  |           |        |            |  |           |        |           |  |          
|Accruing loans and leases which are 90 days or more overdue                                                    | $         | 2,407  |           |  | $         | 2,680  |            |  | $         | 5,430  |           |  | $        
|                                                                                                               |           |        |           |  |           |        |            |  |           |        |           |  |          
|Total nonperforming loans as a percentage of total loans and leases(1)                                         |           | 0.47   | %         |  |           | 0.51   | %          |  |           | 0.56   | %         |  |          
|Total nonperforming assets as a percentage of total assets                                                     |           | 0.31   | %         |  |           | 0.34   | %          |  |           | 0.37   | %         |  |          
|Total nonperforming assets as a percentage of total
 loans and leases (1) and total other nonperforming assets |           | 0.50   | %         |  |           | 0.55   | %          |  |           | 0.60   | %         |  |          



---

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


Provision/Allowance for Loan and Lease
 Losses

We provided $10.8 million and $12.1 million
 for loan and lease losses in the quarters ended September 30, 2002 and 2001, respectively.
 As shown in Table 9, net charge-offs for the third quarter of 2002 were $10.4 million,
 or 0.31% of average loans outstanding, compared to $8.8 million, or 0.32% of average
 loans outstanding, for the third quarter of 2001. The decrease in the provision
 for loan and lease losses for the three months ended September 30, 2002 reflects
 the levels of nonperforming loans and lower levels of classified loans and related
 coverage ratios as compared to the third quarter of 2001. At September 30, 2002,
 the allowance for loan and lease losses amounted to $201.7 million, or 1.47% of
 total portfolio loans and leases, as compared to $158.5 million, or 1.45%, at September
 30, 2001. The ratio of the allowance for loan and lease losses to nonperforming
 loans was 311% at September 30, 2002 and 248% at September 30, 2001.

Provisions are made to the allowance
 for loan and lease losses in order to maintain the allowance at a level which management
 believes is reasonable and reflective of the overall risk of loss inherent in the
 loan and lease portfolio.

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Management considers the allowance appropriate and adequate
 to cover probable losses inherent in the loan and lease portfolio based on the current
 economic environment. During 2002, we have not changed our overall approach in
 the determination of the allowance for loan and lease losses and there have been
 no material changes in assumptions or estimation techniques as compared to prior
 periods in determining the adequacy of the allowance for loan and lease losses in
 the current period.

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

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

|                                                                                                    | 2002 Third |            | 2002 Second |  | 2002 First |            | 2001 Fourth |  | 2001 Third |            | 2001 Second |  | 2001 First
|--------------------------------------------------------------------------------------------------- | ---------- | ---------- | ----------- |  | ---------- | ---------- | ----------- |  | ---------- | ---------- | ----------- |  | ----------
|                                                                                                    | Quarter    |            | Quarter     |  | Quarter    |            | Quarter     |  | Quarter    |            | Quarter     |  | Quarter   
|                                                                                                    |            |            |             |  |            |            |             |  |            |            |             |  |           
|Allowance at beginning of period                                                                    | $          | 193,445    |             |  | $          | 190,890    |             |  | $          | 189,837    |             |  | $         
|Additions due to acquisitions                                                                       |            | 7,822      |             |  |            |           |             |  |            |           |             |  |           
|Charge-offs:                                                                                        |            |            |             |  |            |            |             |  |            |            |             |  |           
|Real estate mortgages                                                                               |            | (20        | )           |  |            | 474        |             |  |            | 501        |             |  |           
|Commercial business loans and leases                                                                |            | 8,703      |             |  |            | 5,319      |             |  |            | 5,374      |             |  |           
|Consumer loans and leases                                                                           |            | 5,922      |             |  |            | 5,834      |             |  |            | 7,042      |             |  |           
|                                                                                                    |            |            |             |  |            |            |             |  |            |            |             |  |           
|Total loans and leases charged off                                                                  |            | 14,605     |             |  |            | 11,627     |             |  |            | 12,917     |             |  |           
|                                                                                                    |            |            |             |  |            |            |             |  |            |            |             |  |           
|Recoveries:                                                                                         |            |            |             |  |            |            |             |  |            |            |             |  |           
|Real estate mortgages                                                                               |            | 58         |             |  |            | 48         |             |  |            | 50         |             |  |           
|Commercial business loans and leases                                                                |            | 3,107      |             |  |            | 2,137      |             |  |            | 1,101      |             |  |           
|Consumer loans and leases                                                                           |            | 1,033      |             |  |            | 1,168      |             |  |            | 991        |             |  |           
|                                                                                                    |            |            |             |  |            |            |             |  |            |            |             |  |           
|Total loans and leases recovered                                                                    |            | 4,198      |             |  |            | 3,353      |             |  |            | 2,142      |             |  |           
|                                                                                                    |            |            |             |  |            |            |             |  |            |            |             |  |           
|Net charge-offs                                                                                     |            | 10,407     |             |  |            | 8,274      |             |  |            | 10,775     |             |  |           
|Provision for loan and lease losses                                                                 |            | 10,829     |             |  |            | 10,829     |             |  |            | 11,828     |             |  |           
|                                                                                                    |            |            |             |  |            |            |             |  |            |            |             |  |           
|Allowance at end of period                                                                          | $          | 201,689    |             |  | $          | 193,445    |             |  | $          | 190,890    |             |  | $         
|                                                                                                    |            |            |             |  |            |            |             |  |            |            |             |  |           
|Average loans and leases outstanding during the period (1)                                          | $          | 13,375,980 |             |  | $          | 12,871,386 |             |  | $          | 12,723,083 |             |  | $         
|                                                                                                    |            |            |             |  |            |            |             |  |            |            |             |  |           
|Ratio of net charge-offs to average
 loans and leases outstanding during the period, annualized (1) |            | 0.31       | %           |  |            | 0.26       | %           |  |            | 0.34       | %           |  |           
|Ratio of allowance to total loans and leases at end of period (1)                                   |            | 1.47       | %           |  |            | 1.48       | %           |  |            | 1.50       | %           |  |           
|Ratio of allowance to nonperforming loans and leases at end of period                               |            | 311        | %           |  |            | 289        | %           |  |            | 268        | %           |  |           
|Ratio of net charge-offs as a percent of
 average outstanding loans and leases, annualized (1):     |            |            |             |  |            |            |             |  |            |            |             |  |           
|Real estate mortgages                                                                               |            | -0.004     | %           |  |            | 0.025      | %           |  |            | 0.027      | %           |  |           
|Commercial business loans and leases                                                                |            | 0.806      | %           |  |            | 0.492      | %           |  |            | 0.703      | %           |  |           
|Consumer loans and leases                                                                           |            | 0.530      | %           |  |            | 0.530      | %           |  |            | 0.693      | %           |  |           



---

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


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##### Table of Contents



Deposits

Total deposits averaged $14.8 billion
 during the third quarter of 2002, an increase of $2.5 billion from the third quarter
 of 2001. Excluding acquisitions, deposits increased $294 million from the third
 quarter of last year, or 2%. Additionally, the deposit mix changed favorably. Certificates
 of deposit and brokered deposits (which tend to pay higher rates) as a percent of
 total deposits declined from 37% in the third quarter of 2001 to 32% in the third
 quarter of 2002. The ratio of loans to deposits was 91% and 89% at September 30,
 2002 and December 31, 2001, respectively.

Average non-interest bearing deposits
 totaled $2.7 billion during the third quarter of 2002 increasing $471.7 million,
 or 21%, from the third quarter of 2001, including approximately $309.7 million related
 to acquisitions. The increase in non-interest bearing deposits reflected strong
 growth in commercial, government and personal accounts.

Average interest-bearing deposits of
 $12.2 billion during the third quarter of 2002 increased $2.0 billion from the third
 quarter of 2001 including approximately $1.9 billion related to acquisitions. Excluding
 acquisitions, average savings, money market and NOW deposits increased by $624 million,
 while certificates of deposit declined $492 million (or 11%). The decline in certificates
 of deposits resulted from Banknorths decision to allow deposits priced above
 alternate funding costs to run off. The average rates paid on NOW and money market
 accounts decreased 96 basis points from 2.49% in the third quarter of 2001 to 1.53%
 in the third quarter of 2002 due largely to lower prevailing interest rates. The
 average rates paid on all deposit types decreased by 136 basis points from 3.39%
 in the third quarter of 2001 to 2.03% in the third quarter of 2002, reflecting the
 decline in prevailing interest rates during 2001 and 2002.

Included within the deposit categories
 above are government banking deposits, which averaged $1.4 billion in the third
 quarter of 2002 and $1.3 billion in the third quarter of 2001. Government banking
 deposits include deposits received from state and local governments, school districts,
 public colleges/universities, utility districts, public housing authorities and
 court systems in our market area. Many of these deposits exceed the FDIC insurance
 coverage amounts and require us to pledge specific collateral or maintain private
 insurance.

Other Funding Sources

Other than deposits, our primary sources
 of funds are borrowings. Our principal borrowing sources are advances from Federal
 Home Loan Banks (FHLB) and securities sold under repurchase agreements.
 Other borrowing sources which we have used include the U.S. Treasurys Note
 Option Treasury, Tax and Loan program, overnight borrowings from other banks, trust
 preferred securities and public/private debt offerings. Average total borrowings
 in the third quarter of 2002 were $4.9 billion, an increase of $752 million from
 the third quarter of 2001. This increase was primarily the result of borrowings
 assumed in acquisitions. Average total borrowings for the nine months ended September
 30, 2002 were $4.7 billion, an increase of $351 million from the comparable period
 of 2001. This increase also was primarily due to borrowings assumed in acquisitions.

Significant transactions related to borrowings
 from the third quarter of 2001 through September 30, 2002 include the assumption
 of approximately $713 million of borrowings from acquired banks, the prepayment
 of approximately $175 million of FHLB advances in the fourth quarter of 2001 and
 the issuance of $200 million of 8% trust preferred securities in February 2002.

Average FHLB borrowings for the third
 quarter of 2002 were $2.5 billion, which increased $221 million or 10% from the
 third quarter of 2001 due primarily to acquisitions. Collateral for FHLB borrowings
 consists primarily of first mortgage loans secured by 1 - 4 family properties, certain
 unencumbered securities and other qualified assets. These borrowings had an average
 cost of 4.48% during the quarter ended September 30, 2002 as compared to 5.05% for
 the comparable period last year. The 57 basis point decrease was due to the Federal
 Reserve Board rate cuts during 2001 and prepayment of $174.6 million of FHLB borrowings
 with a weighted average cost of 5.62%. At September 30, 2002, FHLB borrowings amounted
 to $2.5 billion and our additional borrowing capacity from the FHLB was $2.1 billion.

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##### Table of Contents



Average balances for securities sold
 under repurchase agreements were $1.8 billion and $1.3 billion for the quarters
 ended September 30, 2002 and 2001, respectively, an increase of $589 million. Borrowings
 under repurchase agreements had a weighted average rate of 2.35% and 3.61% for the
 quarters ended September 30, 2002 and 2001, respectively, and are secured by mortgage-backed
 securities and U.S. Government obligations.

In June 2001, Banknorth, NA issued $200
 million of 7.625% subordinated notes due in 2011. Interest is payable semi-annually
 in June and December. The notes qualify as Tier 2 capital.

In October 2002, we increased our existing
 line of credit with a third party financial institution from $80 million to $110
 million at the rate of LIBOR plus 0.625%. The average outstanding balance on this
 line for the nine months ended September 30, 2002 was $2.8 million.

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

CONTRACTUAL OBLIGATIONS

We have entered into numerous contractual
 obligations and commitments. The following tables summarize our contractual cash
 obligations and other commitments at September 30, 2002.



|Contractual Cash Obligations                         | Payments Due - By Period
|---------------------------------------------------- | ------------------------
|                                                     |                         
|(In thousands)                                       |                         
|                                                     | Total                   
|                                                     |                         
|Long-term debt                                       | $                       
|Facility lease obligations                           |                         
|Other long-term obligations                          |                         
|Foreign currency forward contracts (notional amount) |                         
|                                                     |                         
|Total contractual cash obligations                   | $                       
|                                                     |                         



|Other Commitments                     |           |           | Amount of
 Commitment Expiration - Per Period
|------------------------------------- | --------- | --------- | ---------------------------------------------
|                                      | Total     |           |                                              
|(In thousands)                        | Amounts   |           | Less than                                    
|                                      | Committed |           | 1 Year                                       
|                                      |           |           |                                              
|Lines of credit                       | $         | 3,487,372 |                                              
|Standby letters of credit             |           | 244,060   |                                              
|Other commitments                     |           | 1,419,758 |                                              
|Forward commitments to sell loans     |           | 236,991   |                                              
|Interest rate swaps (notional amount) |           | 29,432    |                                              
|                                      |           |           |                                              
|Total commitments                     | $         | 5,417,613 |                                              
|                                      |           |           |                                              

RISK MANAGEMENT

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

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##### Table of Contents



regular basis and then reported to the Board with
 an accompanying explanation of any differences. The risk program includes risk identification,
 measurement, control and monitoring.

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

ASSET-LIABILITY MANAGEMENT

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

Market Risk

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

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

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

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

To cope with these uncertainties, we
 give careful attention to our assumptions. For example, many of our interest-bearing
 deposit products (e.g. interest checking, savings and money market deposits) have
 no contractual maturity

38



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##### Table of Contents



and based on historical experience have only a limited
 sensitivity to movements in market rates. Because we believe we have some control with respect
 to the extent and timing of rates paid on non-maturity deposits, certain assumptions
 regarding rate changes are built into the model. In the case of prepayment of mortgage
 assets, assumptions are derived from published dealer median prepayment estimates
 for comparable mortgage loans or from a vendor supported loan prepayment model that
 is periodically tested using observed loan prepayment behavior.

We manage the interest-rate risk inherent
 in our core banking operations primarily using on-balance sheet instruments, which
 sometimes contain embedded options, mainly fixed-rate portfolio securities and borrowed
 funds. When appropriate, we utilize interest rate instruments such as interest-rate
 swaps, interest rate floors and interest rate corridor agreements, among other instruments.
 As of September 30, 2002, Banknorth used only forward commitments related to hedging
 its mortgage banking operations and commercial loans swaps. The commercial loan
 swaps were part of an approved pilot program to offer interest rate derivative hedging
 products to commercial customers, provided these products are in turn hedged. The
 program is designed to record variable rate commercial loans on our balance sheet
 while allowing the customer to synthetically fix the rate by purchasing a variable
 to fixed interest rate swap, while we currently enter into an offsetting pay fixed
 interest rate swap with a broker. The pilot has been successful to date and it
 is anticipated that customer interest rate derivatives will reduce the interest
 rate risk of our long-term, fixed-rate commercial loans.

We manage the interest-rate risk inherent
 in our mortgage banking operations by entering into forward sales contracts and,
 to a lesser extent, by using purchased mortgage-backed security options. An increase
 in market interest rates between the time we commit to terms on a loan and the time
 we ultimately sell the loan in the secondary market will have the effect of reducing
 the gain (or increasing the loss) we record on the sale. We attempt to mitigate
 this risk by entering into forward sales commitments in amounts sufficient to cover
 all closed loans and approximately 75% to 80% of loan commitments on rate-locked
 loans. Purchased mortgage-backed security options are used to hedge a percentage
 of rate-locked loans.

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



|Residential mortgage loans held for sale            | $ | 58,823 
|--------------------------------------------------- | - | -------
|Rate-locked loan commitments                        |   | 110,650
|Forward sales contracts                             |   | 160,092
|Purchased mortgage-backed security/treasury options |   | 5,000  

Our policy on interest-rate risk simulation
 specifies that if interest rates were to shift gradually up or down 2%, estimated
 net interest income for the subsequent 12 months should decline by less than 5%.
 Our gradual 2% rising rate scenario was within compliance guidelines at September
 30, 2002. However, the gradual 2% falling rate scenario was slightly outside guidelines.
 ALCO voted to approve the guidelines exception because a gradual 2% decreasing
 rate scenario was deemed unlikely based on the current level of interest rates.
 ALCO currently is focusing on a gradual decreasing 1% rate scenario and on strategies
 that prove beneficial to income should rates fall or the yield curve flatten. Strategies
 under review include swapping or restructuring existing fixed-term borrowings and
 buying interest rate floors related to wholesale funding arrangements.

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



|                   | 200 Basis Point |       | 100 Basis Point |  | 100 Basis Point |       | 200 Basis Point
|------------------ | --------------- | ----- | --------------- |  | --------------- | ----- | ---------------
|                   | Rate Decrease   |       | Rate Decrease   |  | Rate Increase   |       | Rate Increase  
|                   |                 |       |                 |  |                 |       |                
|September 30, 2002 |                 | (7.59 | )%              |  |                 | (2.38 | )%             
|                   |                 |       |                 |  |                 |       |                
|December 31, 2001  |                 | (5.37 | )%              |  |                 | (2.45 | )%             
|                   |                 |       |                 |  |                 |       |                

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##### Table of Contents



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, most
 deposit accounts have implied interest rate floors and it is assumed that the related
 interest expense on these accounts will not decrease in proportion to the downward
 shift in rates. Assuming an upward shift in rates of 200 basis points, the simulated
 increase in interest income would be more than the simulated increase in interest
 expense because total adjustable earning assets will reprice more quickly than will
 total adjustable cost liabilities. It should be emphasized, however, that the results
 are dependent on material assumptions such as those discussed above. For instance,
 asymmetrical rate behavior can have a material impact on the simulation results.

The most significant factors affecting
 market risk exposure of net interest income during the three months ended September
 30, 2002 were (i) the shape of the U.S. Government securities and interest rate
 swap yield curve, (ii) changes in the composition and prepayment speeds of mortgage
 assets, (iii) reduction of deposit interest expense, and (iv) changes in the wholesale
 borrowings portfolio structure. Since June 2002, the yield curve fell most significantly
 in the 5-year term (approximately 111 basis points) and in the 10-year term (approximately
 120 basis points). As a result, projected mortgage and loan prepayments were faster
 in the third quarter of 2002 than in the prior quarters of 2002. Overall total
 loans and securities available for sale effective duration estimates became shorter
 due to increased prepayment estimates resulting from sustained low mortgage rates.
 The above table reflects the impact of these changes. The net change in the estimated
 sensitivity of our net interest income to changes in interest rates during the third
 quarter of 2002 was a result of these factors. We remain asset sensitive and project
 net interest income to increase if short and long interest rates move symmetrically
 higher.

In connection with the Andover and MetroWest
 acquisitions in the fourth quarter of 2001, we recorded $8.8 million of mortgage
 servicing rights at market value at the date of acquisition. Mortgage servicing
 rights as of September 30, 2002 totaled $5.2 million (or 0.70% of the underlying
 balance of loans serviced for others) compared to $8.5 million as December 31, 2001.
 The decline in the mortgage servicing rights asset resulted from amortization of
 $2.2 million and an impairment writedown of $1.7 million. New mortgage servicing
 rights from originations are sold on a flow basis shortly after the mortgages are
 sold. As a result, future earnings exposure to changes in the value of mortgage
 servicing rights is not expected to be material.

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

LIQUIDITY

Parent Company

On a parent-only basis at September 30,
 2002, our debt service requirements consisted primarily of junior subordinated debentures
 issued to four subsidiaries: $103 million to Peoples Heritage Capital Trust I, $31
 million to Banknorth Capital Trust I, $206 million to Banknorth Capital Trust II
 and $3.6 million to Ipswich Statutory Trust, in connection with the issuance of
 9.06% Capital Securities due 2027, 10.52% Capital Securities due 2027, 8% Capital
 Securities due 2032 and 10.20% Capital Securities due in 2031, respectively. The
 principal sources of funds for us to meet parent-only obligations are dividends
 from our banking subsidiary, which are subject to regulatory limitations, income
 from investment securities and borrowings, including draws on a $80 million unsecured
 line of credit which is renewable every 364 days and, if used, carries interest
 at LIBOR plus 0.625%. At September 30, 2002, our subsidiary bank had $278.5 million
 available for dividends that could be paid without prior regulatory approval. The
 average balance outstanding on the line of credit during the nine months ended September
 30, 2002 was $2.8 million. In addition, the parent company had $154.1 million in
 cash or cash equivalents at September 30, 2002.

40



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##### Table of Contents



Banking Subsidiary

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

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

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

As of September 30, 2002, Banknorth,
 NA had in the aggregate $3.1 billion of immediately accessible liquidity,
 defined as cash that could be raised within 1-3 days through collateralized
 borrowings or security sales. This represents 21% of retail deposits, as compared
 to a current policy minimum of 10% of deposits.

Also as of September 30, 2002, Banknorth,
 NA had in the aggregate potentially volatile funds of $1.3 billion.
 These are funds that might flow out of the bank over a 90-day period in an adverse
 environment. Management estimates this figure by applying adverse probabilities
 to its various credit-sensitive and economically-sensitive funding sources.

As of September 30, 2002, the ratio of
 immediately accessible liquidity to potentially volatile funds
 was 227%, versus a policy minimum of 100%.

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

CAPITAL

At September 30, 2002, shareholders
 equity amounted to $1.9 billion, or 8.53% of total assets. Tangible equity amounted
 to $1.3 billion or 6% of tangible assets. In addition, through subsidiary trusts,
 we had outstanding at such date $295.1 million of capital securities, of which $91.6
 million mature in 2027, $3.5 million mature in 2031 and $200 million mature in 2032,
 all of which qualify as Tier 1 Capital. We also have $200 million of 7.625% subordinated
 notes due in 2011 that qualify as Tier 2 capital.

We paid a $0.15 per share dividend on
 our common stock during the third quarter of 2002 compared to a $0.13 per share
 dividend in the third quarter of 2001. In February 2002, the Board authorized 8
 million shares to be repurchased in the open market in addition to the 13 million
 share repurchase program authorized in 2001. During the nine months ended September
 30, 2002, we repurchased 6.2 million shares at an average price of $24.29. As of
 September 30, 2002, a total of 7.4 million shares were available for repurchase
 under these authorizations.

Capital guidelines issued by the Federal
 Reserve Board require us to maintain certain ratios, set forth in Table 10. As
 indicated in such table, our regulatory capital currently substantially exceeds
 all applicable requirements.

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TABLE 10 - Regulatory Capital Requirements(Dollars in thousands)

|                                            | For Capital Adequacy
|------------------------------------------- | --------------------
|                                            | Actual              
|                                            |                     
|                                            | Amount              
|                                            |                     
|As of September 30, 2002:                   |                     
|Total capital (to risk weighted assets)     | $                   
|Tier 1 capital (to risk weighted assets)    |                     
|Tier 1 leverage capital (to average assets) |                     
|As of December 31, 2001:                    |                     
|Total capital (to risk weighted assets)     | $                   
|Tier 1 capital (to risk weighted assets)    |                     
|Tier 1 leverage capital (to average assets) |                     

Net risk weighted assets were $15.6 billion
 and $14.4 billion at September 30, 2002 and December 31, 2001, respectively.

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

IMPACT OF NEW ACCOUNTING STANDARDS

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

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

In June 2001, the FASB issued SFAS No.
 143, Accounting for Asset Retirement Obligations. SFAS No. 143 applies
 to legal obligations associated with the retirement of long-lived assets that result
 from the acquisition, construction, development and (or) the normal operation of
 a long-lived asset. It is effective for financial statements

42



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##### Table of Contents



issued for fiscal
 years beginning after June 15, 2002. The adoption of this standard is not expected
 to have a material impact on our financial condition, results of operations, earnings
 per share or cash flows.

FORWARD LOOKING STATEMENTS

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

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




Item 3. Quantitative and Qualitative
 Disclosures about Market Risk

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




Item 4. Controls and Procedures

Within 90 days prior to the date of this Quarterly
 Report, Banknorth carried out an evaluation, under the supervision and with the participation of
 Banknorths management, including Banknorths Chief Executive Officer and Chief Financial
 Officer, of the effectiveness of the design and operation of the Companys
 disclosure controls and procedures. Based upon that evaluation, the Chief Executive
 Officer and Chief Financial Officer concluded that Banknorths disclosure controls
 and procedures are effective. There were no significant changes in Banknorths
 internal controls or in other factors that could significantly affect these controls
 subsequent to the date of their evaluation.

Disclosure controls and procedures are
 the controls and other procedures of Banknorth that are designed to ensure that
 the information required to be disclosed by Banknorth in its reports filed or submitted
 under the Exchange Act is recorded, processed, summarized and reported within the
 time periods specified in the Securities and Exchange Commissions rules and
 forms. Disclosure controls and procedures include, without limitation, controls
 and procedures designed to ensure that information required to be disclosed by Banknorth
 in its reports filed under the Exchange Act is accumulated and communicated to Banknorths
 management, including the principal executive officer and principal financial
 officer, as appropriate to allow timely decisions regarding required disclosure.

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##### Table of Contents






Part II - Other Information




Item 1.   Legal Proceedings

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




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




Item 3.   Defaults Upon Senior Securities
  not applicable.




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




Item 5.   Other Information  not
 applicable.




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



|(a) | The
 following exhibits are filed as part of this report.                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                      
|    |                                                                                                                      
|    |                                                                                                                      
|(b) | We filed a
 Current Report on Form 8-K or 8-K/A on July 29, 2002, August 13, 14, and 26, 2002
 and September 3, 2002.

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##### Table of Contents






SIGNATURES

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



|                           |  | BANKNORTH
 GROUP, INC.
|-------------------------- |  | ----------------------
|                           |  |                       
|Date:   November
 14, 2002 |  | By:                   
|                           |  |                       
|                           |  |                       
|                           |  |                       
|                           |  |                       
|                           |  |                       
|                           |  |                       
|Date:   November
 14, 2002 |  | By:                   
|                           |  |                       
|                           |  |                       
|                           |  |                       
|                           |  |                       
|                           |  |                       
|                           |  |                       
|                           |  |                       
|Date:   November
 14, 2002 |  | By:                   
|                           |  |                       
|                           |  |                       
|                           |  |                       
|                           |  |                       
|                           |  |                       

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##### Table of Contents






PURSUANT TO SECTION 302
 OF THE SARBANES-OXLEY ACT OF 2002CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

I, William J. Ryan, certify that:



|1. | I have
 reviewed this quarterly report on Form 10-Q of Banknorth Group, Inc. (the Registrant);                                                                                                                                                                                                                                  
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                   
|2. | Based on
 my knowledge, this quarterly report does not contain any untrue statement of a material
 fact or omit to state a material fact necessary to make the statements made, in
 light of the circumstances under which such statements were made, not misleading
 with respect to the period covered by this quarterly report;
|   |                                                                                                                                                                                                                                                                                                                                   
|3. | Based on
 my knowledge, the financial statements, and other financial information included
 in this quarterly report, fairly present in all material respects the financial
 condition, results of operations and cash flows of the Registrant as of, and for,
 the periods presented in this quarterly report;                   
|   |                                                                                                                                                                                                                                                                                                                                   
|4. | The Registrants
 other certifying officers and I are responsible for establishing and maintaining
 disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and
 15d-14) for the Registrant and we have:                                                                                                      



|   | a)                                                                                                                                                                                               | designed
 such disclosure controls and procedures to ensure that material information relating
 to the Registrant, including its consolidated subsidiaries, is made known to us
 by others within those entities, particularly during the period in which this quarterly
 report is being prepared;
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                 
|b) | evaluated
 the effectiveness of the Registrants disclosure controls and procedures as
 of a date within 90 days prior to the filing date of this quarterly report (the
 Evaluation Date); and
|   |                                                                                                                                                                                                 
|c) | presented
 in this quarterly report our conclusions about the effectiveness of the disclosure
 controls and procedures based on our evaluation as of the Evaluation Date;                       



|5. | The Registrants
 other certifying officers and I have disclosed, based on our most recent
 evaluation, to the Registrants auditors and the audit committee of Registrants
 board of directors (or persons performing the equivalent functions):
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                   



|   | a)                                                                                                                                                       | all significant
 deficiencies in the design or operation of internal controls which could adversely
 affect the Registrants ability to record, process, summarize and report financial
 data and have identified for the Registrants auditors any material weaknesses
 in internal controls; and
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                         
|b) | any fraud,
 whether or not material, that involves management or other employees who have a
 significant role in the Registrants internal controls; and



|6. | The Registrants
 other certifying officers and I have indicated in this quarterly report whether
 or not there were significant changes in internal controls or in other factors that
 could significantly affect internal controls subsequent to the date of our most
 recent evaluation, including any corrective actions with regard to significant deficiencies
 and material weaknesses.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Date:   November
 8, 2002 | /s/William
 J. Ryan     
|------------------------- | ------------------------
|                          |                         
|                          | William J.
 Ryan        
|                          | Chief Executive
 Officer

46



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##### Table of Contents






PURSUANT TO SECTION 302
 OF THE SARBANES-OXLEY ACT OF 2002CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Peter J. Verrill, certify that:



|1. | I have
 reviewed this quarterly report on Form 10-Q of Banknorth Group, Inc. (the Registrant);                                                                                                                                                                                                                                  
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                   
|2. | Based on
 my knowledge, this quarterly report does not contain any untrue statement of a material
 fact or omit to state a material fact necessary to make the statements made, in
 light of the circumstances under which such statements were made, not misleading
 with respect to the period covered by this quarterly report;
|   |                                                                                                                                                                                                                                                                                                                                   
|3. | Based on
 my knowledge, the financial statements, and other financial information included
 in this quarterly report, fairly present in all material respects the financial
 condition, results of operations and cash flows of the Registrant as of, and for,
 the periods presented in this annual report;                      
|   |                                                                                                                                                                                                                                                                                                                                   
|4. | The Registrants
 other certifying officers and I are responsible for establishing and maintaining
 disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and
 15d-14) for the Registrant and we have:                                                                                                      



|   | a)                                                                                                                                                                                               | designed
 such disclosure controls and procedures to ensure that material information relating
 to the Registrant, including its consolidated subsidiaries, is made known to us
 by others within those entities, particularly during the period in which this quarterly
 report is being prepared;
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                 
|b) | evaluated
 the effectiveness of the Registrants disclosure controls and procedures as
 of a date within 90 days prior to the filing date of this quarterly report (the
 Evaluation Date); and
|   |                                                                                                                                                                                                 
|c) | presented
 in this quarterly report our conclusions about the effectiveness of the disclosure
 controls and procedures based on our evaluation as of the Evaluation Date;                       



|5. | The Registrants
 other certifying officers and I have disclosed, based on our most recent
 evaluation, to the Registrants auditors and the audit committee of Registrants
 board of directors (or persons performing the equivalent functions):
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|   | a)                                                                                                                                                       | all significant
 deficiencies in the design or operation of internal controls which could adversely
 affect the Registrants ability to record, process, summarize and report financial
 data and have identified for the Registrants auditors any material weaknesses
 in internal controls; and
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                         
|b) | any fraud,
 whether or not material, that involves management or other employees who have a
 significant role in the Registrants internal controls; and



|6. | The Registrants
 other certifying officers and I have indicated in this quarterly report whether
 or not there were significant changes in internal controls or in other factors that
 could significantly affect internal controls subsequent to the date of our most
 recent evaluation, including any corrective actions with regard to significant deficiencies
 and material weaknesses.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Date: November
 8, 2002 | /s/ Peter
 J. Verrill   
|----------------------- | ------------------------
|                        |                         
|                        | Peter J.
 Verrill       
|                        | Chief Financial
 Officer

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EXHIBIT INDEX



|Exhibit
 99.1 | Certification
 of Principal Executive Officer, dated November 8, 2002
|------------- | ---------------------------------------------------------------------
|              |                                                                      
|Exhibit
 99.2 | Certification
 of Principal Financial Officer, dated November 8, 2002

48