##### 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 March 31, 2003

OR

|  |  |                                                                                          
|- |  | -----------------------------------------------------------------------------------------
|o |  | 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
incorporation or organization) |  | (I.R.S. Employer
Identification No.)
|                                                               |  |                                     
|Two Portland Square, Portland, Maine                           |  | 04112                               
|                                                               |  |                                     
|(Address of principal executive offices)                       |  | (Zip Code)                          

(207) 761-8500
(Registrants telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports); and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No o

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes x No o

The number of shares outstanding of the Registrants common stock and related
stock purchase rights as of April 30, 2003 is:

|                                       |  |  |               | 
|-------------------------------------- |  |  | ------------- | 
|Common stock, par value $.01 per share |  |  | 162,610,564   | 
|(Class)                                |  |  | (Outstanding) | 

Available on the Web @ www.banknorth.com





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TABLE OF CONTENTS



|                                                 |                                                                                       |                                                            |  |  |  |  |  | 
|------------------------------------------------ | ------------------------------------------------------------------------------------- | ---------------------------------------------------------- |  |  |  |  |  | 
|                                                 |                                                                                       | CONSOLIDATED BALANCE SHEETS                               
|                                                 |                                                                                       | CONSOLIDATED STATEMENTS OF INCOME                         
|                                                 |                                                                                       | CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
|                                                 |                                                                                       | CONSOLIDATED STATEMENTS OF CASH FLOWS                     
|                                                 |                                                                                       | Notes to Consolidated Financial Statements                
|                                                 | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                                 | Item 3. Quantitative and Qualitative Disclosures about Market Risk                   
|                                                 | Item 4. Controls and Procedures                                                      
|Part II  Other Information                     
|                                                 | Item 1. Legal Proceedings                                                            
|                                                 | Item 2. Changes in Securities and Use of Proceeds  not applicable.                  
|                                                 | Item 3. Defaults Upon Senior Securities  not applicable.                            
|                                                 | Item 4. Submission of Matters to a Vote of Security Holders  not applicable.        
|                                                 | Item 5. Other Information  not applicable.                                          
|                                                 | Item 6. Exhibits and Reports on Form 8-K.                                            
|SIGNATURES                                      
|EXHIBIT INDEX                                   
|Ex-99.1 Certification of Chief Executive Officer
|Ex-99.2 Certification of Chief 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
March 31, 2003 and December 31, 2002                                        |  |      | 3 | 
|                              |                                                                                               | Consolidated
Statements of Income  Three months ended
March 31, 2003 and 2002                          |  |      | 4 | 
|                              |                                                                                               | Consolidated Statements of Changes in Shareholders Equity  Three months ended March 31, 2003 and 2002 |  |      | 5 | 
|                              |                                                                                               | Consolidated Statements of Cash Flows  Three months ended March 31, 2003 and 2002                      |  |      | 6 | 
|                              |                                                                                               | Notes to Consolidated Financial Statements                                                              |  |      | 7 | 
|                              | Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations |                                                                                                         |  | 14   |  
|                              | Item 3. Quantitative and Qualitative Disclosures about Market Risk                            |                                                                                                         |  | 38   |  
|                              | Item 4. Controls and Procedures                                                               |                                                                                                         |  | 38   |  
|PART II. OTHER INFORMATION    |                                                                                               |                                                                                                         |  |     
|                              | Item 1. Legal proceedings                                                                     |                                                                                                         |  | 39   |  
|                              | Item 2. Changes in securities and use of proceeds                                             |                                                                                                         |  | 39   |  
|                              | Item 3. Defaults upon senior securities                                                       |                                                                                                         |  | 39   |  
|                              | Item 4. Submission of matters to a vote of security holders                                   |                                                                                                         |  | 39   |  
|                              | Item 5. Other information                                                                     |                                                                                                         |  | 39   |  
|                              | Item 6. Exhibits and reports on Form 8-K                                                      |                                                                                                         |  | 39   |  
|                              | Signatures                                                                                    |                                                                                                         |  | 40   |  
|                              | Section 302 Certification of the Chief Executive Officer                                      |                                                                                                         |  | 41   |  
|                              | Section 302 Certification of the Chief Financial Officer                                      |                                                                                                         |  | 42   |  
|                              | Exhibits                                                                                      |                                                                                                         |  | 43   |  

2



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##### Table of Contents






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

|                                                                                                                               |                                           |                                            |                |                      |            |                |            |                   |            |            |            | 
|------------------------------------------------------------------------------------------------------------------------------ | ----------------------------------------- | ------------------------------------------ | -------------- | -------------------- | ---------- | -------------- | ---------- | ----------------- | ---------- | ---------- | ---------- | 
|                                                                                                                               |                                           |                                            |                |                      |            | March 31, 2003 |            | December 31, 2002
|                                                                                                                               |                                           |                                            |                |                      |            |                |            |                  
|Assets                                                                                                                         |                                           |                                            |                |                      |            |                |            |                  
|Cash and due from banks                                                                                                        |                                           | $                                          | 604,779        |                      |            | $              | 690,250    |                  
|Federal funds sold and other short term investments                                                                            |                                           |                                            | 2,838          |                      |            |                | 79,753     |                  
|Securities available for sale, at market value                                                                                 |                                           |                                            | 7,674,151      |                      |            |                | 6,731,467  |                  
|Securities held to maturity (fair value of $197,752 and $221,571 at March 31, 2003
and December 31, 2002, respectively)        |                                           |                                            | 193,181        |                      |            |                | 216,409    |                  
|Loans held for sale                                                                                                            |                                           |                                            | 87,396         |                      |            |                | 128,622    |                  
|Loans and leases:                                                                                                              |                                           |                                            |                |                      |            |                |            |                  
|                                                                                                                               | Residential real estate mortgages         |                                            |                | 3,028,851            |            |                |            | 2,382,197         |           
|                                                                                                                               | Commercial real estate mortgages          |                                            |                | 5,016,865            |            |                |            | 4,792,049         |           
|                                                                                                                               | Commercial business loans and leases      |                                            |                | 3,080,034            |            |                |            | 2,968,474         |           
|                                                                                                                               | Consumer loans and leases                 |                                            |                | 4,453,423            |            |                |            | 3,913,288         |           
|                                                                                                                               |                                           |                                            |                |                      |            |                |            |                  
|                                                                                                                               |                                           | Total loans and leases                     |                |                      | 15,579,173 |                |            |                   | 14,056,008 |           
|                                                                                                                               | Less: Allowance for loan and lease losses |                                            |                | 226,677              |            |                |            | 208,273           |           
|                                                                                                                               |                                           |                                            |                |                      |            |                |            |                  
|                                                                                                                               |                                           |                                            |                | Net loans and leases |            |                | 15,352,496 |                   |            |            | 13,847,735 | 
|                                                                                                                               |                                           |                                            |                |                      |            |                |            |                  
|Premises and equipment, net                                                                                                    |                                           |                                            | 278,316        |                      |            |                | 271,677    |                  
|Goodwill                                                                                                                       |                                           |                                            | 1,095,476      |                      |            |                | 660,684    |                  
|Identifiable intangible assets                                                                                                 |                                           |                                            | 41,292         |                      |            |                | 34,474     |                  
|Mortgage servicing rights                                                                                                      |                                           |                                            | 3,620          |                      |            |                | 3,598      |                  
|Bank-owned life insurance                                                                                                      |                                           |                                            | 470,645        |                      |            |                | 380,405    |                  
|Other assets                                                                                                                   |                                           |                                            | 451,101        |                      |            |                | 373,867    |                  
|                                                                                                                               |                                           |                                            |                |                      |            |                |            |                  
|                                                                                                                               | Total assets                              |                                            | $              | 26,255,291           |            |                | $          | 23,418,941        |           
|                                                                                                                               |                                           |                                            |                |                      |            |                |            |                  
|Liabilities and Shareholders Equity                                                                                           |                                           |                                            |                |                      |            |                |            |                  
|Deposits:                                                                                                                      |                                           |                                            |                |                      |            |                |            |                  
|                                                                                                                               | Savings accounts                          |                                            | $              | 2,439,896            |            |                | $          | 1,940,195         |           
|                                                                                                                               | Money market access and NOW accounts      |                                            |                | 6,632,023            |            |                |            | 6,091,429         |           
|                                                                                                                               | Certificates of deposit                   |                                            |                | 5,381,509            |            |                |            | 4,658,778         |           
|                                                                                                                               | Demand deposits                           |                                            |                | 3,093,152            |            |                |            | 2,974,199         |           
|                                                                                                                               |                                           |                                            |                |                      |            |                |            |                  
|                                                                                                                               |                                           |                                            | Total deposits |                      |            | 17,546,580     |            |                   |            | 15,664,601 |           
|Short-term borrowings                                                                                                          |                                           |                                            | 1,164,039      |                      |            |                | 1,276,467  |                  
|Long-term borrowings                                                                                                           |                                           |                                            | 4,534,670      |                      |            |                | 3,861,058  |                  
|Company obligated, mandatorily redeemable securities of subsidiary trusts
holding solely parent junior subordinated debentures |                                           |                                            | 295,056        |                      |            |                | 295,056    |                  
|Other liabilities                                                                                                              |                                           |                                            | 216,752        |                      |            |                | 258,274    |                  
|                                                                                                                               |                                           |                                            |                |                      |            |                |            |                  
|                                                                                                                               | Total liabilities                         |                                            |                | 23,757,097           |            |                |            | 21,355,456        |           
|                                                                                                                               |                                           |                                            |                |                      |            |                |            |                  
|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,
Issued 2003  182,292,973; Issued 2002  168,892,284)  |                                           |                                            | 1,823          |                      |            |                | 1,689      |                  
|Paid-in capital                                                                                                                |                                           |                                            | 1,438,913      |                      |            |                | 1,059,778  |                  
|Retained earnings                                                                                                              |                                           |                                            | 1,326,656      |                      |            |                | 1,269,422  |                  
|Treasury stock, at cost (18,411,870 shares in 2003 and 18,313,517 shares in 2002)                                              |                                           |                                            | (385,286       | )                    |            |                | (382,350   | )                
|Accumulated other comprehensive income                                                                                         |                                           |                                            | 116,088        |                      |            |                | 114,946    |                  
|                                                                                                                               |                                           |                                            |                |                      |            |                |            |                  
|                                                                                                                               | Total shareholders equity                |                                            |                | 2,498,194            |            |                |            | 2,063,485         |           
|                                                                                                                               |                                           |                                            |                |                      |            |                |            |                  
|                                                                                                                               |                                           | Total liabilities and shareholders equity |                | $                    | 26,255,291 |                |            | $                 | 23,418,941 |           
|                                                                                                                               |                                           |                                            |                |                      |            |                |            |                  

See accompanying Notes to Consolidated Financial Statements.

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

|                                     |                                                |                                                               |         |                    |         |      |         |         |         | 
|------------------------------------ | ---------------------------------------------- | ------------------------------------------------------------- | ------- | ------------------ | ------- | ---- | ------- | ------- | ------- | 
|                                     |                                                |                                                               |         | Three Months Ended
|                                     |                                                |                                                               |         | March 31,         
|                                     |                                                |                                                               |         |                   
|                                     |                                                |                                                               |         | 2003               |         | 2002
|                                     |                                                |                                                               |         |                    |         |     
|Interest and dividend income:        |                                                |                                                               |         |                    |         |      |         |        
|                                     | Interest and fees on loans and leases          |                                                               | $       | 220,285            |         |      | $       | 221,784 |        
|                                     | Interest and dividends on securities           |                                                               |         | 89,042             |         |      |         | 84,222  |        
|                                     |                                                |                                                               |         |                    |         |      |         |         |        
|                                     |                                                | Total interest and dividend income                            |         |                    | 309,327 |      |         |         | 306,006 | 
|                                     |                                                |                                                               |         |                    |         |      |         |         |        
|Interest expense:                    |                                                |                                                               |         |                    |         |      |         |        
|                                     | Interest on deposits                           |                                                               |         | 51,391             |         |      |         | 64,841  |        
|                                     | Interest on borrowed funds                     |                                                               |         | 51,799             |         |      |         | 44,679  |        
|                                     |                                                |                                                               |         |                    |         |      |         |         |        
|                                     |                                                | Total interest expense                                        |         |                    | 103,190 |      |         |         | 109,520 | 
|                                     |                                                |                                                               |         |                    |         |      |         |         |        
|                                     |                                                | Net interest income                                           |         |                    | 206,137 |      |         |         | 196,486 | 
|Provision for loan and lease losses  |                                                |                                                               | 10,901  |                    |         |      | 11,828  |        
|                                     |                                                |                                                               |         |                    |         |      |         |         |        
|                                     |                                                | Net interest income after provision
for loan and lease losses |         |                    | 195,236 |      |         |         | 184,658 | 
|                                     |                                                |                                                               |         |                    |         |      |         |         |        
|Noninterest income:                  |                                                |                                                               |         |                    |         |      |         |        
|                                     | Deposit services                               |                                                               |         | 22,526             |         |      |         | 18,960  |        
|                                     | Insurance brokerage commissions                |                                                               |         | 12,357             |         |      |         | 10,155  |        
|                                     | Merchant and electronic banking income, net    |                                                               |         | 9,118              |         |      |         | 7,749   |        
|                                     | Trust and investment management services       |                                                               |         | 7,351              |         |      |         | 8,277   |        
|                                     | Bank-owned life insurance                      |                                                               |         | 5,342              |         |      |         | 4,376   |        
|                                     | Investment planning services                   |                                                               |         | 3,256              |         |      |         | 2,718   |        
|                                     | Net securities gains                           |                                                               |         | 2,782              |         |      |         | 19      |        
|                                     | Other noninterest income                       |                                                               |         | 15,506             |         |      |         | 9,322   |        
|                                     |                                                |                                                               |         |                    |         |      |         |         |        
|                                     |                                                |                                                               | 78,238  |                    |         |      | 61,576  |        
|                                     |                                                |                                                               |         |                    |         |      |         |         |        
|Noninterest expenses:                |                                                |                                                               |         |                    |         |      |         |        
|                                     | Compensation and employee benefits             |                                                               |         | 80,693             |         |      |         | 75,298  |        
|                                     | Data processing                                |                                                               |         | 10,178             |         |      |         | 10,582  |        
|                                     | Occupancy                                      |                                                               |         | 14,909             |         |      |         | 12,498  |        
|                                     | Equipment                                      |                                                               |         | 11,250             |         |      |         | 9,730   |        
|                                     | Advertising and marketing                      |                                                               |         | 5,060              |         |      |         | 3,978   |        
|                                     | Amortization of identifiable intangible assets |                                                               |         | 1,997              |         |      |         | 1,584   |        
|                                     | Merger
and consolidation costs                 |                                                               |         | 4,450              |         |      |         | 8,204   |        
|                                     | Other noninterest expenses                     |                                                               |         | 21,371             |         |      |         | 21,023  |        
|                                     |                                                |                                                               |         |                    |         |      |         |         |        
|                                     |                                                |                                                               | 149,908 |                    |         |      | 142,897 |        
|                                     |                                                |                                                               |         |                    |         |      |         |         |        
|Income before income tax expense     |                                                |                                                               | 123,566 |                    |         |      | 103,337 |        
|Applicable income tax expense        |                                                |                                                               | 42,173  |                    |         |      | 34,859  |        
|                                     |                                                |                                                               |         |                    |         |      |         |         |        
|                                     |                                                | Net income                                                    |         | $                  | 81,393  |      |         | $       | 68,478  | 
|                                     |                                                |                                                               |         |                    |         |      |         |         |        
|Basic earnings per share             |                                                | $                                                             | 0.52    |                    |         | $    | 0.46    |        
|Diluted earnings per share           |                                                | $                                                             | 0.51    |                    |         | $    | 0.45    |        
|Weighted average shares outstanding: |                                                |                                                               |         |                    |         |      |         |        
|                                     |                                                | Basic                                                         |         |                    | 157,667 |      |         |         | 149,347 | 
|                                     |                                                | Diluted                                                       |         |                    | 159,328 |      |         |         | 151,116 | 

See accompanying Notes to Consolidated Financial Statements.

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

|                                                                                              |                      |  |             |   |        |   |         |  |          |   |           |   |          |   |               |   |          |  |         |   |  |  |           |   |  |   |         |   |  |   |           |        | 
|--------------------------------------------------------------------------------------------- | -------------------- |  | ----------- | - | ------ | - | ------- |  | -------- | - | --------- | - | -------- | - | ------------- | - | -------- |  | ------- | - |  |  | --------- | - |  | - | ------- | - |  | - | --------- | ------ | 
|                                                                                              |                      |  | Common      |   |        |   |         |  |          |   |           |   |          |   |               |   | Unearned |  |         |   |  |  | Other     |   |  |   |        
|                                                                                              |                      |  | Shares      |   | Common |   | Paid-in |  | Retained |   | Compen-   |   | Treasury |   | Comprehensive |   |          |  |        
|                                                                                              |                      |  | Outstanding |   | Stock  |   | Capital |  | Earnings |   | sation    |   | Stock    |   | Income (Loss) |   | Total   
|                                                                                              |                      |  |             |   |        |   |         |  |          |   |           |   |          |   |               |   |         
|Balances at December 31, 2002                                                                 |                      |  | 150,579     |   |        | $ | 1,689   |  |          | $ | 1,059,778 |   |          | $ | 1,269,422     |   |          |  | $0      |   |  |  | ($382,350 | ) |  | $ | 114,946 |   |  | $ | 2,063,485 |       
|Net income                                                                                    |                      |  |            |   |        |   |        |  |          |   |          |   |          |   | 81,393        |   |          |  |        |   |  |  |          |   |  |   |        |   |  |   | 81,393    |       
|Unrealized gain on available for sale securities, net of
tax and reclassification adjustment  |                      |  |            |   |        |   |        |  |          |   |          |   |          |   |              |   |          |  |        |   |  |  |          |   |  |   | 215     |   |  |   | 215       |       
|Unrealized gain on cash flow hedges,
net of tax and reclassification adjustment               |                      |  |            |   |        |   |        |  |          |   |          |   |          |   |              |   |          |  |        |   |  |  |          |   |  |   | 927     |   |  |   | 927       |       
|                                                                                              |                      |  |             |   |        |   |         |  |          |   |           |   |          |   |               |   |          |  |         |   |  |  |           |   |  |   |         |   |  |   |           |       
|                                                                                              | Comprehensive income |  |             |   |        |   |         |  |          |   |           |   |          |   |               |   |          |  |         |   |  |  |           |   |  |   |         |   |  |   |           | 82,535 | 
|Issuance of stock for acquisitions                                                            |                      |  | 13,401      |   |        |   | 134     |  |          |   | 382,669   |   |          |   |              |   |          |  |        |   |  |  |          |   |  |   |        |   |  |   | 382,803   |       
|Treasury stock issued for employee benefit plans                                              |                      |  | 601         |   |        |   |        |  |          |   | (2,788    | ) |          |   |              |   |          |  |        |   |  |  | 11,548    |   |  |   |        |   |  |   | 8,760     |       
|Treasury stock purchased                                                                      |                      |  | (700        | ) |        |   |        |  |          |   |          |   |          |   |              |   |          |  |        |   |  |  | (15,524   | ) |  |   |        |   |  |   | (15,524   | )     
|Distribution of restricted stock                                                              |                      |  |            |   |        |   |        |  |          |   | (746      | ) |          |   |              |   |          |  |        |   |  |  | 1,040     |   |  |   |        |   |  |   | 294       |       
|Cash dividends                                                                                |                      |  |            |   |        |   |        |  |          |   |          |   |          |   | (24,159       | ) |          |  |        |   |  |  |          |   |  |   |        |   |  |   | (24,159   | )     
|                                                                                              |                      |  |             |   |        |   |         |  |          |   |           |   |          |   |               |   |          |  |         |   |  |  |           |   |  |   |         |   |  |   |           |       
|Balances
at March 31, 2003                                                                    |                      |  | 163,881     |   |        | $ | 1,823   |  |          | $ | 1,438,913 |   |          | $ | 1,326,656     |   |          |  | $0      |   |  |  | ($385,286 | ) |  | $ | 116,088 |   |  | $ | 2,498,194 |       
|                                                                                              |                      |  |             |   |        |   |         |  |          |   |           |   |          |   |               |   |          |  |         |   |  |  |           |   |  |   |         |   |  |   |           |       
|Balances at December 31, 2001                                                                 |                      |  | 151,221     |   |        | $ | 1,651   |  |          |   | $958,764  |   |          | $ | 1,056,678     |   |          |  | ($1,017 | ) |  |  | ($267,529 | ) |  |   | $40,568 |   |  | $ | 1,789,115 |       
|Net income                                                                                    |                      |  |            |   |        |   |        |  |          |   |          |   |          |   | 68,478        |   |          |  |        |   |  |  |          |   |  |   |        |   |  |   | 68,478    |       
|Unrealized gain on available for sales securities, net of
tax and reclassification adjustment |                      |  |             |   |        |   |        |  |          |   |          |   |          |   |              |   |          |  |        |   |  |  |          |   |  |   | (28,393 | ) |  |   | (28,393   | )     
|Unrealized gain on cash flow hedges,
net of tax and reclassification adjustment               |                      |  |            |   |        |   |        |  |          |   |          |   |          |   |              |   |          |  |        |   |  |  |          |   |  |   | (14     | ) |  |   | (14       | )     
|                                                                                              |                      |  |             |   |        |   |         |  |          |   |           |   |          |   |               |   |          |  |         |   |  |  |           |   |  |   |         |   |  |   |           |       
|                                                                                              | Comprehensive income |  |             |   |        |   |         |  |          |   |           |   |          |   |               |   |          |  |         |   |  |  |           |   |  |   |         |   |  |   |           | 40,071 | 
|Treasury stock issued for employee benefit plans                                              |                      |  | 1,198       |   |        |   |        |  |          |   | (5,525    | ) |          |   |              |   |          |  |        |   |  |  | 23,118    |   |  |   |        |   |  |   | 17,593    |       
|Treasury stock purchased                                                                      |                      |  | (5,501      | ) |        |   |        |  |          |   |          |   |          |   |              |   |          |  |        |   |  |  | (132,815  | ) |  |   |        |   |  |   | (132,815  | )     
|Issuance and distribution of restricted stock                                                 |                      |  |            |   |        |   |        |  |          |   | (421      | ) |          |   |              |   |          |  |        |   |  |  | 771       |   |  |   |        |   |  |   | 350       |       
|Decrease in unearned compensation-ESOP                                                        |                      |  |            |   |        |   |        |  |          |   | 3,421     |   |          |   |              |   |          |  | 562     |   |  |  |          |   |  |   |        |   |  |   | 3,983     |       
|Cash dividends                                                                                |                      |  |            |   |        |   |        |  |          |   |          |   |          |   | (20,260       | ) |          |  |        |   |  |  |          |   |  |   |        |   |  |   | (20,260   | )     
|                                                                                              |                      |  |             |   |        |   |         |  |          |   |           |   |          |   |               |   |          |  |         |   |  |  |           |   |  |   |         |   |  |   |           |       
|Balances
at March 31, 2002                                                                    |                      |  | 146,918     |   |        | $ | 1,651   |  |          |   | $956,239  |   |          | $ | 1,104,896     |   |          |  | ($455   | ) |  |  | ($376,455 | ) |  |   | $12,161 |   |  | $ | 1,698,037 |       
|                                                                                              |                      |  |             |   |        |   |         |  |          |   |           |   |          |   |               |   |          |  |         |   |  |  |           |   |  |   |         |   |  |   |           |       

See accompanying Notes to Consolidated Financial Statements.

5



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

|                                                                                                                                                     |                                                                                    |                                                                               |          |                    |          |      |          |            |          |  
|---------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------- | ----------------------------------------------------------------------------- | -------- | ------------------ | -------- | ---- | -------- | ---------- | -------- | -
|                                                                                                                                                     |                                                                                    |                                                                               |          | Three Months Ended
|                                                                                                                                                     |                                                                                    |                                                                               |          | March 31,         
|                                                                                                                                                     |                                                                                    |                                                                               |          |                   
|                                                                                                                                                     |                                                                                    |                                                                               |          | 2003               |          | 2002
|                                                                                                                                                     |                                                                                    |                                                                               |          |                    |          |     
|Cash flows from operating activities:                                                                                                                |                                                                                    |                                                                               |          |                    |          |      |          |           
|                                                                                                                                                     | Net income                                                                         |                                                                               | $        | 81,393             |          |      | $        | 68,478     |         
|                                                                                                                                                     | Adjustments to reconcile net income to net cash provided by operating activities:  |                                                                               |          |                    |          |      |          |            |         
|                                                                                                                                                     |                                                                                    | Provision for loan and lease losses                                           |          |                    | 10,901   |      |          |            | 11,828   |  
|                                                                                                                                                     |                                                                                    | Depreciation and amortization                                                 |          |                    | 10,556   |      |          |            | 17,475   |  
|                                                                                                                                                     |                                                                                    | Amortization of other intangibles                                             |          |                    | 1,997    |      |          |            | 1,584    |  
|                                                                                                                                                     |                                                                                    | Provision for deferred tax expense                                            |          |                    | 6,984    |      |          |            | 3,676    |  
|                                                                                                                                                     |                                                                                    | ESOP expense                                                                  |          |                    |         |      |          |            | 3,983    |  
|                                                                                                                                                     |                                                                                    | Issuance and amortization of restricted stock units                           |          |                    | 294      |      |          |            | 350      |  
|                                                                                                                                                     |                                                                                    | Net (gains) realized from sales of securities                                 |          |                    | (2,782   | )    |          |            | (19      | )
|                                                                                                                                                     |                                                                                    | Net (gains) realized from sales of loans held for sale                        |          |                    | (4,031   | )    |          |            | (2,179   | )
|                                                                                                                                                     |                                                                                    | Earnings from bank owned life insurance                                       |          |                    | (5,342   | )    |          |            | (4,376   | )
|                                                                                                                                                     |                                                                                    | Net decrease (increase) in mortgage servicing rights                          |          |                    | 450      |      |          |            | (19      | )
|                                                                                                                                                     |                                                                                    | Proceeds from sales of loans held for sale                                    |          |                    | 261,154  |      |          |            | 216,023  |  
|                                                                                                                                                     |                                                                                    | Residential loans originated and purchased for sale                           |          |                    | (214,470 | )    |          |            | (158,641 | )
|                                                                                                                                                     |                                                                                    | Net (increase) decrease in interest and dividends receivable and other assets |          |                    | (13,861  | )    |          |            | (10,617  | )
|                                                                                                                                                     |                                                                                    | Net increase (decrease) in other liabilities                                  |          |                    | (44,608  | )    |          |            | (44,752  | )
|                                                                                                                                                     |                                                                                    |                                                                               |          |                    |          |      |          |            |         
|Net cash provided by operating activities                                                                                                            |                                                                                    |                                                                               | 88,635   |                    |          |      | 102,794  |           
|                                                                                                                                                     |                                                                                    |                                                                               |          |                    |          |      |          |            |         
|Cash flows from investing activities:                                                                                                                |                                                                                    |                                                                               |          |                    |          |      |          |           
|                                                                                                                                                     | Proceeds from sales of securities available for sale                               |                                                                               |          | 471,817            |          |      |          | 220,150    |         
|                                                                                                                                                     | Proceeds from maturities and principal repayments of securities available for sale |                                                                               |          | 878,571            |          |      |          | 608,768    |         
|                                                                                                                                                     | Purchases of securities available for sale                                         |                                                                               |          | (1,681,598         | )        |      |          | (1,043,295 | )       
|                                                                                                                                                     | Proceeds from maturities and principal repayments of securities held to maturity   |                                                                               |          | 23,228             |          |      |          | 28,899     |         
|                                                                                                                                                     | Net (increase) in loans and leases                                                 |                                                                               |          | (78,383            | )        |      |          | (63,185    | )       
|                                                                                                                                                     | Net additions to premises and equipment                                            |                                                                               |          | (3,566             | )        |      |          | (9,931     | )       
|                                                                                                                                                     | Purchases of bank owned life insurance                                             |                                                                               |          |                   |          |      |          | (40,000    | )       
|                                                                                                                                                     | Payment for acquisitions, net of cash acquired                                     |                                                                               |          | 48,354             |          |      |          |           |         
|                                                                                                                                                     |                                                                                    |                                                                               |          |                    |          |      |          |            |         
|Net cash (used in) investing activities                                                                                                              |                                                                                    |                                                                               | (341,577 | )                  |          |      | (298,594 | )         
|                                                                                                                                                     |                                                                                    |                                                                               |          |                    |          |      |          |            |         
|Cash flows from financing activities:                                                                                                                |                                                                                    |                                                                               |          |                    |          |      |          |           
|                                                                                                                                                     | Net increase (decrease) in deposits                                                |                                                                               |          | (37,865            | )        |      |          | (89,622    | )       
|                                                                                                                                                     | Net increase (decrease) in securities sold under repurchase agreements             |                                                                               |          | 462,585            |          |      |          | (23,428    | )       
|                                                                                                                                                     | Proceeds from Federal Home Loan Bank borrowings                                    |                                                                               |          | (23,455            | )        |      |          | 3,280      |         
|                                                                                                                                                     | Payments on Federal Home Loan Bank borrowings                                      |                                                                               |          | (328,827           | )        |      |          | (117,865   | )       
|                                                                                                                                                     | Net increase (decrease) in other borrowings                                        |                                                                               |          | 18,191             |          |      |          | (35,233    | )       
|                                                                                                                                                     | Issuance of securities of subsidiary trusts, net                                   |                                                                               |          |                   |          |      |          | 193,150    |         
|                                                                                                                                                     | Treasury stock issued for employee benefit plans                                   |                                                                               |          | 8,760              |          |      |          | 17,593     |         
|                                                                                                                                                     | Purchase of treasury stock                                                         |                                                                               |          | (15,524            | )        |      |          | (132,815   | )       
|                                                                                                                                                     | Cash dividends paid to shareholders                                                |                                                                               |          | (24,159            | )        |      |          | (20,259    | )       
|                                                                                                                                                     |                                                                                    |                                                                               |          |                    |          |      |          |            |         
|Net cash provided (used) by financing activities                                                                                                     |                                                                                    |                                                                               | 59,706   |                    |          |      | (205,199 | )         
|                                                                                                                                                     |                                                                                    |                                                                               |          |                    |          |      |          |            |         
|Increase (decrease) in cash and cash equivalents                                                                                                     |                                                                                    |                                                                               | (193,236 | )                  |          |      | (400,999 | )         
|                                                                                                                                                     | Cash and cash equivalents at beginning of period                                   |                                                                               |          | 717,003            |          |      |          | 871,211    |         
|                                                                                                                                                     |                                                                                    |                                                                               |          |                    |          |      |          |            |         
|                                                                                                                                                     | Cash and cash equivalents at end of period                                         |                                                                               | $        | 523,767            |          |      | $        | 470,212    |         
|                                                                                                                                                     |                                                                                    |                                                                               |          |                    |          |      |          |            |         
|For the three months ended March 31, 2003 and 2002, interest of $100,125 and
$106,425 and income taxes of $12,513 and $1,055 were paid, respectively |                                                                                    |                                                                               |          |                    |          |      |          |           

See accompanying Notes to Consolidated Financial Statements.

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BANKNORTH GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2003
(In thousands, except per share data and as noted) (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 significant accounting
and reporting policies from those disclosed in its 2002 Annual Report.
Banknorth has adopted the disclosure provision of SFAS No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure as shown in Note 3.
Banknorth has also adopted Statement of Financial Accounting Standards (SFAS)
No. 145 which, among other things, rescinds SFAS 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 effects. All
prior period items that did not meet the extraordinary item classification
criteria in Opinion No. 30 were reclassified. There have been no significant
changes in the methods or assumptions used in the accounting policies which
require material estimates and assumptions.

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 herein. The results of operations for the three
months ended March 31, 2003 are not necessarily indicative of the results that
may be expected for any other interim period or the entire year ending December
31, 2003. Certain amounts in the prior periods have been reclassified to
conform to the current presentation. All significant intercompany balances and
transactions have been eliminated in the accompanying consolidated financial
statements.

Note 2  Acquisitions

Acquisitions are an important part of Banknorths strategic plans. The
following table summarizes acquisitions completed since January 1, 2002. The
acquisitions were accounted for as purchases and, as such, were included in our
results of operations from the date of acquisition.

|                                  |  |             |            |        |  |                  |         |          |  |              |       |       |  |                           |       |          |  |   |     |  |  |       |       |  |  |  |      |  |  |   |       | 
|--------------------------------- |  | ----------- | ---------- | ------ |  | ---------------- | ------- | -------- |  | ------------ | ----- | ----- |  | ------------------------- | ----- | -------- |  | - | --- |  |  | ----- | ----- |  |  |  | ---- |  |  | - | ----- | 
|                                  |  |             |            |        |  |                  |         |          |  |              |       |       |  | Transaction Related Items
|                                  |  |             |            |        |  |                  |         |          |  |              |       |       |  |                          
|                                  |  |             |            |        |  | Balance at       |         |          |  |              |       |       |  |                           |       |          |  |   |     |  |  |       |       |  |  | 
|                                  |  |             |            |        |  | Acquisition Date |         |          |  |              |       | Other |  |                           |       |          |  |   |     |  |  | Total
|                                  |  | Acquisition |            |        |  |                  |         |          |  | Identifiable |       | Cash  |  | Shares                    |       | Purchase
|(Dollars and shares in millions)  |  | Date        |            | Assets |  | Equity           |         | Goodwill |  | Intangibles  |       | Paid  |  | Issued                    |       | Price   
|                                 
|American Financial Holdings, Inc. |  |             | 2/14/2003  |        |  | $                | 2,690.3 |          |  | $            | 408.2 |       |  | $                         | 425.8 |          |  | $ | 9.2 |  |  | $     | 328.5 |  |  |  | 13.4 |  |  | $ | 711.3 | 
|Warren Bancorp, Inc.              |  |             | 12/31/2002 |        |  |                  | 466.1   |          |  |              | 45.3  |       |  |                           | 93.0  |          |  |   | 2.7 |  |  |       | 59.8  |  |  |  | 2.7  |  |  |   | 136.6 | 
|Bancorp Connecticut, Inc.         |  |             | 8/31/2002  |        |  |                  | 661.7   |          |  |              | 61.4  |       |  |                           | 98.0  |          |  |   | 8.7 |  |  |       | 161.2 |  |  |  |     |  |  |   | 154.2 | 
|Ipswich Bancshares, Inc.          |  |             | 7/26/2002  |        |  |                  | 318.0   |          |  |              | 13.9  |       |  |                           | 23.5  |          |  |   | 4.8 |  |  |       | 19.9  |  |  |  | 0.9  |  |  |   | 40.1  | 
|Insurance agency acquisition      |  |             | 7/2/2002   |        |  |                  | 2.5     |          |  |              |      |       |  |                           | 5.6   |          |  |   | 2.2 |  |  |       |      |  |  |  | 0.2  |  |  |   | 7.4   | 

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The following table summarizes the estimated fair value of the assets acquired
and liabilities assumed for American Financial Holdings, Inc. at the date of
acquisition.

|                          |                           |   |           |           | 
|------------------------- | ------------------------- | - | --------- | --------- | 
|Assets:                   |                           |   |           |          
|Investments               |                           | $ | 608,291   |          
|Loans and leases, net     |                           |   | 1,437,279 |          
|Premises and equipment    |                           |   | 13,629    |          
|Mortgage servicing rights |                           |   | 472       |          
|Goodwill                  |                           |   | 425,775   |          
|Other intangibles         |                           |   | 9,241     |          
|Other assets              |                           |   | 542,850   |          
|                          |                           |   |           |          
|                          | Total assets acquired     |   |           | 3,037,537 | 
|                          |                           |   |           |          
|Liabilities:              |                           |   |           |          
|Deposits                  |                           |   | 1,923,154 |          
|Borrowings                |                           |   | 399,960   |          
|Other liabilities         |                           |   | 3,077     |          
|                          |                           |   |           |          
|                          | Total liabilities assumed |   |           | 2,326,191 | 
|                          |                           |   |           |          
|                          | Net assets acquired       |   | $         | 711,346   | 
|                          |                           |   |           |          

Banknorth expects that some adjustments of the estimated fair values assigned
to the assets acquired and liabilities assumed at the acquisition date will be
recorded after March 31, 2003, although such adjustments are not expected to be
significant.

Merger charges related to the American acquisition recorded as an expense by
Banknorth totaled $3.3 million ($2.1 million after-tax). In addition,
Banknorth accrued $13.6 million ($8.8 million after-tax) of merger-related
costs for severance, contract terminations, and asset write-downs with an
offsetting charge to goodwill. Prior to the acquisition date, American
recorded cash and non-cash merger related charges. Contractual obligations
payable to certain executives of American upon a change in control totaling
$15.0 million ($9.8 million after-tax) were accrued by American on February 14,
2003. The following non-cash merger related charges triggered upon change in
control were also recorded by American on February 14, 2003: (i) $37.3 million
(which is non-deductible for tax purposes) for allocation of unallocated ESOP
shares and (ii) $22.1 million ($14.4 million after-tax) for the accelerated
vesting of stock options and restricted stock awards. These non-cash merger
charges were recorded by American as merger expenses with an offsetting credit
to shareholders equity.

Note 3  Stock Compensation Plans

Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for
Stock-Based Compensation encourages all entities to adopt a fair value based
method of accounting for employee stock compensation plans, whereby
compensation cost is measured at the grant date based on the value of the award
and is recognized over the service period, which is usually the vesting period.
However, it also allows an entity to continue to measure compensation cost for
those plans using the intrinsic value based method of accounting prescribed by
APB Opinion No. 25, Accounting for Stock Issued to Employees, whereby
compensation cost is the excess, if any, of the quoted market price of the
underlying stock at the grant date (or other measurement date) over the amount
an employee must pay to acquire the stock upon exercise of the stock option.
Banknorth has elected to continue with the accounting methodology in Opinion
No. 25 and, as a result, must make pro forma disclosures of net income and
earnings per share as if the fair value based method of accounting had been
applied. The pro forma disclosures include the effects of all awards granted
and the effects of the Employee Stock Purchase Plan. There were no options
granted during the quarter ended March 31, 2003. Had Banknorth determined
compensation cost based on the fair value at the grant date for its stock
options and expense related to the employee stock purchase plan under SFAS No.
123, its net income would have been reduced to the pro forma amounts indicated
as follows:

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##### Table of Contents



|                                                                                                                |                            |                 |          |        |                              |      |        |        |       |      | 
|--------------------------------------------------------------------------------------------------------------- | -------------------------- | --------------- | -------- | ------ | ---------------------------- | ---- | ------ | ------ | ----- | ---- | 
|                                                                                                                |                            |                 |          |        | Three Months Ended March 31,
|                                                                                                                |                            |                 |          |        |                             
|                                                                                                                |                            |                 |          |        | 2003                         |      | 2002  
|                                                                                                                |                            |                 |          |        |                              |      |       
|Net income, as reported                                                                                         |                            | $               | 81,393   |        |                              | $    | 68,478 |       
|Deduct: Total stock-based employee
compensation expense determined under
fair value based method for all awards |                            |                 | (3,751   | )      |                              |      | (2,940 | )     
|                                                                                                                |                            | Less tax effect |          |        | 1,313                        |      |        |        | 1,029 |     
|                                                                                                                |                            |                 |          |        |                              |      |        |       
|                                                                                                                | Net of related tax effects |                 |          | (2,438 | )                            |      |        | (1,911 | )    
|                                                                                                                |                            |                 |          |        |                              |      |        |       
|Proforma net income                                                                                             |                            | $               | 78,955   |        |                              | $    | 66,567 |       
|                                                                                                                |                            |                 |          |        |                              |      |        |       
|Earnings per share                                                                                              |                            |                 |          |        |                              |      |        |       
|                                                                                                                | Basic   As reported       |                 | $        | 0.52   |                              |      | $      | 0.46   |      
|                                                                                                                |                            |                 | Proforma |        | $                            | 0.50 |        |        | $     | 0.45 | 
|                                                                                                                | Diluted   As reported     |                 | $        | 0.51   |                              |      | $      | 0.45   |      
|                                                                                                                |                            |                 | Proforma |        | $                            | 0.50 |        |        | $     | 0.44 | 

On April 22, 2003, the Financial Accounting Standards Board (FASB) decided to
require all companies to expense the value of employee stock options. It has
also tentatively decided in principle to measure employee equity-based awards
at their date of grant and will later decide the method for determining the
cost of employee stock options, as well as the extent to which a final
Statement on this matter will permit adjustments for actual forfeitures and
actual performance outcomes, which will affect the amount of compensation cost
recognized over the employee service period. The FASB plans to issue an
exposure draft later this year, which could become effective in 2004. Until a
new Statement is issued, the provisions of SFAS No. 123 remain in effect.

Note 4  Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill and identifiable intangible
assets for the three months ended March 31, 2003 follows:



|                                                   |  |          |           |             |  |                                |        |              |  |              |       |       |  |   |        |  
|-------------------------------------------------- |  | -------- | --------- | ----------- |  | ------------------------------ | ------ | ------------ |  | ------------ | ----- | ----- |  | - | ------ | -
|                                                   |  |          |           |             |  | Identifiable
Intangible Assets
|                                                   |  |          |           |             |  |                               
|                                                   |  |          |           |             |  |                                |        |              |  | Other        |       | Total
|                                                   |  |          |           |             |  | Core Deposit                   |        | Identifiable |  | Identifiable
|                                                   |  | Goodwill |           | Intangibles |  | Intangibles                    |        | Intangibles 
|                                                   |  |          |           |             |  |                                |        |             
|Balance, December 31, 2002                         |  | $        | 660,684   |             |  | $                              | 28,438 |              |  | $            | 6,036 |       |  | $ | 34,474 |  
|Recorded during the year                           |  |          | 425,775   |             |  |                                | 6,443  |              |  |              | 4,708 |       |  |   | 11,151 |  
|Adjust Warrens estimated CDI to actual            |  |          | 2,244     |             |  |                                | (2,244 | )            |  |              |      |       |  |   | (2,244 | )
|Amortization expense                               |  |          |          |             |  |                                | (1,175 | )            |  |              | (822  | )     |  |   | (1,997 | )
|Massachusetts REIT adjustment (see Note 13)        |  |          | 5,904     |             |  |                                |       |              |  |              |      |       |  |   |       |  
|Other adjustments of purchase accounting estimates |  |          | 869       |             |  |                                |       |              |  |              | (92   | )     |  |   | (92    | )
|                                                   |  |          |           |             |  |                                |        |              |  |              |       |       |  |   |        |  
|Balance, March 31, 2003                            |  | $        | 1,095,476 |             |  | $                              | 31,462 |              |  | $            | 9,830 |       |  | $ | 41,292 |  
|                                                   |  |          |           |             |  |                                |        |              |  |              |       |       |  |   |        |  
|Estimated Annual Amortization Expense:             |  |          |           |             |  |                                |        |              |  |              |       |       |  |   |        |  
|2003                                               |  |          |          |             |  | $                              | 4,576  |              |  | $            | 4,338 |       |  | $ | 8,914  |  
|2004                                               |  |          |          |             |  |                                | 3,841  |              |  |              | 2,174 |       |  |   | 6,015  |  
|2005                                               |  |          |          |             |  |                                | 3,550  |              |  |              | 1,017 |       |  |   | 4,567  |  
|2006                                               |  |          |          |             |  |                                | 3,364  |              |  |              | 269   |       |  |   | 3,633  |  
|2007                                               |  |          |          |             |  |                                | 3,245  |              |  |              | 269   |       |  |   | 3,514  |  
|thereafter                                         |  |          |          |             |  |                                | 14,062 |              |  |              | 673   |       |  |   | 14,735 |  

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The components of identifiable intangible assets follows:

|                                |       |   |                |        |              |   |              |        |  |   |        |        | 
|------------------------------- | ----- | - | -------------- | ------ | ------------ | - | ------------ | ------ |  | - | ------ | ------ | 
|                                |       |   | March 31, 2003
|                                |       |   |               
|                                |       |   | Gross Carrying |        | Accumulated  |   | Net Carrying
|                                |       |   | Amount         |        | Amortization |   | Amount      
|                                |       |   |                |        |              |   |             
|Identifiable intangible assets: |       |   |                |        |              |   |              |        |  |   |        |       
|Core deposit intangibles        |       | $ | 61,286         |        |              | $ | 29,824       |        |  | $ | 31,462 |       
|Other identifiable intangibles  |       |   | 11,639         |        |              |   | 1,809        |        |  |   | 9,830  |       
|                                |       |   |                |        |              |   |              |        |  |   |        |       
|                                | Total |   | $              | 72,925 |              |   | $            | 31,633 |  |   | $      | 41,292 | 
|                                |       |   |                |        |              |   |              |        |  |   |        |       

Note 5  Short-term borrowings

A summary of short-term borrowings follows:

|                                                        |  |                |           |                   |  |   |           | 
|------------------------------------------------------- |  | -------------- | --------- | ----------------- |  | - | --------- | 
|                                                        |  | March 31, 2003 |           | December 31, 2002
|                                                        |  |                |           |                  
|Securities sold under agreements to repurchase  retail |  | $              | 1,061,613 |                   |  | $ | 1,222,466 | 
|Federal funds purchased                                 |  |                | 83,850    |                   |  |   | 53,000    | 
|Treasury, tax and loan notes                            |  |                | 18,576    |                   |  |   | 1,001     | 
|                                                        |  |                |           |                   |  |   |           | 
|                                                        |  | $              | 1,164,039 |                   |  | $ | 1,276,467 | 
|                                                        |  |                |           |                   |  |   |           | 

Note 6  Long-term Debt

A summary of long-term debt (debt with original maturities of more than one
year) follows:

|                                                           |  |                |           |                   |  |   |           | 
|---------------------------------------------------------- |  | -------------- | --------- | ----------------- |  | - | --------- | 
|                                                           |  | March 31, 2003 |           | December 31, 2002
|                                                           |  |                |           |                  
|Federal Home Loan Bank advances                            |  | $              | 2,453,698 |                   |  | $ | 2,482,582 | 
|Securities sold under agreements to repurchase  wholesale |  |                | 1,871,049 |                   |  |   | 1,171,049 | 
|Subordinated long-term debt 7.625%, due 2011               |  |                | 201,880   |                   |  |   | 200,000   | 
|Other long-term debt                                       |  |                | 8,043     |                   |  |   | 7,427     | 
|                                                           |  |                |           |                   |  |   |           | 
|Total                                                      |  | $              | 4,534,670 |                   |  | $ | 3,861,058 | 
|                                                           |  |                |           |                   |  |   |           | 

In the first quarter of 2003, Banknorth entered into an interest rate swap
agreement for $200 million to hedge the fair value of the $200 million
subordinated debt (fixed rate of 7.625% due in 2011). The effect of the hedge,
which is accounted as a fair value hedge, is to synthetically convert this
fixed rate debt to a variable rate set at 3 month LIBOR plus 3.47%.

Note 7  Capital Trust Securities

The following is a summary of the capital trust securities outstanding as of
March 31, 2003:

|                                 |  |          |           |        |  |      |         |        |  |          |       |   |  |  |           | 
|-------------------------------- |  | -------- | --------- | ------ |  | ---- | ------- | ------ |  | -------- | ----- | - |  |  | --------- | 
|                                 |  | Issuance |           |        |  |      |         | Stated |  | Maturity
|Name                             |  | Date     |           | Amount |  | Rate |         | Date  
|                                 |  |          |           |        |  |      |         |       
|Peoples Heritage Capital Trust I |  |          | 1/31/1997 |        |  | $    | 61,556  |        |  |          | 9.06  | % |  |  | 2/1/2027  | 
|Banknorth Capital Trust I        |  |          | 5/1/1997  |        |  |      | 30,000  |        |  |          | 10.52 | % |  |  | 5/1/2027  | 
|Ipswich Statutory Trust I        |  |          | 2/22/2001 |        |  |      | 3,500   |        |  |          | 10.20 | % |  |  | 2/22/2031 | 
|Banknorth Capital Trust II       |  |          | 2/22/2002 |        |  |      | 200,000 |        |  |          | 8.00  | % |  |  | 4/1/2032  | 
|                                 |  |          |           |        |  |      |         |        |  |          |       |   |  |  |           | 
|                                 |  |          |           |        |  | $    | 295,056 |        |  |          |       |   |  |  |           | 
|                                 |  |          |           |        |  |      |         |        |  |          |       |   |  |  |           | 

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##### Table of Contents



Note 8  Shareholders Equity

During the three months ended March 31, 2003, Banknorth repurchased 700,000
shares of its outstanding common stock at an average price of $22.18. At March
31, 2003, there were a total of 6.6 million shares remaining under existing
repurchase authorizations. See Note 14 for more information regarding stock
repurchases.

Note 9  Comprehensive Income

The following table presents the reconciliation of transactions affecting
Accumulated Other Comprehensive Income included in shareholders equity for the
periods indicated.

|                                                                      |  |         |          |        |  |        |         |   |  |   |          |  
|--------------------------------------------------------------------- |  | ------- | -------- | ------ |  | ------ | ------- | - |  | - | -------- | -
|                                                                      |  | Pre-tax |          | Tax    |  | Net of
|                                                                      |  | Amount  |          | Effect |  | Tax   
|                                                                      |  |         |          |        |  |        |         |   |  |   |          |  
|March 31, 2003                                                        |  |         |          |        |  |        |         |   |  |   |          |  
|Unrealized gain (loss) on securities available for sale               |  | $       | 3,363    |        |  |        | ($1,340 | ) |  | $ | 2,023    |  
|Unrealized gain (loss) on cash flow hedges                            |  |         | (3,102   | )      |  |        | 1,085   |   |  |   | (2,017   | )
|Reclassification adjustment for gains (losses) realized in net income |  |         | 1,747    |        |  |        | (611    | ) |  |   | 1,136    |  
|                                                                      |  |         |          |        |  |        |         |   |  |   |          |  
|Net change in unrealized gains (losses)                               |  | $       | 2,008    |        |  |        | ($866   | ) |  | $ | 1,142    |  
|                                                                      |  |         |          |        |  |        |         |   |  |   |          |  
|March 31, 2002                                                        |  |         |          |        |  |        |         |   |  |   |          |  
|Unrealized gain (loss) on securities available for sale               |  |         | ($43,663 | )      |  | $      | 15,282  |   |  |   | ($28,381 | )
|Unrealized gain (loss) on cash flow hedges                            |  |         | (349     | )      |  |        | 122     |   |  |   | (227     | )
|Reclassification adjustment for gains (losses) realized in net income |  |         | 310      |        |  |        | (109    | ) |  |   | 201      |  
|                                                                      |  |         |          |        |  |        |         |   |  |   |          |  
|Net change in unrealized gains (losses)                               |  |         | ($43,702 | )      |  | $      | 15,295  |   |  |   | ($28,407 | )
|                                                                      |  |         |          |        |  |        |         |   |  |   |          |  

Note 10  Earnings Per Share

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

|                                                   |  |                    |         |      |  |   |         | 
|-------------------------------------------------- |  | ------------------ | ------- | ---- |  | - | ------- | 
|                                                   |  | Three Months Ended
|                                                   |  | March 31,         
|                                                   |  |                   
|                                                   |  | 2003               |         | 2002
|                                                   |  |                    |         |     
|Net income                                         |  | $                  | 81,393  |      |  | $ | 68,478  | 
|                                                   |  |                    |         |      |  |   |         | 
|Weighted average basic common shares outstanding   |  |                    | 157,667 |      |  |   | 149,347 | 
|Effect of dilutive stock options                   |  |                    | 1,661   |      |  |   | 1,769   | 
|                                                   |  |                    |         |      |  |   |         | 
|Weighted average diluted common shares outstanding |  |                    | 159,328 |      |  |   | 151,116 | 
|                                                   |  |                    |         |      |  |   |         | 
|Basic earnings per share                           |  | $                  | 0.52    |      |  | $ | 0.46    | 
|                                                   |  |                    |         |      |  |   |         | 
|Diluted earnings per share                         |  | $                  | 0.51    |      |  | $ | 0.45    | 
|                                                   |  |                    |         |      |  |   |         | 

For the three months ended March 31, 2003 and 2002, options to purchase 4.1
million and 68 thousand shares, respectively, were outstanding but not included
in the computation of diluted earnings per share because they were
antidilutive.

Note 11  Other noninterest income

The following table presents the detail of other noninterest income for the
periods indicated:

|                      |  |                              |        |      |  |   |       | 
|--------------------- |  | ---------------------------- | ------ | ---- |  | - | ----- | 
|                      |  | Three Months Ended March 31,
|                      |  |                             
|                      |  | 2003                         |        | 2002
|                      |  |                              |        |     
|Covered call premiums |  | $                            | 7,039  |      |  | $ | 2,569 | 
|Loan fee income       |  |                              | 5,102  |      |  |   | 5,436 | 
|Other income          |  |                              | 3,365  |      |  |   | 1,317 | 
|                      |  |                              |        |      |  |   |       | 
|Total                 |  | $                            | 15,506 |      |  | $ | 9,322 | 
|                      |  |                              |        |      |  |   |       | 

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Note 12  New Accounting Standards

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities under SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities, resulting in more consistent reporting of contracts
as either derivatives or hybrid instruments. SFAS No. 149 is effective for
contracts entered into or modified after June 30, 2003, and should be applied
prospectively. Implementation issues that have been effective for fiscal
quarters that began prior to June 15, 2003 should continue to be applied in
accordance with their respective effective dates. Banknorth is currently
assessing the impact of this statement on its financial statements.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities, an interpretation of ARB No. 51. This
Interpretation addresses the consolidation by business enterprises of variable
interest entities as defined in the Interpretation. The Interpretation applies
to variable interest in variable interest entities created or obtained after
January 31, 2003. Banknorth adopted the provisions of FASB Interpretation No.
46 with no material impact on its financial condition or results of operations,
earnings per share or cash flows.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation -Transition and Disclosure. SFAS No. 148 amends SFAS No. 123,
Accounting for Stock-Based Compensation to provide alternative methods of
transition when companies elect to change from the intrinsic method to the fair
value method of accounting for stock-based employee compensation, including
stock options. In addition, the Statement amends the disclosure requirement of
SFAS No. 123 to require prominent disclosures in both annual and interim
financial statements about the fair value based method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. Banknorth adopted the disclosure provisions of SFAS No. 148 as of
December 31, 2002. Banknorth currently uses the intrinsic method of
accounting for stock options.

In November 2002, the FASB issued FASB Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. This Interpretation requires the
recording at fair value the issuance of guarantees which would include the
issuance of standby letters of credit. Banknorth adopted the provisions of
FASB Interpretation No. 45 beginning January 1, 2003. At March 31, 2003, the
approximate fair value of standby letters of credit were $1.3 million.
Adoption of the Interpretation did not materially affect our financial
condition, results of operations, earnings per share or cash flows.

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. SFAS No. 146 requires the recognition of
certain 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 was applied to exit or disposal activities initiated after
December 31, 2002. Adoption of this standard did not materially affect our
financial condition, results of operations, earnings per share or cash flows.

In April 2002, the FASB issued SFAS No. 145 which rescinds SFAS 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. 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. We adopted SFAS 145 January 1, 2003. Upon adoption, we
reclassified to other income an extraordinary item from the early
extinguishment of debt of $3.9 million after-tax, or $.03 per diluted share in
the fourth quarter of 2001.

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. SFAS No. 143 applies to legal obligations associated with the
retirement of long-lived assets that result from the acquisition, construction,
development and (or) the normal operation of a long-lived asset. It is
effective for financial statements issued for fiscal years beginning after June
15, 2002. The adoption of this standard effective January 1, 2003 did not have
a material impact on our financial condition, results of operations, earnings
per share or cash flows.

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##### Table of Contents



Note 13  State Tax Assessment

During 2002, notices to assess tax plus interest for the years 2001, 2000 and
1999 were received from the Massachusetts Department of Revenue (DOR) related
to certain banks that Banknorth acquired through December 2002 which had a real
estate investment trust (REIT) in its corporate structure. The acquired
banks are among at least 40 banking institutions in Massachusetts that have
received notices of this type. These acquired banks have since been combined
with Banknorth, NA. The DOR contends that dividend distributions from a REIT
to a parent company are fully taxable in Massachusetts.

To further bolster the DOR position discussed above, on March 5, 2003,
legislation was enacted in Massachusetts that seeks to retroactively disallow
the dividends received deduction from a REIT effective for tax years ending on
or after December 31, 1999. Additionally, for tax years 2002 and later, this
legislation gives the DOR expanded powers for reviewing the business purpose of
transactions that have tax benefits. The aggregate assessment of tax in
connection with our acquired banks for 2001, 2000 and 1999 is approximately
$5.9 million, net of Federal benefit. As a result of the new law, in March
2003, we recorded the amount of the aggregate tax assessment as taxes payable
with an offsetting increase to the goodwill previously recorded by us in
connection with these acquisitions.

Banknorth disagrees with the position of the DOR and contends that the
legislative changes may not be applied retroactively. With respect to the
assessments issued to the acquired banks, it is Banknorths position that
Massachusetts law provides for a 95% dividends-received deduction during those
years ended prior to enactment of the legislation. It is not currently
possible to predict the ultimate outcome of this matter.

Note 14  Subsequent Events

On April 30, 2003, we issued $150 million in 3.75% Senior Notes due May 1,
2008. Interest on the notes is scheduled to be paid semi-annually on May 1 and
November 1 of each year and the notes are not redeemable prior to their
maturity. There are no sinking fund provisions for the notes. On April 30,
2003, we also entered into a 5-year interest rate swap agreement to convert the
fixed rate senior notes to a variable rate note. Under the agreement, we pay
3 month LIBOR plus 0.41% and receive a fixed rate of 3.75% on a $150 million
notional amount. This is accounted for as a fair value hedge.

In April 2003, as part of a deleveraging strategy, we sold approximately $850
million of investment securities and paid off a similar amount of borrowings.
The gain on the sale of these securities of approximately $29 million was
substantially offset by a similar amount of prepayment penalties on the early
payoff of borrowings. The weighted average yield on these securities was 5.22%
while the weighted average cost of the bonds was 4.49%. In addition, during
April 2003, we repurchased 2.4 million shares of our common stock in the open
market.

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##### Table of Contents



BANKNORTH GROUP, INC. AND SUBSIDIARIES




MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(In thousands, except per share data and as noted)

Overview

Banknorths financial statements for the three months ended March 31, 2003
reflect the acquisition of American Financial Holdings, Inc. (American) from
the date of acquisition on February 14, 2003. American had total assets of
$2.7 billion at the date of acquisition. In addition, the financial statements
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, Bancorp Connecticut, Inc. (Bancorp), which closed on
August 31, 2002, and Warren Bancorp (Warren), which closed on December 31,
2002. These 2002 acquisitions increased total assets by $1.7 billion. All of
these mergers were accounted for under the purchase method of accounting, and
as a result, the assets and liabilities of these companies and their results of operations
have been included in our financial statements since the
date of acquisition.

SUMMARY

We reported consolidated net income of $81.4 million, or $0.51 per diluted
share, for the first quarter of 2003 as compared with $68.5 million, or $0.45
per diluted share, for the first quarter of 2002, an increase of 19% over the
quarterly earnings in the first quarter of 2002. Our growth in net income for
the quarter ended March 31, 2003 over the same quarter last year was due in
part to acquisitions completed in 2002 and 2003. Results were diminished by
the effect of merger-related charges and branch closing costs and, in the first
quarter of 2002, charter consolidation costs. Such charges totaled $4.5
million ($2.9 million after-tax) for the three months ended March 31, 2003 and
$8.2 million ($5.3 million after-tax) for the three months ended March 31,
2002.

Annualized return on average equity (ROE) and return on average assets
(ROA) were 14.26% and 1.32%, respectively, for the quarter ended March 31,
2003 and were 15.73% and 1.36%, respectively, for the comparable quarter last
year.

Results for the first quarter of 2003 improved over the first quarter of 2002
due primarily to the benefit of acquisitions, combined with strong fee income
and our ability to compete successfully in our existing markets. Net interest
income increased by $9.7 million (or 5%) over the first quarter of last year as
a volume increase more than offset a 57 basis point decline in net interest
margin. Noninterest income was $78.2 million and $61.6 million for the
quarters ended March 31, 2003 and 2002, respectively, a 27% increase.
Noninterest expenses totaled $149.9 million and $142.9 million for the quarters
ended March 31, 2003 and 2002, respectively, an increase of 5%. The added
expenses resulting from acquisitions were mitigated by lower incentive expense
and lower merger and consolidation costs. The efficiency ratio
was 52.71% in the first quarter of 2003 compared to 55.37% in the comparable
period last year. For a description of the methodology we use to calculate the
efficiency ratio, see Note 5 to Table 1.

Selected quarterly data, ratios and per share data are provided in Table 1.

14



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##### Table of Contents



TABLE 1  Selected Quarterly Data

|                                                                    |         |  |   |  |  |   |         |         |        |   |         |         |        |   |         |         |  |   |         |         |  |   |         |         | 
|------------------------------------------------------------------- | ------- |  | - |  |  | - | ------- | ------- | ------ | - | ------- | ------- | ------ | - | ------- | ------- |  | - | ------- | ------- |  | - | ------- | ------- | 
|                                                                    |         |  |   |  |  |   | 2003    |         | 2002  
|                                                                    |         |  |   |  |  |   |         |         |       
|                                                                    |         |  |   |  |  |   | First   |         | Fourth |   | Third   |         | Second |   | First  
|                                                                    |         |  |   |  |  |   |         |         |        |   |         |         |        |   |        
|Net interest income                                                 |         |  | A |  |  | $ | 206,137 |         |        | $ | 199,563 |         |        | $ | 200,996 |         |  | $ | 199,473 |         |  | $ | 196,486 |        
|Provision for loan and lease losses                                 |         |  |   |  |  |   | 10,901  |         |        |   | 10,829  |         |        |   | 10,829  |         |  |   | 10,829  |         |  |   | 11,828  |        
|                                                                    |         |  |   |  |  |   |         |         |        |   |         |         |        |   |         |         |  |   |         |         |  |   |         |        
|Net interest income after loan and lease loss provision             |         |  |   |  |  |   | 195,236 |         |        |   | 188,734 |         |        |   | 190,167 |         |  |   | 188,644 |         |  |   | 184,658 |        
|Noninterest income (1)                                              |         |  | B |  |  |   | 75,456  |         |        |   | 77,736  |         |        |   | 65,296  |         |  |   | 62,636  |         |  |   | 61,557  |        
|Net securities gains                                                |         |  | C |  |  |   | 2,782   |         |        |   | 6,705   |         |        |   | 208     |         |  |   | 350     |         |  |   | 19      |        
|Noninterest
expenses (excluding merger and consolidation costs) (2) |         |  | D |  |  |   | 145,458 |         |        |   | 154,868 |         |        |   | 139,409 |         |  |   | 135,730 |         |  |   | 134,693 |        
|Merger
and consolidation costs (2)                                  |         |  | E |  |  |   | 4,450   |         |        |   | 3,258   |         |        |   | 2,168   |         |  |   | 1,061   |         |  |   | 8,204   |        
|                                                                    |         |  |   |  |  |   |         |         |        |   |         |         |        |   |         |         |  |   |         |         |  |   |         |        
|Income before income taxes                                          |         |  |   |  |  |   | 123,566 |         |        |   | 115,049 |         |        |   | 114,094 |         |  |   | 114,839 |         |  |   | 103,337 |        
|Income tax expense                                                  |         |  |   |  |  |   | 42,173  |         |        |   | 37,911  |         |        |   | 37,232  |         |  |   | 38,680  |         |  |   | 34,859  |        
|                                                                    |         |  |   |  |  |   |         |         |        |   |         |         |        |   |         |         |  |   |         |         |  |   |         |        
|Net income                                                          |         |  |   |  |  | $ | 81,393  |         |        | $ | 77,138  |         |        | $ | 76,862  |         |  | $ | 76,159  |         |  | $ | 68,478  |        
|                                                                    |         |  |   |  |  |   |         |         |        |   |         |         |        |   |         |         |  |   |         |         |  |   |         |        
|Weighted Average shares outstanding:                                |         |  |   |  |  |   |         |         |        |   |         |         |        |   |         |         |  |   |         |         |  |   |         |        
|                                                                    | Basic   |  |   |  |  |   |         | 157,667 |        |   |         | 148,226 |        |   |         | 148,099 |  |   |         | 147,233 |  |   |         | 149,347 | 
|                                                                    | Diluted |  |   |  |  |   |         | 159,328 |        |   |         | 149,389 |        |   |         | 149,662 |  |   |         | 149,064 |  |   |         | 151,116 | 
|Basic earnings per share:                                           |         |  |   |  |  | $ | 0.52    |         |        | $ | 0.52    |         |        | $ | 0.52    |         |  | $ | 0.52    |         |  | $ | 0.46    |        
|Diluted earnings per share:                                         |         |  |   |  |  | $ | 0.51    |         |        | $ | 0.52    |         |        | $ | 0.51    |         |  | $ | 0.51    |         |  | $ | 0.45    |        
|Return on average assets (3)                                        |         |  |   |  |  |   | 1.32    | %       |        |   | 1.35    | %       |        |   | 1.40    | %       |  |   | 1.46    | %       |  |   | 1.36    | %      
|Return on average equity (3)                                        |         |  |   |  |  |   | 14.26   | %       |        |   | 15.75   | %       |        |   | 16.25   | %       |  |   | 17.44   | %       |  |   | 15.73   | %      
|Net interest margin (fully-taxable equivalent) (3)                  |         |  |   |  |  |   | 3.66    | %       |        |   | 3.86    | %       |        |   | 4.03    | %       |  |   | 4.18    | %       |  |   | 4.24    | %      
|Noninterest income as a percent of total income (4)                 |         |  |   |  |  |   | 27.51   | %       |        |   | 29.73   | %       |        |   | 24.58   | %       |  |   | 24.00   | %       |  |   | 23.86   | %      
|Efficiency ratio (5)                                                |         |  |   |  |  |   | 52.71   | %       |        |   | 55.68   | %       |        |   | 53.12   | %       |  |   | 52.12   | %       |  |   | 55.37   | %      



---

|(1) |  | Excludes securities transactions.                                                                                                                                                                                                                        
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Merger and consolidation costs consist of merger charges, charter consolidation costs, asset write-downs and branch closing costs where applicable.
See Table 5.                                                                                         
|   
|(3) |  | Annualized.                                                                                                                                                                                                                                              
|   
|(4) |  | Represents noninterest income (including net securities gains) as a percentage of net interest income and noninterest income (including net securities gains).
Noninterest income as a percent of total income is calculated as (B+C) divided by (A+B+C).
|   
|(5) |  | Represents noninterest expenses
(including merger and consolidation costs) as a percentage of net interest income and noninterest income (including
net securities gains). Efficiency ratio is calculated as (D+E) divided by (A+B+C).                   

RECENT DEVELOPMENTS

In April and early May 2003, we implemented a deleveraging strategy which is
meant to benefit our net interest margin, mitigate interest rate risk and
reduce optionality in our balance sheet while being neutral to earnings per
share. As of May 2, 2003, we had sold $850 million of investment securities
(which had a combined yield of 5.22%) and used the proceeds to payoff a like
amount of borrowings (which had a combined cost of 4.49%). The gain on sale of
the securities totaled $29.2 million, while the prepayment charges on the
borrowings totaled $28.5 million. The reduction in assets freed up about $51
million of Tier 1 leverage capital which has been used to repurchase
approximately 2.4 million shares of our common stock in the open market. We
estimate that the benefit to the net interest margin in the second quarter of
this year will be approximately 0.07%. Had the deleveraging been completed as
of April 1, 2003, the benefit to the net interest margin in the second quarter
would have been approximately 0.11%. We anticipate that another approximately
$50 million of assets will be sold, with offsetting reduction in borrowings,
in the second quarter.

In April 2003, we issued $150 million of 5-year senior notes carrying a
fixed rate of 3.75%. We simultaneously entered into a $150 million
interest rate swap agreement pursuant to which we will receive a fixed
rate of 3.75% and pay a variable rate based on 3 month LIBOR plus 0.41%.
This swap will be accounted for as a fair value hedge of the notes.
The proceeds from the notes offering will be used for general corporate
purposes, which may include repurchases of our common stock.

15



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##### Table of Contents



RESULTS OF OPERATIONS

Net Interest Income

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

Fully-taxable equivalent net interest income for the first quarter of 2003
increased $9.6 million, or 5%, compared to the first quarter of 2002. This
increase was primarily attributable to increases in the volume of
interest-earning assets and interest-bearing liabilities. Average earning
assets increased $4.0 billion, or 21%, for the three months ended March 31,
2003 compared to the same period in the prior year, primarily as a result of
acquisitions. Average loans and leases increased by $2.1 billion, or 17%,
compared to the first quarter of 2002 due primarily to acquisitions and, to a
lesser extent, internal loan growth. Average loans as a percent of average
earning assets was 65% and 68% for the quarters ended March 31, 2003 and 2002,
respectively. Net interest margin, which represents fully-taxable equivalent
net interest income as a percentage of average interest-earning assets,
decreased from 4.23% to 3.66% during the three months ended March 31, 2002 and
2003, respectively, a decline of 13% (or 57 basis points). The primary reason
for this margin compression were the effects of acquisitions (13 basis points,
including cash paid and lower margins on acquired banks), a heavier weighting
of U. S. agency securities in our investment portfolio versus mortgage-backed
securities (10 basis points) with the balance of the decline relating to the
impact of prepayments and repricing on loans, securities, deposits and
borrowings in a declining rate environment. 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, decreased from
3.83% to 3.37% on a fully-taxable equivalent basis during the three months
ended March 31, 2002 and 2003, respectively, primarily due to a 63 basis point
decrease in rates paid on interest-bearing liabilities compared to a 109 basis
point decrease in interest rates earned on interest-earning assets.

We have taken some actions to increase the net interest margin. In March 2003,
we entered into an interest rate swap agreement to hedge the fair value of our
banking subsidiarys $200 million subordinated debt (fixed rate of 7.625%
maturing in 2011). The effect of this hedge is to synthetically convert this
fixed rate debt to a variable rate set at 3 month LIBOR plus 3.47%. For
additional recent actions in this regard, see Recent Developments.

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.

16



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##### Table of Contents



TABLE 2  Average Balances, Yields and Rates

|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |        |      |      |      | 
|--------------------------------------------------- | ------------------------------------ | ------------------------------------------ | ---------------------------------- | ---------------------- | ---------- | ------------------ | ---------- | ------------------- | ------- | -------- | ------- | --------------- | ---- | -------- | --------- | --------- | ---------- | ---------- | ---------- | ------ | ------- | ------- | ------- | ------ | ---- | ---- | ---- | 
|                                                    |                                      |                                            |                                    |                        |            | 2003 First Quarter |            | 2002 Fourth Quarter
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      | Yield/   |           |           |            |            |            |        |         |         |         | Yield/
|                                                    |                                      |                                            |                                    |                        |            | Average Balance    |            | Interest            |         | Rate (1) |         | Average Balance |      | Interest |           | Rate (1) 
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |          
|Loans and leases (2):                               |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    | Residential real estate mortgages    |                                            | $                                  | 2,792,615              |            |                    | $          | 41,652              |         |          |         | 5.97            | %    |          | $         | 2,641,957 |            |            | $          | 42,420 |         |         |         | 6.42   | %   
|                                                    | Commercial real estate mortgages     |                                            |                                    | 4,913,188              |            |                    |            | 77,810              |         |          |         | 6.42            |      |          |           | 4,504,625 |            |            |            | 76,131 |         |         |         | 6.71   |     
|                                                    | Commercial business loans and leases |                                            |                                    | 3,006,370              |            |                    |            | 39,475              |         |          |         | 5.32            |      |          |           | 2,844,994 |            |            |            | 39,940 |         |         |         | 5.57   |     
|                                                    | Consumer loans and leases            |                                            |                                    | 4,186,917              |            |                    |            | 62,178              |         |          |         | 6.02            |      |          |           | 3,830,542 |            |            |            | 62,237 |         |         |         | 6.45   |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            |                                    | Total loans and leases |            |                    | 14,899,090 |                     |         |          | 221,115 |                 |      |          | 6.00      |           |            |            | 13,822,118 |        |         |         | 220,728 |        |      |      | 6.35 | 
|Investment securities (3)                           |                                      |                                            | 7,879,925                          |                        |            |                    | 89,449     |                     |         |          | 4.54    |                 |      |          | 6,896,813 |           |            |            | 86,959     |        |         |         | 5.04    |       
|Federal funds sold and other short-term investments |                                      |                                            | 4,535                              |                        |            |                    | 25         |                     |         |          | 2.21    |                 |      |          | 22,576    |           |            |            | 88         |        |         |         | 1.54    |       
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      | Total earning assets                       |                                    |                        | 22,783,550 |                    |            |                     | 310,589 |          |         |                 | 5.50 |          |           |           | 20,741,507 |            |            |        | 307,775 |         |         |        | 5.91 |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Noninterest-earning assets                          |                                      |                                            | 2,283,927                          |                        |            |                    |            |                     |         |          |         |                 |      |          | 1,904,181 |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      | Total assets                               |                                    | $                      | 25,067,477 |                    |            |                     |         |          |         |                 |      |          |           | $         | 22,645,688 |            |            |        |         |         |         |        |      |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Interest-bearing deposits:                          |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    | Regular savings                      |                                            | $                                  | 2,173,771              |            |                    |            | 3,075               |         |          |         | 0.57            |      |          | $         | 1,835,068 |            |            |            | 3,213  |         |         |         | 0.69   |     
|                                                    | NOW and money market accounts        |                                            |                                    | 6,217,880              |            |                    |            | 15,707              |         |          |         | 1.02            |      |          |           | 5,889,603 |            |            |            | 18,944 |         |         |         | 1.28   |     
|                                                    | Certificates of deposit              |                                            |                                    | 5,012,351              |            |                    |            | 32,609              |         |          |         | 2.64            |      |          |           | 4,624,776 |            |            |            | 33,753 |         |         |         | 2.90   |     
|                                                    | Brokered deposits                    |                                            |                                    |                       |            |                    |            |                    |         |          |         | 0.00            |      |          |           | 22,431    |            |            |            | 96     |         |         |         | 1.70   |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            | Total interest-bearing deposits    |                        |            | 13,404,002         |            |                     |         | 51,391   |         |                 |      | 1.55     |           |           |            | 12,371,878 |            |        |         | 56,006  |         |        |      | 1.80 |     
|Borrowed funds                                      |                                      |                                            | 6,272,657                          |                        |            |                    | 51,799     |                     |         |          | 3.34    |                 |      |          | 5,296,244 |           |            |            | 51,000     |        |         |         | 3.83    |       
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            | Total interest-bearing liabilities |                        |            | 19,676,659         |            |                     |         | 103,190  |         |                 |      | 2.13     |           |           |            | 17,668,122 |            |        |         | 107,006 |         |        |      | 2.41 |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Non-interest bearing deposits                       |                                      |                                            | 2,905,737                          |                        |            |                    |            |                     |         |          |         |                 |      |          | 2,837,369 |           |            |            |            |        |         |         |         |       
|Other liabilities                                   |                                      |                                            | 170,732                            |                        |            |                    |            |                     |         |          |         |                 |      |          | 196,567   |           |            |            |            |        |         |         |         |       
|Shareholders equity                                |                                      |                                            | 2,314,349                          |                        |            |                    |            |                     |         |          |         |                 |      |          | 1,943,630 |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      | Total liabilities and shareholders equity |                                    | $                      | 25,067,477 |                    |            |                     |         |          |         |                 |      |          |           | $         | 22,645,688 |            |            |        |         |         |         |        |      |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Net earning assets                                  |                                      | $                                          | 3,106,891                          |                        |            |                    |            |                     |         |          |         |                 |      | $        | 3,073,385 |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Net interest income (fully-taxable equivalent)      |                                      |                                            |                                    |                        |            |                    | 207,399    |                     |         |          |         |                 |      |          |           |           |            |            | 200,769    |        |         |         |         |       
|Less: fully-taxable equivalent adjustments          |                                      |                                            |                                    |                        |            |                    | (1,262     | )                   |         |          |         |                 |      |          |           |           |            |            | (1,206     | )      |         |         |         |       
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      | Net interest income                        |                                    |                        |            |                    |            | $                   | 206,137 |          |         |                 |      |          |           |           |            |            |            | $      | 199,563 |         |         |        |      |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Net interest rate spread (fully-taxable equivalent) |                                      |                                            |                                    |                        |            |                    |            |                     |         |          | 3.37    | %               |      |          |           |           |            |            |            |        |         |         | 3.50    | %     
|Net interest margin (fully-taxable equivalent)      |                                      |                                            |                                    |                        |            |                    |            |                     |         |          | 3.66    | %               |      |          |           |           |            |            |            |        |         |         | 3.86    | %     



---

|(1) |  | Annualized.                                                
|--- |  | -----------------------------------------------------------
|   
|(2) |  | Loans and leases include loans held for sale.              
|   
|(3) |  | Includes securities available for sale and held to maturity

17



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##### Table of Contents



TABLE 2  Average Balances, Yields and Rates

|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |        |      |      |      | 
|--------------------------------------------------- | ------------------------------------ | ------------------------------------------ | ---------------------------------- | ---------------------- | ---------- | ------------------ | ---------- | ------------------- | ------- | -------- | ------- | --------------- | ---- | -------- | --------- | --------- | ---------- | ---------- | ---------- | ------ | ------- | ------- | ------- | ------ | ---- | ---- | ---- | 
|                                                    |                                      |                                            |                                    |                        |            | 2002 Third Quarter |            | 2002 Second Quarter |        
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                    
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      | Yield/   |           |           |            |            |            |        |         |         |         | Yield/
|                                                    |                                      |                                            |                                    |                        |            | Average Balance    |            | Interest            |         | Rate (1) |         | Average Balance |      | Interest |           | Rate (1) 
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |          
|Loans and leases (2):                               |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    | Residential real estate mortgages    |                                            | $                                  | 2,657,333              |            |                    | $          | 44,205              |         |          |         | 6.65            | %    |          | $         | 2,569,964 |            |            | $          | 43,946 |         |         |         | 6.84   | %   
|                                                    | Commercial real estate mortgages     |                                            |                                    | 4,347,508              |            |                    |            | 75,210              |         |          |         | 6.86            |      |          |           | 4,216,766 |            |            |            | 74,347 |         |         |         | 7.07   |     
|                                                    | Commercial business loans and leases |                                            |                                    | 2,754,430              |            |                    |            | 40,327              |         |          |         | 5.81            |      |          |           | 2,595,548 |            |            |            | 39,333 |         |         |         | 6.08   |     
|                                                    | Consumer loans and leases            |                                            |                                    | 3,662,187              |            |                    |            | 62,624              |         |          |         | 6.78            |      |          |           | 3,530,040 |            |            |            | 62,158 |         |         |         | 7.06   |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            |                                    | Total loans and leases |            |                    | 13,421,458 |                     |         |          | 222,366 |                 |      |          | 6.58      |           |            |            | 12,912,318 |        |         |         | 219,784 |        |      |      | 6.82 | 
|Investment securities (3)                           |                                      |                                            | 6,487,448                          |                        |            |                    | 91,518     |                     |         |          | 5.64    |                 |      |          | 6,276,523 |           |            |            | 90,804     |        |         |         | 5.79    |       
|Federal funds sold and other short-term investments |                                      |                                            | 118,281                            |                        |            |                    | 510        |                     |         |          | 1.71    |                 |      |          | 25,856    |           |            |            | 52         |        |         |         | 0.81    |       
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      | Total earning assets                       |                                    |                        | 20,027,187 |                    |            |                     | 314,394 |          |         |                 | 6.25 |          |           |           | 19,214,697 |            |            |        | 310,640 |         |         |        | 6.48 |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Noninterest-earning assets                          |                                      |                                            | 1,770,564                          |                        |            |                    |            |                     |         |          |         |                 |      |          | 1,676,185 |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      | Total assets                               |                                    | $                      | 21,797,751 |                    |            |                     |         |          |         |                 |      |          |           | $         | 20,890,882 |            |            |        |         |         |         |        |      |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Interest-bearing deposits:                          |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    | Regular savings                      |                                            | $                                  | 1,773,402              |            |                    |            | 4,207               |         |          |         | 0.94            |      |          | $         | 1,716,942 |            |            |            | 4,061  |         |         |         | 0.95   |     
|                                                    | NOW and money market accounts        |                                            |                                    | 5,608,231              |            |                    |            | 21,649              |         |          |         | 1.53            |      |          |           | 5,246,053 |            |            |            | 19,897 |         |         |         | 1.52   |     
|                                                    | Certificates of deposit              |                                            |                                    | 4,736,817              |            |                    |            | 36,307              |         |          |         | 3.04            |      |          |           | 4,652,499 |            |            |            | 37,273 |         |         |         | 3.21   |     
|                                                    | Brokered deposits                    |                                            |                                    | 37,000                 |            |                    |            | 173                 |         |          |         | 1.85            |      |          |           | 50,741    |            |            |            | 235    |         |         |         | 1.86   |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            | Total interest-bearing deposits    |                        |            | 12,155,450         |            |                     |         | 62,336   |         |                 |      | 2.03     |           |           |            | 11,666,235 |            |        |         | 61,466  |         |        |      | 2.11 |     
|Borrowed funds                                      |                                      |                                            | 4,885,461                          |                        |            |                    | 49,825     |                     |         |          | 4.05    |                 |      |          | 4,784,197 |           |            |            | 48,448     |        |         |         | 4.06    |       
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            | Total interest-bearing liabilities |                        |            | 17,040,911         |            |                     |         | 112,161  |         |                 |      | 2.61     |           |           |            | 16,450,432 |            |        |         | 109,914 |         |        |      | 2.68 |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Non-interest bearing deposits                       |                                      |                                            | 2,684,263                          |                        |            |                    |            |                     |         |          |         |                 |      |          | 2,520,968 |           |            |            |            |        |         |         |         |       
|Other liabilities                                   |                                      |                                            | 196,573                            |                        |            |                    |            |                     |         |          |         |                 |      |          | 168,403   |           |            |            |            |        |         |         |         |       
|Shareholders equity                                |                                      |                                            | 1,876,004                          |                        |            |                    |            |                     |         |          |         |                 |      |          | 1,751,079 |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      | Total liabilities and shareholders equity |                                    | $                      | 21,797,751 |                    |            |                     |         |          |         |                 |      |          |           | $         | 20,890,882 |            |            |        |         |         |         |        |      |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Net earning assets                                  |                                      | $                                          | 2,986,276                          |                        |            |                    |            |                     |         |          |         |                 |      | $        | 2,764,265 |           |            |            |            |        |         |         |         |       
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Net interest income (fully-taxable equivalent)      |                                      |                                            |                                    |                        |            |                    | 202,233    |                     |         |          |         |                 |      |          |           |           |            |            | 200,726    |        |         |         |         |       
|Less: fully-taxable equivalent adjustments          |                                      |                                            |                                    |                        |            |                    | (1,237     | )                   |         |          |         |                 |      |          |           |           |            |            | (1,253     | )      |         |         |         |       
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|                                                    |                                      | Net interest income                        |                                    |                        |            |                    |            | $                   | 200,996 |          |         |                 |      |          |           |           |            |            |            | $      | 199,473 |         |         |        |      |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |                     |         |          |         |                 |      |          |           |           |            |            |            |        |         |         |         |       
|Net interest rate spread (fully-taxable equivalent) |                                      |                                            |                                    |                        |            |                    |            |                     |         |          | 3.64    | %               |      |          |           |           |            |            |            |        |         |         | 3.80    | %     
|Net interest margin (fully-taxable equivalent)      |                                      |                                            |                                    |                        |            |                    |            |                     |         |          | 4.03    | %               |      |          |           |           |            |            |            |        |         |         | 4.18    | %     



---

|(1) |  | Annualized.                                                
|--- |  | -----------------------------------------------------------
|   
|(2) |  | Loans and leases include loans held for sale.              
|   
|(3) |  | Includes securities available for sale and held to maturity

18



---



##### Table of Contents



TABLE 2  Average Balances, Yields and Rates

|                                                    |                                      |                                            |                                    |                        |            |                    |            |          |         |          |         |      |      |        |      | 
|--------------------------------------------------- | ------------------------------------ | ------------------------------------------ | ---------------------------------- | ---------------------- | ---------- | ------------------ | ---------- | -------- | ------- | -------- | ------- | ---- | ---- | ------ | ---- | 
|                                                    |                                      |                                            |                                    |                        |            | 2002 First Quarter
|                                                    |                                      |                                            |                                    |                        |            |                   
|                                                    |                                      |                                            |                                    |                        |            |                    |            |          |         |          |         |      |      | Yield/
|                                                    |                                      |                                            |                                    |                        |            | Average Balance    |            | Interest |         | Rate (1)
|                                                    |                                      |                                            |                                    |                        |            |                    |            |          |         |         
|Loans and leases (2):                               |                                      |                                            |                                    |                        |            |                    |            |          |         |          |         |     
|                                                    | Residential real estate mortgages    |                                            | $                                  | 2,675,415              |            |                    | $          | 47,265   |         |          |         | 7.07 | %   
|                                                    | Commercial real estate mortgages     |                                            |                                    | 4,101,873              |            |                    |            | 72,724   |         |          |         | 7.19 |     
|                                                    | Commercial business loans and leases |                                            |                                    | 2,464,378              |            |                    |            | 38,661   |         |          |         | 6.36 |     
|                                                    | Consumer loans and leases            |                                            |                                    | 3,539,213              |            |                    |            | 63,952   |         |          |         | 7.33 |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |          |         |          |         |     
|                                                    |                                      |                                            |                                    | Total loans and leases |            |                    | 12,780,879 |          |         |          | 222,602 |      |      |        | 7.04 | 
|Investment securities (3)                           |                                      |                                            | 5,943,057                          |                        |            |                    | 84,296     |          |         |          | 5.68    |     
|Federal funds sold and other short-term investments |                                      |                                            | 72,107                             |                        |            |                    | 415        |          |         |          | 2.33    |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |          |         |          |         |     
|                                                    |                                      | Total earning assets                       |                                    |                        | 18,796,043 |                    |            |          | 307,313 |          |         |      | 6.59 |       
|                                                    |                                      |                                            |                                    |                        |            |                    |            |          |         |          |         |     
|Noninterest-earning assets                          |                                      |                                            | 1,671,783                          |                        |            |                    |            |          |         |          |         |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |          |         |          |         |     
|                                                    |                                      | Total assets                               |                                    | $                      | 20,467,826 |                    |            |          |         |          |         |      |      |       
|                                                    |                                      |                                            |                                    |                        |            |                    |            |          |         |          |         |     
|Interest-bearing deposits:                          |                                      |                                            |                                    |                        |            |                    |            |          |         |          |         |     
|                                                    | Regular savings                      |                                            | $                                  | 1,646,822              |            |                    |            | 3,964    |         |          |         | 0.98 |     
|                                                    | NOW and money market accounts        |                                            |                                    | 5,099,310              |            |                    |            | 18,895   |         |          |         | 1.50 |     
|                                                    | Certificates of deposit              |                                            |                                    | 4,762,399              |            |                    |            | 41,694   |         |          |         | 3.55 |     
|                                                    | Brokered deposits                    |                                            |                                    | 63,594                 |            |                    |            | 288      |         |          |         | 1.84 |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |          |         |          |         |     
|                                                    |                                      |                                            | Total interest-bearing deposits    |                        |            | 11,572,125         |            |          |         | 64,841   |         |      |      | 2.27   |     
|Borrowed funds                                      |                                      |                                            | 4,511,945                          |                        |            |                    | 44,679     |          |         |          | 4.01    |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |          |         |          |         |     
|                                                    |                                      |                                            | Total interest-bearing liabilities |                        |            | 16,084,070         |            |          |         | 109,520  |         |      |      | 2.76   |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |          |         |          |         |     
|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)      |                                      |                                            |                                    |                        |            |                    | 197,793    |          |         |          |         |     
|Less: fully-taxable equivalent adjustments          |                                      |                                            |                                    |                        |            |                    | (1,307     | )        |         |          |         |     
|                                                    |                                      |                                            |                                    |                        |            |                    |            |          |         |          |         |     
|                                                    |                                      | Net interest income                        |                                    |                        |            |                    |            | $        | 196,486 |          |         |      |      |       
|                                                    |                                      |                                            |                                    |                        |            |                    |            |          |         |          |         |     
|Net interest rate spread (fully-taxable equivalent) |                                      |                                            |                                    |                        |            |                    |            |          |         |          | 3.83    | %   
|Net interest margin (fully-taxable equivalent)      |                                      |                                            |                                    |                        |            |                    |            |          |         |          | 4.23    | %   



---

|(1) |  | Annualized.                                                
|--- |  | -----------------------------------------------------------
|   
|(2) |  | Loans and leases include loans held for sale.              
|   
|(3) |  | Includes securities available for sale and held to maturity

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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

|                                                    |                               |   |                                   |       |      |  |            |         |        |  |          |        |       |   |         |        |  
|--------------------------------------------------- | ----------------------------- | - | --------------------------------- | ----- | ---- |  | ---------- | ------- | ------ |  | -------- | ------ | ----- | - | ------- | ------ | -
|                                                    |                               |   | Three Months Ended               
|                                                    |                               |   | March 31, 2003 vs. March 31, 2002
|                                                    |                               |   | Increase (decrease) due to       
|                                                    |                               |   |                                  
|                                                    |                               |   |                                   |       |      |  |            |         |        |  | Rate and |        | Total
|                                                    |                               |   | Volume (1)                        |       | Rate |  | Volume (2) |         | Change
|                                                    |                               |   |                                   |       |      |  |            |         |       
|Interest income:                                    |                               |   |                                   |       |      |  |            |         |        |  |          |        |       |   |         |       
|Loans and leases                                    |                               | $ | 36,770                            |       |      |  | ($32,775   | )       |        |  | ($5,482  | )      |       |   | ($1,487 | )     
|Securities                                          |                               |   | 27,127                            |       |      |  | (16,706    | )       |        |  | (5,268   | )      |       |   | 5,153   |       
|Federal funds sold and other short-term investments |                               |   | (388                              | )     |      |  | (21        | )       |        |  | 19       |        |       |   | (390    | )     
|                                                    |                               |   |                                   |       |      |  |            |         |        |  |          |        |       |   |         |       
|Total interest income                               |                               |   | 63,509                            |       |      |  | (49,502    | )       |        |  | (10,731  | )      |       |   | 3,276   |       
|                                                    |                               |   |                                   |       |      |  |            |         |        |  |          |        |       |   |         |       
|Interest expense:                                   |                               |   |                                   |       |      |  |            |         |        |  |          |        |       |   |         |       
|Interest-bearing deposits                           |                               |   |                                   |       |      |  |            |         |        |  |          |        |       |   |         |       
|                                                    | Regular savings               |   |                                   | 1,273 |      |  |            | (1,665  | )      |  |          | (497   | )     |   |         | (889   | )
|                                                    | NOW and money market accounts |   |                                   | 4,137 |      |  |            | (6,035  | )      |  |          | (1,290 | )     |   |         | (3,188 | )
|                                                    | Certificates of deposit       |   |                                   | 2,188 |      |  |            | (10,686 | )      |  |          | (587   | )     |   |         | (9,085 | )
|                                                    | Brokered deposits             |   |                                   | (289  | )    |  |            | (289    | )      |  |          | 290    |       |   |         | (288   | )
|                                                    |                               |   |                                   |       |      |  |            |         |        |  |          |        |       |   |         |       
|Total interest-bearing deposits                     |                               |   | 7,309                             |       |      |  | (18,675    | )       |        |  | (2,084   | )      |       |   | (13,450 | )     
|Borrowed funds                                      |                               |   | 17,409                            |       |      |  | (7,454     | )       |        |  | (2,835   | )      |       |   | 7,120   |       
|                                                    |                               |   |                                   |       |      |  |            |         |        |  |          |        |       |   |         |       
|Total interest expense                              |                               |   | 24,718                            |       |      |  | (26,129    | )       |        |  | (4,919   | )      |       |   | (6,330  | )     
|                                                    |                               |   |                                   |       |      |  |            |         |        |  |          |        |       |   |         |       
|Net interest income (fully taxable equivalent)      |                               | $ | 38,791                            |       |      |  | ($23,373   | )       |        |  | ($5,812  | )      |       | $ | 9,606   |       
|                                                    |                               |   |                                   |       |      |  |            |         |        |  |          |        |       |   |         |       



---

|(1) |  | Volume increases include the effects of the acquisitions of Ipswich on July 26, 2002, Bancorp on August 31, 2002,
Warren on December 31, 2002 and American on February 14, 2003.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Includes changes in interest income and expense not due solely to volume or rate changes.                                                                                       

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Provision and Allowance for Loan and Lease Losses

We provided $10.9 million and $11.8 million for loan and lease losses in the
quarters ended March 31, 2003 and 2002, respectively. The lower provision was
related to lower net charge-offs and a better coverage ratio of the allowance
to non-performing loans and leases. As shown in Table 4, net charge-offs for
the first quarter of 2003 were $8.8 million, or 0.24% of average loans
outstanding, compared to $10.8 million, or 0.34% of average loans outstanding,
for the first quarter of 2002. The provision for loan and lease losses for the
three months ended March 31, 2003 exceeded net charge-offs by $2.1 million. At
March 31, 2003, the allowance for loan and lease losses amounted to $226.7
million, or 1.46% of total portfolio loans and leases, as compared to $208.3
million, or 1.48%, at December 31, 2002. The ratio of the allowance for loan
and lease losses to nonperforming loans was 288% at March 31, 2003 and 319% at
December 31, 2002. In addition, the allowance increased by $16.3 million as a
result of carrying over the allowance of American which was acquired on
February 14, 2003.

The allowance for loan and leases losses is maintained at a level
determined to be adequate by management to absorb future charge-offs of loans
and leases deemed uncollectable. This allowance is increased by provisions
charged to income and by recoveries on loans previously charged off. Arriving
at an appropriate level of allowance for loan and lease losses necessarily
involves a high degree of judgment and is determined based on managements
ongoing evaluation. As discussed under Critical Accounting Policies, we
believe that the methods used by us in determining the allowance for loan and
lease losses constitute a critical accounting policy. Although we utilize
judgment in providing for losses, for the reasons discussed under Critical
Accounting Policies and Credit Risk Management  Nonperforming Assets, there
can be no assurance that we will not have to increase the amount of our
provision for loan and lease losses in future periods.

TABLE 4  Allowance for Loan and Lease Losses

|                                                                                                   |                                    |                                      |            |            |        |             |            |            |       |             |            |            |        |   |            |        |       |   |            |        |       |  
|-------------------------------------------------------------------------------------------------- | ---------------------------------- | ------------------------------------ | ---------- | ---------- | ------ | ----------- | ---------- | ---------- | ----- | ----------- | ---------- | ---------- | ------ | - | ---------- | ------ | ----- | - | ---------- | ------ | ----- | -
|                                                                                                   |                                    |                                      |            | 2003 First |        | 2002 Fourth |            | 2002 Third |       | 2002 Second |            | 2002 First
|                                                                                                   |                                    |                                      |            | Quarter    |        | Quarter     |            | Quarter    |       | Quarter     |            | Quarter   
|                                                                                                   |                                    |                                      |            |            |        |             |            |            |       |             |            |           
|Allowance at beginning of period                                                                   |                                    | $                                    | 208,273    |            |        | $           | 201,689    |            |       | $           | 193,444    |            |        | $ | 190,890    |        |       | $ | 189,837    |       
|Additions due to acquisitions                                                                      |                                    |                                      | 16,346     |            |        |             | 4,972      |            |       |             | 7,822      |            |        |   |           |        |       |   |           |       
|Charge-offs:                                                                                       |                                    |                                      |            |            |        |             |            |            |       |             |            |            |        |   |            |        |       |   |            |       
|Real estate mortgages                                                                              |                                    |                                      | 317        |            |        |             | 196        |            |       |             | (20        | )          |        |   | 474        |        |       |   | 501        |       
|Commercial business loans and leases                                                               |                                    |                                      | 3,205      |            |        |             | 5,060      |            |       |             | 8,703      |            |        |   | 5,319      |        |       |   | 5,374      |       
|Consumer loans and leases                                                                          |                                    |                                      | 7,609      |            |        |             | 7,597      |            |       |             | 5,922      |            |        |   | 5,834      |        |       |   | 7,042      |       
|                                                                                                   |                                    |                                      |            |            |        |             |            |            |       |             |            |            |        |   |            |        |       |   |            |       
|                                                                                                   | Total loans and leases charged off |                                      |            | 11,131     |        |             |            | 12,853     |       |             |            | 14,605     |        |   |            | 11,627 |       |   |            | 12,917 |      
|                                                                                                   |                                    |                                      |            |            |        |             |            |            |       |             |            |            |        |   |            |        |       |   |            |       
|Recoveries:                                                                                        |                                    |                                      |            |            |        |             |            |            |       |             |            |            |        |   |            |        |       |   |            |       
|Real estate mortgages                                                                              |                                    |                                      | 556        |            |        |             | 82         |            |       |             | 58         |            |        |   | 48         |        |       |   | 50         |       
|Commercial business loans and leases                                                               |                                    |                                      | 632        |            |        |             | 2,628      |            |       |             | 3,108      |            |        |   | 2,136      |        |       |   | 1,101      |       
|Consumer loans and leases                                                                          |                                    |                                      | 1,100      |            |        |             | 927        |            |       |             | 1,033      |            |        |   | 1,168      |        |       |   | 991        |       
|                                                                                                   |                                    |                                      |            |            |        |             |            |            |       |             |            |            |        |   |            |        |       |   |            |       
|                                                                                                   | Total loans and leases recovered   |                                      |            | 2,288      |        |             |            | 3,637      |       |             |            | 4,199      |        |   |            | 3,352  |       |   |            | 2,142  |      
|                                                                                                   |                                    |                                      |            |            |        |             |            |            |       |             |            |            |        |   |            |        |       |   |            |       
|Net charge-offs                                                                                    |                                    |                                      | 8,843      |            |        |             | 9,216      |            |       |             | 10,406     |            |        |   | 8,275      |        |       |   | 10,775     |       
|Provision for loan and lease losses                                                                |                                    |                                      | 10,901     |            |        |             | 10,828     |            |       |             | 10,829     |            |        |   | 10,829     |        |       |   | 11,828     |       
|                                                                                                   |                                    |                                      |            |            |        |             |            |            |       |             |            |            |        |   |            |        |       |   |            |       
|Allowance at end of period                                                                         |                                    | $                                    | 226,677    |            |        | $           | 208,273    |            |       | $           | 201,689    |            |        | $ | 193,444    |        |       | $ | 190,890    |       
|                                                                                                   |                                    |                                      |            |            |        |             |            |            |       |             |            |            |        |   |            |        |       |   |            |       
|Average loans and leases outstanding
during the period (1)                                         |                                    | $                                    | 14,829,108 |            |        | $           | 13,750,315 |            |       | $           | 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) |                                    |                                      | 0.24       | %          |        |             | 0.27       | %          |       |             | 0.31       | %          |        |   | 0.26       | %      |       |   | 0.34       | %     
|Ratio of allowance to total loans and leases
at end of period (1)                                  |                                    |                                      | 1.46       | %          |        |             | 1.48       | %          |       |             | 1.47       | %          |        |   | 1.48       | %      |       |   | 1.50       | %     
|Ratio of allowance to nonperforming loans
and leases at end of period                              |                                    |                                      | 288        | %          |        |             | 319        | %          |       |             | 311        | %          |        |   | 289        | %      |       |   | 268        | %     
|Ratio of net charge-offs as a percent of average
outstanding loans and leases, annualized (1):     |                                    |                                      |            |            |        |             |            |            |       |             |            |            |        |   |            |        |       |   |            |       
|                                                                                                   |                                    | Real estate mortgages                |            |            | -0.013 | %           |            |            | 0.006 | %           |            |            | -0.004 | % |            |        | 0.025 | % |            |        | 0.027 | %
|                                                                                                   |                                    | Commercial business loans and leases |            |            | 0.347  | %           |            |            | 0.339 | %           |            |            | 0.806  | % |            |        | 0.492 | % |            |        | 0.703 | %
|                                                                                                   |                                    | Consumer loans and leases            |            |            | 0.630  | %           |            |            | 0.691 | %           |            |            | 0.530  | % |            |        | 0.530 | % |            |        | 0.693 | %



---

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

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##### Table of Contents



Noninterest Income

First quarter noninterest income totaled $78.2 million, an increase of $16.7
million, or 27%, from the first quarter of 2002. This increase was primarily
due to increases in deposit services income, net securities gains, insurance
brokerage commissions, merchant and electronic banking income and other
noninterest income (primarily covered call premium income). These increases
were partially offset by lower income from trust and investment management
services. Noninterest income, including securities gains and losses, as a
percent of total income was 28% and 24% for the quarters ended March 31, 2003
and 2002, respectively.

Deposit services income increased by $3.6 million, or 19%, during the three
months ended March 31, 2003 as compared to the same period in the prior year.
This increase was primarily attributable to volume and fee increases on deposit
accounts and overdraft fees, which were due in part to the acquisitions in 2003
and 2002.

Insurance brokerage commissions income amounted to $12.4 million for the first
quarter of 2003 compared to $10.2 million for the same period in 2002, an
increase of 22%. This increase was primarily attributable to (i) the
acquisition of Community in the third quarter of 2002 and (ii) higher annual
bonus and profit sharing commissions received from the carriers in the first
quarter of 2003 which is not expected to continue during the remainder of 2003.

Merchant and electronic banking income was $9.1 million for the first quarter
of 2003 compared to $7.7 million for the first quarter of 2002, an increase of
18%. This income represents fees and interchange income generated by the use
of our ATMs and debit cards issued by us along with 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.

Trust and investment management services income amounted to $7.4 million for
the quarter ended March 31, 2003 compared to $8.3 million for the first quarter
of 2002, a decrease of 11%. Assets under management decreased to $8.2 billion
at March 31, 2003 from $8.3 billion at March 31, 2002. Lower trust and
investment management services income resulted from a change in the mix of
assets (discretionary vs. nondiscretionary) and the overall declines in the stock
markets, which adversely impacted fees that are dependent upon the market value
of assets.

Bank-owned life insurance (BOLI) income was $5.3 million for the first
quarter of 2003, compared to $4.4 million for the same period in 2002, an
increase of 22%. The increase related to BOLI purchased in 2002 and $85.6
million of BOLI acquired in the American merger. Income from BOLI represents
life insurance on the lives of certain employees who have provided a consent
allowing the Bank to be the beneficiary of such policies. Most of the BOLI is
invested in the general account of quality insurance companies. Standard and
Poors rated all such companies AA- or better at March 31, 2003. The BOLI
investment provides a means to mitigate increasing employee benefit costs. For
the first quarter of 2003, the average carrying value of BOLI was $425.1
million compared to $324.4 million for the first quarter of 2002.

Investment planning services income in the first quarter of 2003 amounted to
$3.3 million compared to $2.7 million in the first quarter of 2002, an increase
of $538 thousand, or 20%. This increase was primarily attributable to
commissions earned from increased sales of third party mutual funds and
annuities.

Net securities gains amounted to $2.8 million and $19 thousand during the
quarters ended March 31, 2003 and 2002, respectively. During the first quarter
of 2003, we sold $469 million in securities. 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 $15.5 million and $9.3 million for the
quarters ended March 31, 2003 and 2002. The increase of $6.2 million was
primarily due to an increase in covered call premium income of $4.5 million
resulting from call options written on both securities we own and securities we
had committed to buy.

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##### Table of Contents



Noninterest Expense

Noninterest expense was $149.9 million and $142.9 million for the quarters
ended March 31, 2003 and 2002, respectively, which represented an increase of
$7.1 million, or 5%. Expense categories that increased included compensation
and employee benefits expense ($5.4 million), occupancy expense ($2.4 million)
and equipment expense ($1.5 million). These increases were primarily driven by
additional staffing, properties and equipment from acquisitions.
Merger and consolidation costs declined by $3.8 million due
mainly to completion of the charter consolidation project in the first quarter
of 2002 (see Table 5). The efficiency ratio was 52.71% and 55.37% for the
quarters ended March 31, 2003 and 2002, respectively. For a description of the
methodology we used to calculate the efficiency ratio, see Note 5 to Table 1.

Compensation and employee benefits expense of $80.7 million for the quarter
ended March 31, 2003 increased $5.4 million, or 7%, from the same quarter of
last year. This increase was primarily due to additional employees from the
acquisitions and increased benefit costs which were partially offset by lower
incentive accruals. The total number of full-time equivalent employees was
approximately 6,800 at March 31, 2003 compared to 6,000 at March 31, 2002.
Pension expense under the defined benefit pension plan (which is included in
compensation and employee benefits expense) was $2.5 million and $873 thousand
for the three months ended March 31, 2003 and 2002, respectively, and increased
primarily due to a lower discount rate and a lower expected rate of return on
plan assets. The fair value of plan assets as of March 31, 2003 was $158.1
million as compared to $154.9 million at December 31, 2002.

Data processing expense amounted to $10.2 million and $10.6 million for the
quarters ended March 31, 2003 and 2002, respectively. Beginning in July 2002,
check processing was insourced and the primary costs are now recorded in
compensation and employee benefits. Previously, a third-party vendor handled
check processing and its charges were recorded as data processing costs. The
decrease was also attributable to lower bank card expenses due to lower fees
charged by a new third-party processor. Increased spending on technology
investments and software and software maintenance costs partially offset this
reduction in data processing costs.

Occupancy expense of $14.9 million during the three months ended March 31, 2003
increased $2.4 million, or 19%, from the same quarter in 2002, primarily due to
the cost of an additional facility and the cost of facilities assumed in
acquisitions.

Equipment expense of $11.3 million during the three months ended March 31, 2003
increased $1.5 million, or 16%, from the first quarter of last year. This
increase was primarily due to depreciation relating to new technology equipment
and software (e.g., e-commerce) and depreciation/maintenance of equipment
obtained through acquisitions.

Advertising and marketing expense amounted to $5.1 million and $4.0 million for
the three months ended March 31, 2003 and 2002, respectively. The $1.1
million, or 27.2%, increase was primarily due to the acquisitions in 2003 and
2002 and additional expenses for the introduction of our products in new market
areas.

Amortization of identifiable intangible assets of $2.0 million during the three
months ended March 31, 2003 increased $413 thousand from the first quarter of
last year. This increase was primarily due to amortization of core deposit
intangibles and other identifiable intangibles recorded in connection with
acquisitions. For additional information, see Note 4 to the Consolidated Financial
Statements included herein.

Merger and consolidation costs amounted to $4.5 million and
$8.2 million for the three months ended March 31, 2003 and 2002, respectively.
On an after-tax basis, these charges amounted to $2.9 million and $5.3 million
during these respective periods. The following table summarizes
merger and consolidation costs for the three months ended March 31, 2003 and
2002.

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##### Table of Contents



Table 5  Merger and
Consolidation Costs

|                                                           |  |                    |       |      |  |   |       | 
|---------------------------------------------------------- |  | ------------------ | ----- | ---- |  | - | ----- | 
|                                                           |  | Three Months Ended
|                                                           |  | March 31,         
|                                                           |  |                   
|                                                           |  | 2003               |       | 2002
|                                                           |  |                    |       |     
|American Merger Charges                                    |  |                    |       |      |  |   |       | 
|Personnel costs                                            |  | $                  | 915   |      |  |   |      | 
|Systems conversion and integration/customer communications |  |                    | 1,221 |      |  |   |      | 
|Other costs                                                |  |                    | 1,114 |      |  |   |      | 
|                                                           |  |                    |       |      |  |   |       | 
|                                                           |  |                    | 3,250 |      |  |   |      | 
|                                                           |  |                    |       |      |  |   |       | 
|Warren Merger Charges                                      |  |                    |       |      |  |   |       | 
|Personnel costs                                            |  |                    | 623   |      |  |   |      | 
|Systems conversion and integration/customer communications |  |                    | 505   |      |  |   |      | 
|Other costs                                                |  |                    | 100   |      |  |   |      | 
|                                                           |  |                    |       |      |  |   |       | 
|                                                           |  |                    | 1,228 |      |  |   |      | 
|                                                           |  |                    |       |      |  |   |       | 
|Andover/MetroWest Merger Charges                           |  |                    |       |      |  |   |       | 
|Personnel costs                                            |  |                    | 1     |      |  |   | 1,058 | 
|Systems conversion and integration/customer communications |  |                    |      |      |  |   | 2,716 | 
|Other costs                                                |  |                    | (24   | )    |  |   | 2,032 | 
|                                                           |  |                    |       |      |  |   |       | 
|                                                           |  |                    | (23   | )    |  |   | 5,806 | 
|                                                           |  |                    |       |      |  |   |       | 
|Charter Consolidation Costs                                |  |                    |       |      |  |   |       | 
|Branch signage                                             |  |                    |      |      |  |   | 729   | 
|Customer notices                                           |  |                    |      |      |  |   | 567   | 
|Forms and documents                                        |  |                    |      |      |  |   | 384   | 
|Other costs                                                |  |                    |      |      |  |   | 649   | 
|                                                           |  |                    |       |      |  |   |       | 
|                                                           |  |                    |      |      |  |   | 2,329 | 
|                                                           |  |                    |       |      |  |   |       | 
|Other
Costs                                                |  |                    |       |      |  |   |       | 
|Bancorp and Ipswich Merger Charges                         |  |                    | 38    |      |  |   |      | 
|Branch decommissioning costs                               |  |                    | (43   | )    |  |   | 66    | 
|Other costs                                                |  |                    |      |      |  |   | 3     | 
|                                                           |  |                    |       |      |  |   |       | 
|                                                           |  |                    | (5    | )    |  |   | 69    | 
|                                                           |  |                    |       |      |  |   |       | 
|Total
Merger and Consolidation Costs                       |  | $                  | 4,450 |      |  | $ | 8,204 | 
|                                                           |  |                    |       |      |  |   |       | 

The following table summarizes activity in the accrual account for merger and
consolidation costs from December 31, 2002 through March 31, 2003.

TABLE 6  Merger and
Consolidation Costs  Activity in the Accrual Account

|                                     |  |          |       |                |  |         |        |          |  |             |       |                 |  |         |          |   |  |                |      |   |  |   |       | 
|------------------------------------ |  | -------- | ----- | -------------- |  | ------- | ------ | -------- |  | ----------- | ----- | --------------- |  | ------- | -------- | - |  | -------------- | ---- | - |  | - | ----- | 
|                                     |  |          |       |                |  |         |        |          |  |             |       |                 |  |         |          |   |  | Non-cash Write |      |   |  |  
|                                     |  | Balance  |       | Accrued        |  |         |        |          |  | Cash        |       | Downs and Other |  | Balance
|                                     |  | 12/31/02 |       | at Acquisition |  | Charges |        | Payments |  | Adjustments |       | 3/31/03        
|                                     |  |          |       |                |  |         |        |          |  |             |       |                
|American Merger                      |  | $        | 0     |                |  | $       | 13,600 |          |  | $           | 3,250 |                 |  |         | ($13,537 | ) |  | $              | 0    |   |  | $ | 3,313 | 
|Warren Merger                        |  |          | 2,052 |                |  |         |       |          |  |             | 1,228 |                 |  |         | (2,131   | ) |  |                | 731  |   |  |   | 1,880 | 
|Andover / MetroWest Merger           |  |          | 321   |                |  |         |       |          |  |             | (23   | )               |  |         | (14      | ) |  |                | (183 | ) |  |   | 101   | 
|Other
Merger and Consolidation Costs |  |          | 3,181 |                |  |         |       |          |  |             | (5    | )               |  |         | (349     | ) |  |                | (129 | ) |  |   | 2,698 | 
|                                     |  |          |       |                |  |         |        |          |  |             |       |                 |  |         |          |   |  |                |      |   |  |   |       | 
|Total                                |  | $        | 5,554 |                |  | $       | 13,600 |          |  | $           | 4,450 |                 |  |         | ($16,031 | ) |  | $              | 419  |   |  | $ | 7,992 | 
|                                     |  |          |       |                |  |         |        |          |  |             |       |                 |  |         |          |   |  |                |      |   |  |   |       | 

Other non-interest expenses amounted to $21.4 million and $21.0 million during
the three months ended March 31, 2003 and 2002, respectively. The following
table summarizes the principal components of other noninterest expenses for the
periods indicated.

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TABLE 7  Other Noninterest Expenses

|                                                       |  |         |        |         |  |         |        |         |  |         |        |  |  |   |        |  |  |   |        | 
|------------------------------------------------------ |  | ------- | ------ | ------- |  | ------- | ------ | ------- |  | ------- | ------ |  |  | - | ------ |  |  | - | ------ | 
|                                                       |  | 2003    |        | 2002   
|                                                       |  |         |        |        
|                                                       |  | First   |        | Fourth  |  | Third   |        | Second  |  | First  
|                                                       |  | Quarter |        | Quarter |  | Quarter |        | Quarter |  | Quarter
|                                                       |  |         |        |         |  |         |        |         |  |        
|Telephone                                              |  |         | 3,468  |         |  |         | 3,600  |         |  |         | 3,276  |  |  |   | 3,332  |  |  |   | 3,189  | 
|Office supplies                                        |  |         | 2,794  |         |  |         | 2,594  |         |  |         | 2,726  |  |  |   | 2,597  |  |  |   | 2,819  | 
|Postage and freight                                    |  |         | 3,074  |         |  |         | 2,490  |         |  |         | 2,402  |  |  |   | 2,206  |  |  |   | 2,609  | 
|Miscellaneous loan costs                               |  |         | 948    |         |  |         | 1,178  |         |  |         | 239    |  |  |   | 1,706  |  |  |   | 1,167  | 
|Deposits and other assessments                         |  |         | 899    |         |  |         | 871    |         |  |         | 969    |  |  |   | 901    |  |  |   | 799    | 
|Collection and carrying costs
of non-performing assets |  |         | 308    |         |  |         | 595    |         |  |         | 662    |  |  |   | 807    |  |  |   | 649    | 
|Other                                                  |  |         | 9,880  |         |  |         | 13,698 |         |  |         | 10,968 |  |  |   | 10,518 |  |  |   | 9,791  | 
|                                                       |  |         |        |         |  |         |        |         |  |         |        |  |  |   |        |  |  |   |        | 
|Total                                                  |  | $       | 21,371 |         |  | $       | 25,026 |         |  | $       | 21,242 |  |  | $ | 22,067 |  |  | $ | 21,023 | 
|                                                       |  |         |        |         |  |         |        |         |  |         |        |  |  |   |        |  |  |   |        | 

Taxes

The effective tax rate was 34% for the quarters ended March 31, 2003 and 2002,
respectively.

Comprehensive Income

Comprehensive income amounted to $82.5 million and $40.1 million during the
three months ended March 31, 2003 and 2002, respectively. Comprehensive income
was different from our 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 related to loans held for sale) that are accounted
for as cash flow hedges. For additional information, see Note 9 to the
Unaudited Consolidated Financial Statements included herein.

Our available for sale investment portfolio had unrealized gains, net of
applicable income tax effects, of $118.1 million, $118.0 million and $11.9
million at March 31, 2003, December 31, 2002 and March 31, 2002, respectively.
At March 31, 2003, the net unrealized gains of $181.7 million, before related
tax effect, represented 2% of securities available for sale. We attempt to
balance the interest rate risk of assets with liabilities (see Interest Rate
Risk and Asset Liability Management). However, the change in value of our
liabilities, which tends to fall in rising interest rate environments and rise
in falling interest rate environments, is not included in other comprehensive
income.

FINANCIAL CONDITION

Our consolidated total assets amounted to $26.3 billion and $23.4 billion at
March 31, 2003 and December 31, 2002, respectively. Total average assets were
$25.1 billion and $20.5 billion for the three months ended March 31, 2003 and
2002, respectively. These increases were largely due to the acquisitions in
2003 and 2002, which added $4.7 billion in assets. Shareholders equity
totaled $2.5 billion at March 31, 2003 and $2.1 billion at December 31, 2002.

Securities and Other Earning Assets

The securities portfolio (including securities classified as held to maturity)
averaged $7.9 billion during the first quarter of 2003, as compared to $5.9
billion in the first quarter of 2002. 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 4.54% for
the quarter ended March 31, 2003 and 5.68% for the quarter ended March 31,
2002. 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
$118.1 million and $118.0 million

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at March 31, 2003 and December 31, 2002, respectively. These
unrealized gains do not impact net income or regulatory capital but are
recorded as adjustments to shareholders equity, net of related deferred income
taxes. Unrealized gains, net of related deferred income taxes, are a component
of Comprehensive Income contained in the Consolidated Statement of Changes in
Shareholders Equity.

Loans and Leases

Total loans and leases (including loans held for sale) averaged $14.9 billion
during the first quarter of 2003, an increase of $2.1 billion, or 17%, from the
first quarter of 2002. This increase was primarily attributable to
approximately $2.5 billion of loans and leases obtained as a result of
acquisitions. Average loans as a percent of average earning assets was 65%
during the quarter ended March 31, 2003 compared to 68% during the quarter
ended March 31, 2002.

Average residential real estate loans (which include mortgage loans held for
sale) of $2.8 billion during the first quarter of 2003 increased $117 million
from the average amount of such loans during the first quarter of last year.
Excluding acquisitions, average residential loans decreased $1.2 billion as a
result of increased refinancing activity and prepayments in a lower interest
rate environment. Mortgage loans held for sale amounted to $87.4 million and
$128.6 million at March 31, 2003 and December 31, 2002, respectively. We are
currently selling substantially all of the conforming 30-year fixed-rate loans
we originate.

Average commercial real estate loans of $4.9 billion increased $811 million, or
20%, from the first quarter of last year. Excluding acquisitions, average
commercial real estate loans increased $444 million. While most of our markets
reflected increases, the largest increases were in our expansion markets in
Massachusetts and Connecticut. The average yield on commercial real estate
loans during the first quarter of 2003 was 6.42%, as compared to 7.19% in the
first quarter of 2002, a decrease of 77 basis points. The lower yield reflects
the effect of the repricing of variable-rate loans and fixed-rate loans which
have refinanced at lower rates and the origination of new loans at the lower
prevailing rates.

Commercial business loans and leases averaged $3.0 billion during the first
quarter of 2003, an increase of $542 million, or 22%, over the first quarter of
2002. Excluding acquisitions, average commercial business loans and leases
increased $324 million. Our expansion markets in Massachusetts and Connecticut
reflected the greatest amount of growth. The yield on commercial business
loans and leases decreased to 5.32% in the first quarter of 2003 from 6.36% in
the first quarter of 2002. The decrease in the yield was primarily due to the
competition for new loans and the repricing of variable-rate loans in a period
where the prime rate decreased by 0.50%.

Consumer loans and leases averaged $4.2 billion during the first quarter of
2003, an increase of $648 million, or 18%, from the first quarter of 2002.
Acquisitions accounted for approximately $556 million (or 15%) of the increase
while internal loan growth accounted for approximately $92 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 6.02% in the first
quarter of 2003 from 7.33% in the first quarter of 2002. For a description of
the types of loans and leases in our loan and lease portfolio and a breakdown
of our consumer loans, see Credit Risk.

Deposits

Total deposits averaged $16.3 billion during the first quarter of 2003, an
increase of $2.3 billion from the first quarter of 2002. Excluding
acquisitions, core deposits (deposits excluding certificates of deposit and
brokered deposits) increased $565 million from the first quarter of last year,
or 5%. 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 34% in the first quarter of 2002 to 31% in the
first quarter of 2003. The ratio of loans to deposits was 89% and 90% at March
31, 2003 and December 31, 2002, respectively.

Average non-interest bearing deposits totaled $2.9 billion during the first
quarter of 2003, increasing $459 million, or 19%, from the first quarter of
2002, including approximately $193 million related to acquisitions. The
increase in non-interest bearing deposits reflected strong growth in
commercial, government and personal accounts.

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Average interest-bearing deposits of $13.4 billion during the first quarter of
2003 increased $1.8 billion from the first quarter of 2002, including
approximately $2.6 billion related to acquisitions. Excluding acquisitions,
average money market and NOW deposits increased by $331 million, while average
certificates of deposit declined by $1.0 billion. The decline in certificates
of deposits resulted from our decision to allow deposits priced above alternate
funding costs to run off. The average rates paid on NOW and money market
accounts decreased 48 basis points from 1.50% in the first quarter of 2002 to
1.02% in the first quarter of 2003 due largely to lower prevailing interest
rates. The average rates paid on all deposit types decreased by 72 basis
points from 2.27% in the first quarter of 2002 to 1.55% in the first quarter of
2003, reflecting the decline in prevailing interest rates.

Included within the deposit categories above are government banking deposits,
which averaged $1.6 billion in the first quarter of 2003 and $1.3 billion in
the first quarter of 2002. 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

We use both short-term and long-term borrowings to fund the growth of earning
assets in excess of deposit growth. Short-term borrowings, which include
federal funds purchased, retail securities sold under agreements to repurchase
and other short-term borrowings, amounted to $1.2 billion and $1.3 billion at
March 31, 2003 and December 31, 2002, respectively, a decrease of $112 million,
or 9 %.

At March 31, 2003, we also had a $110 million unsecured line of credit. The
line is renewable every 364 days and, if used, carries interest at LIBOR plus
0.625%. There were no drawdowns on this line in 2003.

Long-term debt includes FHLB advances, subordinated notes, wholesale securities
sold under agreements to repurchase, capital lease obligations and other debt
with terms greater than one year. Long-term debt was $4.5 billion and $3.9
billion at March 31, 2003 and December 31, 2002, respectively. The increase in
long-term debt was primarily due to borrowings assumed in acquisitions.

At March 31, 2003 and December 31, 2002, FHLB borrowings amounted to $2.5
billion. FHLB collateral consists primarily of first mortgage loans secured by
single-family properties, certain unencumbered securities and other qualified
assets. These borrowings had an average cost of 4.52% during the three months
ended March 31, 2003 as compared to 4.43% during the three months ended March
31, 2002. Our additional borrowing capacity with the FHLB at March 31, 2003
was approximately $2.7 billion.

Subordinated notes consisted of $200 million of 7.625% subordinated notes due
2011 issued by our banking subsidiary in 2001. The notes qualify as Tier 2
capital for regulatory purposes.

At March 31, 2003 and December 31, 2002, wholesale securities sold under
repurchase agreements amounted to $1.9 billion and $1.2 billion, respectively,
and were collateralized by mortgage-backed securities and U.S. Government
obligations.

At March 31, 2003 and December 31, 2002, through subsidiary trusts, we had
outstanding $295.1 million of capital securities which qualify as Tier 1
capital for regulatory purposes. See the Capital section below.

We have a shelf registration on file with the Securities and Exchange
Commission 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. We had $800 million remaining on
this shelf registration statement as of March 31, 2003. On April 30, 2003, we
issued $150 million in 3.75% Senior Notes due May 1, 2008, leaving $650 million
remaining on the shelf registration statement.

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##### Table of Contents



CONTRACTUAL OBLIGATIONS

We have entered into numerous contractual obligations and commitments. The
following tables summarize our contractual cash obligations, other
commitments and derivative financial investments at March 31, 2003.

|                                  |                      |   |           |           |        |   |                        |         |       |   |           |           |         |   |         |         |  |   |           |         | 
|--------------------------------- | -------------------- | - | --------- | --------- | ------ | - | ---------------------- | ------- | ----- | - | --------- | --------- | ------- | - | ------- | ------- |  | - | --------- | ------- | 
|Contractual Obligations (1)       |                      |   |           |           |        |   | Payments Due By Period
|                                  |                      |   |           |           |        |   |                       
|                                  |                      |   |           |           |        |   | Less than              |         | 1 - 3 |   | 4 -5      |           | After 5
|                                  |                      |   | Total     |           | 1 Year |   | Years                  |         | Years |   | Years    
|                                  |                      |   |           |           |        |   |                        |         |       |   |          
|Long-term debt                    |                      | $ | 2,657,560 |           |        | $ | 871,293                |         |       | $ | 862,240   |           |         | $ | 75,973  |         |  | $ | 848,054   |        
|Capital lease obligations         |                      |   | 6,061     |           |        |   | 27                     |         |       |   | 140       |           |         |   | 415     |         |  |   | 5,479     |        
|Repurchase agreements  wholesale |                      |   | 1,871,049 |           |        |   | 100,000                |         |       |   | 1,571,049 |           |         |   | 100,000 |         |  |   | 100,000   |        
|                                  |                      |   |           |           |        |   |                        |         |       |   |           |           |         |   |         |         |  |   |           |        
|                                  | Total long-term debt |   |           | 4,534,670 |        |   |                        | 971,320 |       |   |           | 2,433,429 |         |   |         | 176,388 |  |   |           | 953,533 | 
|Capital trust securities          |                      |   | 295,056   |           |        |   |                       |         |       |   |          |           |         |   |        |         |  |   | 295,056   |        
|Operating lease obligations       |                      |   | 164,826   |           |        |   | 23,529                 |         |       |   | 40,473    |           |         |   | 31,190  |         |  |   | 69,634    |        
|                                  |                      |   |           |           |        |   |                        |         |       |   |           |           |         |   |         |         |  |   |           |        
|Total contractual obligations     |                      | $ | 4,994,552 |           |        | $ | 994,849                |         |       | $ | 2,473,902 |           |         | $ | 207,578 |         |  | $ | 1,318,223 |        
|                                  |                      |   |           |           |        |   |                        |         |       |   |           |           |         |   |         |         |  |   |           |        



---

|(1) |  | Other liabilities are short term in nature, except for liabilities related to employee benefit plans.
|--- |  | -----------------------------------------------------------------------------------------------------

|                                   |  |           |           |           |                                              |       |           |       |  |         |         |  |  |   |         |  |  |   |           | 
|---------------------------------- |  | --------- | --------- | --------- | -------------------------------------------- | ----- | --------- | ----- |  | ------- | ------- |  |  | - | ------- |  |  | - | --------- | 
|Other Commitments                  |  |           |           |           | Amount of Commitment Expiration - Per Period
|                                   |  | Total     |           |          
|                                   |  | Amounts   |           | Less than |                                              | 1 - 3 |           | 4 -5  |  | After 5
|                                   |  | Committed |           | 1 Year    |                                              | Years |           | Years |  | Years  
|                                   |  |           |           |           |                                              |       |           |       |  |        
|Unused portions on lines of credit |  | $         | 4,259,528 |           |                                              | $     | 451,627   |       |  | $       | 248,470 |  |  | $ | 138,267 |  |  | $ | 3,421,164 | 
|Standby letters of credit          |  |           | 304,860   |           |                                              |       | 144,533   |       |  |         | 90,580  |  |  |   | 57,236  |  |  |   | 12,511    | 
|Commitments to originate loans     |  |           | 1,578,891 |           |                                              |       | 1,100,244 |       |  |         | 239,631 |  |  |   | 49,736  |  |  |   | 189,280   | 
|Other commitments                  |  |           | 52,227    |           |                                              |       | 14,421    |       |  |         | 9,814   |  |  |   | 2,165   |  |  |   | 25,827    | 
|                                   |  |           |           |           |                                              |       |           |       |  |         |         |  |  |   |         |  |  |   |           | 
|Total commitments                  |  | $         | 6,195,506 |           |                                              | $     | 1,710,825 |       |  | $       | 588,495 |  |  | $ | 247,404 |  |  | $ | 3,648,782 | 
|                                   |  |           |           |           |                                              |       |           |       |  |         |         |  |  |   |         |  |  |   |           | 

|                                       |                                        |  |           |         |           |                                              |         |   |       |  |         |       |  |  |   |        |  |  |   |         | 
|-------------------------------------- | -------------------------------------- |  | --------- | ------- | --------- | -------------------------------------------- | ------- | - | ----- |  | ------- | ----- |  |  | - | ------ |  |  | - | ------- | 
|Derivative Financial Instruments       |                                        |  |           |         |           | Amount of Commitment Expiration - Per Period
|                                       |                                        |  | Total     |         |          
|                                       |                                        |  | Amounts   |         | Less than |                                              | 1 - 3   |   | 4 -5  |  | After 5
|                                       |                                        |  | Committed |         | 1 Year    |                                              | Years   |   | Years |  | Years  
|                                       |                                        |  |           |         |           |                                              |         |   |       |  |        
|Interest rate swaps (notional amount): |                                        |  |           |         |           |                                              |         |   |       |  |         |       |  |  |   |        |  |  |   |        
|                                       | Interest rate swaps with borrowers     |  | $         | 103,593 |           |                                              | $       |  |       |  | $       | 8,386 |  |  | $ | 21,181 |  |  | $ | 74,026  | 
|                                       | Interest rate swaps with third parties |  |           | 303,593 |           |                                              |         |  |       |  |         | 8,386 |  |  |   | 21,181 |  |  |   | 274,026 | 
|Forward commitments to sell loans      |                                        |  | 180,000   |         |           |                                              | 180,000 |   |       |  |        |       |  |  |  |        |  |  |  |        
|Foreign currency forward contracts     |                                        |  | 18,446    |         |           |                                              | 13,573  |   |       |  | 4,873   |       |  |  |  |        |  |  |  |        

RISK MANAGEMENT

The primary goal of our risk management program is to determine how certain
existing or emerging issues in 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. Our board of directors and management believe that there are
seven applicable risk categories, consisting of credit, interest rate,
liquidity, transaction, compliance, strategic and reputation risk. Each risk
category is viewed from a quantity of risk perspective (high, medium or low)
coupled with a quality of risk perspective. In addition, an aggregate level of
risk is assigned as a whole as well as the direction of risk (stable,
increasing or decreasing). Each risk category and the overall risk level is
compared to regulatory views on a regular basis and then reported to the board
with an accompanying explanation as to the existence of any differences. The
risk program includes risk identification, measurement, control and monitoring.

Our board of directors has established the overall strategic direction for
Banknorth. It approves our overall risk policies and oversees our overall risk
management process. The board has established 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.

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CREDIT RISK MANAGEMENT

General

The Board Risk Management Committee monitors our credit risk management. Our
strategy for credit risk management includes stringent, centralized policies
and uniform underwriting criteria for all loans. The strategy also includes
diversification on a geographic, industry and customer level, regular credit
examinations and quarterly management review of large loans and loans with a
deterioration of credit quality. We maintain an internal rating system that
provides a mechanism to regularly monitor the credit quality of our loan
portfolio. The rating system is intended to identify and measure the credit
quality of lending relationships. For consumer loans, we utilize standard
credit scoring systems to assess consumer credit risks and to price consumer
products accordingly. We strive to identify potential problem loans early,
take any necessary charge-offs promptly and maintain adequate reserve levels.
See Results of Operations   Provision and Allowance for Loan and Lease
Losses.

Our residential loan portfolio accounted for 19% of the total loan portfolio at
March 31, 2003 and 17% at December 31, 2002. This proportionate increase is
due to the composition of the loan portfolio of American acquired in February
2003. Our residential loans are generally secured by single-family homes
(one-to-four units) and have a maximum loan to value ratio of 80%, unless the
excess is protected by mortgage insurance. At March 31, 2003, 0.32% of our
residential loans were nonperforming, as compared to 0.24% at December 31, 2002
and 0.30% at March 31, 2002. Net charge-offs to average residential loans
outstanding for the three months ended March 31, 2003 was not significant.

Our commercial real estate loan portfolio accounted for 32% of the total loan
portfolio at March 31, 2002 and 34% at December 31, 2002. This portfolio
consists 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 (food stores). These loans
generally are secured by properties located in the New England states and
upstate New York. At March 31, 2003, 0.46% of our commercial real estate loans
were nonperforming, as compared to 0.37% at December 31, 2002 and 0.50% at
March 31, 2002. Net charge-offs to average commercial real estate loans
outstanding for the three months ended March 31, 2003 was (.02%).

Our commercial business loan and lease portfolio accounted for 20% of the total
loan portfolio at March 31, 2003 compared to 21% at December 31, 2002.
Commercial business loans and leases are generally made to small to medium size
businesses located within our market areas. These loans are not concentrated
in any particular industry, but reflect the broad-based economy 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. Through
a subsidiary, we also offer direct equipment leases, which amounted to $101.4
million at March 31, 2003. We do not emphasize the purchase of participations
in syndicated commercial loans. At March 31, 2003, we had $218 million of
outstanding participations in syndicated commercial loans and had an additional
$296 million of unfunded commitments related to these participations. At March
31, 2003, 1.25% of our commercial business loans were nonperforming, as
compared to 1.10% at December 31, 2002 and 1.38% at March 31, 2002. Net
charge-offs to average commercial business loans and leases outstanding for the
three months ended March 31, 2003 was .35%.

The following table presents the geographic distribution of our commercial real
estate loans and commercial business loans and leases at March 31, 2003 and
December 31, 2002.

Table 8  Commercial Loans by State

|              |       |   |                        |           |                     |   |                        |           |              |   |           |           |              |   |         |           |  |   |           |           |  |   |           |           | 
|------------- | ----- | - | ---------------------- | --------- | ------------------- | - | ---------------------- | --------- | ------------ | - | --------- | --------- | ------------ | - | ------- | --------- |  | - | --------- | --------- |  | - | --------- | --------- | 
|              |       |   | Commercial Real Estate |           | Commercial Business |   | Total Commercial Loans
|              |       |   |                        |           |                     |   |                       
|              |       |   | March 31,              |           | December 31,        |   | March 31,              |           | December 31, |   | March 31, |           | December 31,
|              |       |   | 2003                   |           | 2002                |   | 2003                   |           | 2002         |   | 2003      |           | 2002        
|              |       |   |                        |           |                     |   |                        |           |              |   |           |           |             
|Massachusetts |       | $ | 2,247,044              |           |                     | $ | 2,174,534              |           |              | $ | 1,053,544 |           |              | $ | 982,078 |           |  | $ | 3,300,588 |           |  | $ | 3,156,612 |          
|Maine         |       |   | 860,723                |           |                     |   | 868,091                |           |              |   | 678,301   |           |              |   | 640,258 |           |  |   | 1,539,024 |           |  |   | 1,508,349 |          
|New Hampshire |       |   | 706,457                |           |                     |   | 703,743                |           |              |   | 472,544   |           |              |   | 461,079 |           |  |   | 1,179,001 |           |  |   | 1,164,822 |          
|Vermont       |       |   | 597,029                |           |                     |   | 594,849                |           |              |   | 379,277   |           |              |   | 419,291 |           |  |   | 976,306   |           |  |   | 1,014,140 |          
|Connecticut   |       |   | 435,244                |           |                     |   | 286,658                |           |              |   | 317,244   |           |              |   | 265,503 |           |  |   | 752,488   |           |  |   | 552,161   |          
|New York      |       |   | 170,368                |           |                     |   | 164,174                |           |              |   | 179,124   |           |              |   | 200,265 |           |  |   | 349,492   |           |  |   | 364,439   |          
|              |       |   |                        |           |                     |   |                        |           |              |   |           |           |              |   |         |           |  |   |           |           |  |   |           |          
|              | Total |   | $                      | 5,016,865 |                     |   | $                      | 4,792,049 |              |   | $         | 3,080,034 |              |   | $       | 2,968,474 |  |   | $         | 8,096,899 |  |   | $         | 7,760,523 | 
|              |       |   |                        |           |                     |   |                        |           |              |   |           |           |              |   |         |           |  |   |           |           |  |   |           |          

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Consumer loans and leases accounted for 29% of our total loan portfolio at
March 31, 2003 and 28% at December 31, 2002. At March 31, 2003, 0.17% of our
consumer loans were nonperforming, as compared to 0.23% at December 31, 2002
and March 31, 2002. Net charge-offs to average consumer loans outstanding for
the three months ended March 31, 2003 was .63%. The following table lists our
consumer loans by type as of March 31, 2003 and December 31, 2002:

Table 9  Composition of Consumer Loans

|                                               |  |           |           |              |  |        |        |       |  |   |           |      |  |  |        |  
|---------------------------------------------- |  | --------- | --------- | ------------ |  | ------ | ------ | ----- |  | - | --------- | ---- |  |  | ------ | -
|                                               |  | March 31, |           | December 31,
|                                               |  | 2003      |           | 2002        
|                                               |  |           |           |             
|                                               |  |           |           |              |  | % of   |        |       |  |   |           | % of
|                                               |  | Amount    |           | Total        |  | Amount |        | Total
|                                               |  |           |           |              |  |        |        |      
|Home equity loans                              |  | $         | 1,972,623 |              |  |        | 44.29  | %     |  | $ | 1,554,264 |      |  |  | 39.72  | %
|Automobile and other vehicle loans and leases  |  |           | 1,523,463 |              |  |        | 34.21  | %     |  |   | 1,478,228 |      |  |  | 37.77  | %
|Mobile home loans                              |  |           | 165,559   |              |  |        | 3.72   | %     |  |   | 171,715   |      |  |  | 4.39   | %
|Vision, dental, and orthodontia fee plan loans |  |           | 165,591   |              |  |        | 3.72   | %     |  |   | 172,861   |      |  |  | 4.42   | %
|Education loans                                |  |           | 151,493   |              |  |        | 3.40   | %     |  |   | 135,386   |      |  |  | 3.46   | %
|Other                                          |  |           | 474,694   |              |  |        | 10.66  | %     |  |   | 400,834   |      |  |  | 10.24  | %
|                                               |  |           |           |              |  |        |        |       |  |   |           |      |  |  |        |  
|Total                                          |  | $         | 4,453,423 |              |  |        | 100.00 | %     |  | $ | 3,913,288 |      |  |  | 100.00 | %
|                                               |  |           |           |              |  |        |        |       |  |   |           |      |  |  |        |  

Nonperforming Assets

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. Total nonperforming assets
as a percentage of total assets were 0.31% at March 31, 2003, 0.29% at December
31, 2002 and 0.37% at March 31, 2002. Total nonperforming assets as a
percentage of total loans and total other nonperforming assets was 0.53% at
March 31, 2003, 0.49% at December 31, 2002 and 0.60% at March 31, 2002. See
Table 10 for a summary of nonperforming assets for the last five years. A
significant factor in the increase in nonperforming assets were the
acquisitions in 2003 and 2002 as shown in Table 11.

We continue to focus on asset quality and to allocate significant resources to
the key asset quality control functions of credit policy and administration and
loan review. The collection, workout and asset management functions focus on
the reduction of nonperforming assets. Despite the ongoing focus on asset
quality and reductions of nonperforming asset levels, there can be no assurance
that adverse changes in the real estate markets and economic conditions in our
primary market areas will not result in higher nonperforming asset levels in
the future and negatively impact our operations through higher provisions for
loan losses, net loan charge-offs, decreased accrual of interest income and
increased noninterest expenses as a result of the allocation of resources to
the collection and workout of nonperforming assets.

Residential real estate loans are generally placed on nonaccrual when they
become 120 days past due or are in the process of foreclosure. All closed-end
consumer loans 90 days or more past due and any equity line in the process of
foreclosure are placed on nonaccrual status. Consumer loans are charged-off
upon reaching 120 or 180 days past due depending on the type of loan. We
generally place all commercial real estate loans and commercial business loans
and leases which are 90 days or more past due, unless secured by sufficient
cash or other assets immediately convertible to cash, on nonaccrual status. At
March 31, 2003, we had $3.6 million of accruing loans which were 90 days or
more delinquent, as compared to $3.4 million at December 31, 2002 and $5.4
million at March 31, 2002.

We may also place loans which are less than 90 days past due on nonaccrual
(and, therefore, nonperforming) status when in our judgment these loans are
likely to present future principal and/or interest repayment problems and
ultimately would be classified as nonperforming.

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TABLE 10  Nonperforming Assets

|                                                                                                              |                                      |   |           |        |            |   |           |        |           |   |           |        |  |   |        |        |  |   |        |        | 
|------------------------------------------------------------------------------------------------------------- | ------------------------------------ | - | --------- | ------ | ---------- | - | --------- | ------ | --------- | - | --------- | ------ |  | - | ------ | ------ |  | - | ------ | ------ | 
|                                                                                                              |                                      |   | 3/31/2003 |        | 12/31/2002 |   | 9/30/2002 |        | 6/30/2002 |   | 3/31/2002
|                                                                                                              |                                      |   |           |        |            |   |           |        |           |   |          
|Nonaccrual loans and leases:                                                                                  |                                      |   |           |        |            |   |           |        |           |   |           |        |  |   |        |        |  |   |        |       
|Residential real estate loans                                                                                 |                                      | $ | 9,828     |        |            | $ | 5,719     |        |           | $ | 6,733     |        |  | $ | 7,075  |        |  | $ | 7,689  |       
|Commercial real estate loans                                                                                  |                                      |   | 22,990    |        |            |   | 17,649    |        |           |   | 16,762    |        |  |   | 20,254 |        |  |   | 20,812 |       
|Commercial business loans and leases                                                                          |                                      |   | 38,562    |        |            |   | 32,693    |        |           |   | 33,014    |        |  |   | 33,573 |        |  |   | 34,481 |       
|Consumer loans and leases                                                                                     |                                      |   | 7,457     |        |            |   | 9,194     |        |           |   | 8,364     |        |  |   | 6,008  |        |  |   | 8,183  |       
|                                                                                                              |                                      |   |           |        |            |   |           |        |           |   |           |        |  |   |        |        |  |   |        |       
|Total nonaccrual loans and leases                                                                             |                                      |   | 78,837    |        |            |   | 65,255    |        |           |   | 64,873    |        |  |   | 66,910 |        |  |   | 71,165 |       
|Total troubled debt restructurings                                                                            |                                      |   |          |        |            |   |          |        |           |   |          |        |  |   |       |        |  |   |       |       
|                                                                                                              |                                      |   |           |        |            |   |           |        |           |   |           |        |  |   |        |        |  |   |        |       
|                                                                                                              | Total nonperforming loans and leases |   |           | 78,837 |            |   |           | 65,255 |           |   |           | 64,873 |  |   |        | 66,910 |  |   |        | 71,165 | 
|                                                                                                              |                                      |   |           |        |            |   |           |        |           |   |           |        |  |   |        |        |  |   |        |       
|Other nonperforming assets:                                                                                   |                                      |   |           |        |            |   |           |        |           |   |           |        |  |   |        |        |  |   |        |       
|Other real estate owned, net of related reserves                                                              |                                      |   | 541       |        |            |   | 100       |        |           |   | 92        |        |  |   | 1,212  |        |  |   | 1,262  |       
|Repossessions, net of related reserves                                                                        |                                      |   | 3,276     |        |            |   | 3,536     |        |           |   | 3,807     |        |  |   | 1,964  |        |  |   | 2,251  |       
|Securities available for sale                                                                                 |                                      |   |          |        |            |   |          |        |           |   |          |        |  |   | 2,104  |        |  |   | 2,104  |       
|                                                                                                              |                                      |   |           |        |            |   |           |        |           |   |           |        |  |   |        |        |  |   |        |       
|                                                                                                              | Total other nonperforming assets     |   |           | 3,817  |            |   |           | 3,636  |           |   |           | 3,899  |  |   |        | 5,280  |  |   |        | 5,617  | 
|                                                                                                              |                                      |   |           |        |            |   |           |        |           |   |           |        |  |   |        |        |  |   |        |       
|Total nonperforming assets                                                                                    |                                      | $ | 82,654    |        |            | $ | 68,891    |        |           | $ | 68,772    |        |  | $ | 72,190 |        |  | $ | 76,782 |       
|                                                                                                              |                                      |   |           |        |            |   |           |        |           |   |           |        |  |   |        |        |  |   |        |       
|Accruing loans and leases which are 90 days or more overdue                                                   |                                      | $ | 3,607     |        |            | $ | 3,449     |        |           | $ | 2,407     |        |  | $ | 2,680  |        |  | $ | 5,430  |       
|                                                                                                              |                                      |   |           |        |            |   |           |        |           |   |           |        |  |   |        |        |  |   |        |       
|Total nonperforming loans as a percentage of total
loans and leases(1)                                        |                                      |   | 0.51      | %      |            |   | 0.46      | %      |           |   | 0.47      | %      |  |   | 0.51   | %      |  |   | 0.56   | %     
|Total nonperforming assets as a percentage of total assets                                                    |                                      |   | 0.31      | %      |            |   | 0.29      | %      |           |   | 0.31      | %      |  |   | 0.34   | %      |  |   | 0.37   | %     
|Total nonperforming assets as a percentage of total loans
and leases (1) and total other nonperforming assets |                                      |   | 0.53      | %      |            |   | 0.49      | %      |           |   | 0.50      | %      |  |   | 0.55   | %      |  |   | 0.60   | %     



---

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

TABLE 11  Nonperforming Assets from Acquisitions

|                                     |                                      |   |            |       |           |   |           |     |         |   |     |     |  |   |     |     | 
|------------------------------------ | ------------------------------------ | - | ---------- | ----- | --------- | - | --------- | --- | ------- | - | --- | --- |  | - | --- | --- | 
|                                     |                                      |   | American   |       | Warren    |   | Bancorp   |     | Ipswich
|                                     |                                      |   |            |       |           |   |           |     |        
|Acquisition
date                     | 2/14/2003                            |   | 12/31/2002 |       | 8/31/2002 |   | 7/26/2002
|                                     |                                      |   |            |       |           |   |           |     |         |   |     |     |  |   |     |    
|Nonaccrual loans and leases:         |                                      |   |            |       |           |   |           |     |         |   |     |     |  |   |     |    
|Residential real estate loans        |                                      | $ | 6,044      |       |           | $ |          |     |         | $ | 125 |     |  | $ |    |    
|Commercial real estate loans         |                                      |   |           |       |           |   | 738       |     |         |   |    |     |  |   |    |    
|Commercial business loans and leases |                                      |   |           |       |           |   | 84        |     |         |   | 580 |     |  |   | 167 |    
|Consumer loans and leases            |                                      |   |           |       |           |   |          |     |         |   | 108 |     |  |   |    |    
|                                     |                                      |   |            |       |           |   |           |     |         |   |     |     |  |   |     |    
|                                     | Total nonperforming loans and leases |   |            | 6,044 |           |   |           | 822 |         |   |     | 813 |  |   |     | 167 | 
|                                     |                                      |   |            |       |           |   |           |     |         |   |     |     |  |   |     |    
|Other nonperforming assets:          |                                      |   |            |       |           |   |           |     |         |   |     |     |  |   |     |    
|Other
real estate owned              |                                      |   | 202        |       |           |   |          |     |         |   |    |     |  |   |    |    
|                                     |                                      |   |            |       |           |   |           |     |         |   |     |     |  |   |     |    
|                                     | Total other nonperforming assets     |   |            | 202   |           |   |           |    |         |   |     |    |  |   |     |    | 
|                                     |                                      |   |            |       |           |   |           |     |         |   |     |     |  |   |     |    
|Total nonperforming assets           |                                      | $ | 6,246      |       |           | $ | 822       |     |         | $ | 813 |     |  | $ | 167 |    
|                                     |                                      |   |            |       |           |   |           |     |         |   |     |     |  |   |     |    

Net Charge-offs

Net charge-offs were $8.8 million for the three months ended March 31,2003, as
compared to $10.8 million for the three months ended March 31, 2002. Net
charge-offs represented 0.24% and 0.34% of average loans and leases outstanding
for the quarters ended March 31, 2003 and 2002, respectively.

Potential Problem Loans

In addition to nonperforming loans as discussed in the Credit Risk Management
section above, we also have loans that are 30 to 89 days delinquent and still
accruing. These loans amounted to $144 million at March 31, 2003 compared to

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$139 million at December 31, 2002. These loans and related delinquency trends
are considered in the evaluation of the allowance for loan and lease losses and
the determination of the provision for loan and lease losses.

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 our board of directors and monitored
periodically by the Board Risk Management Committee. 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 the state presidents of our banking subsidiary.

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 and deposit gathering. In
addition to directly impacting net interest income, changes in the level of
interest rates can also affect (i) the amount of loans originated and sold by
us, (ii) the ability of borrowers to repay adjustable or variable rate loans,
(iii) the average maturity of loans, (iv) the rate of amortization of premiums
paid on securities and capitalized mortgage servicing rights, (v) the fair
value of our saleable assets, the amount of unrealized gains and losses on
securities available for sale per SFAS No. 115, and the resultant ability to
realize gains and (vi) per SFAS Nos. 133 and 138, the fair value of derivatives
carried on our balance sheet, derivative hedge effectiveness testing, and the
amount of ineffectiveness recognized in earnings.

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

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

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

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We manage the interest-rate risk inherent in our core banking operations using
non-derivative and derivative instruments. Some non-derivative instruments
sometimes contain embedded options, mainly fixed-rate investment securities and
borrowed funds that can be prepaid or called away. When appropriate, we use
derivative instruments such as interest-rate swaps, interest rate floors,
interest rate caps and interest rate corridor agreements, among other
instruments. Derivatives used for hedging are designated at inception. At
March 31, 2003, our designated hedging activities were limited to forward
commitments related to hedging our mortgage banking operations and a $200
million interest rate swap at 3 month LIBOR plus 3.47% that hedged $200 million
of 7.625% fixed rate subordinated debt issued by our banking subsidiary.

Swaps and caps are offered to commercial borrowers through our commercial
borrower derivative hedging program. While these derivatives are designated as
speculative per SFAS No. 133, we believe that our exposure to commercial
customer derivatives is minimal because these contracts are secured by loan
collateral and are matched with a mirrored fixed-rate swap transaction at
inception. The program allows us to retain variable-rate commercial loans
while allowing the commercial borrowers to synthetically fix the loan rate by
entering into a variable-to-fixed interest rate swap. In the quarter ended
March 31, 2003, we recorded a notional amount of approximately $50 million in
derivative contracts with commercial borrowers and an equal amount of mirrored
transactions with swap dealers. It is anticipated that, over time, customer
interest rate derivatives will reduce the interest rate risk inherent in our
longer-term, fixed-rate commercial business and commercial real estate 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
70 to 90% of all loans which are currently closed or are anticipated to close.
Purchased mortgage-backed security options are also used to hedge rate-locked
loans.

The average balances for the first quarters of 2003 and 2002 of residential
mortgage loans held for sale and related hedge positions are summarized below:

|                                                    |  |                    |         |      |  |   |         | 
|--------------------------------------------------- |  | ------------------ | ------- | ---- |  | - | ------- | 
|                                                    |  | Three Months Ended
|                                                    |  | March 31,         
|                                                    |  |                   
|                                                    |  | 2003               |         | 2002
|                                                    |  |                    |         |     
|Residential mortgage loans held for sale            |  | $                  | 87,957  |      |  | $ | 78,623  | 
|Rate-locked loan commitments                        |  |                    | 94,513  |      |  |   | 58,558  | 
|Forward sales contracts                             |  |                    | 170,075 |      |  |   | 117,224 | 
|Purchased mortgage-backed security/treasury options |  |                    |        |      |  |   | 13,333  | 

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%. The gradual 2% falling
rate scenario was slightly outside guidelines at December 31, 2002. The ALCO
voted to approve the December 31, 2002 guidelines exception because a gradual
2% decreasing rate scenario was deemed unlikely based on the current level of
interest rates. However, all interest rate risk measures were within compliance
guidelines as of March 31, 2003. The ALCO currently is more focused on the
gradual decreasing 1% rate scenario than on the gradual decreasing 2% scenario
and on strategies that prove beneficial to income should rates decline or the
yield curve flatten. A strategy was implemented starting in April 2003 to
deleverage the balance sheet by selling up to $1 billion of investments and
using the proceeds
to payoff wholesale borrowings with similar rates and effective duration. See
Recent Developments above.

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

|                  |  |                 |       |                 |  |                 |       |                 |  |  |      |   |  |  |      |  
|----------------- |  | --------------- | ----- | --------------- |  | --------------- | ----- | --------------- |  |  | ---- | - |  |  | ---- | -
|                  |  | 200 Basis Point |       | 100 Basis Point |  | 100 Basis Point |       | 200 Basis Point
|                  |  | Rate Decrease   |       | Rate Decrease   |  | Rate Increase   |       | Rate Increase  
|                  |  |                 |       |                 |  |                 |       |                
|March 31, 2003    |  |                 | (4.77 | )%              |  |                 | (1.58 | )%              |  |  | 1.27 | % |  |  | 1.57 | %
|                  |  |                 |       |                 |  |                 |       |                 |  |  |      |   |  |  |      |  
|December 31, 2002 |  |                 | (6.22 | )%              |  |                 | (2.64 | )%              |  |  | 2.15 | % |  |  | 3.40 | %
|                  |  |                 |       |                 |  |                 |       |                 |  |  |      |   |  |  |      |  

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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 March 31, 2003 were (i) the shape of the
U.S. Government securities and interest rate swap yield curve, (ii) changes in
the composition of the investment portfolio, (iii) changes in the composition
of mortgage assets and prepayment speeds of mortgage assets, (iv) reduction of
deposit interest expense, and (v) changes in the wholesale borrowings portfolio
structure. Interest rates were little changed for the period March 31, 2003
versus December 31, 2002. However, inter-period mortgage rate changes resulted
in significant mortgage loan activity. As a result, projected mortgage loans
are forecasted to prepay at a 40% constant prepayment rate (CPR) in April 2003.
Because of historically low rates and increased loan cash inflows, effective
duration estimates for loans and mortgage-backed securities are shorter than
normal, thus increasing asset sensitivity. Asset liability management actions
taken to date helped to reduce asset sensitivity. These actions included the
purchase of investments with more structured cash flows, replacing
approximately $700 million
of existing wholesale borrowings some of which were callable, and hedging $200
million of subordinated debt with an interest rate swap. The above table
reflects the net impact of these changes. We remain asset sensitive and project
net interest income to increase if short and long interest rates move
symmetrically higher.

Mortgage servicing rights as of March 31, 2003 had a fair value of
approximately $4.6 million versus a book value of
$3.6 million. The book value of mortgage
servicing rights represented 0.50% of the underlying balance of loans serviced
for others at March 31, 2003. 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 March 31, 2003, our debt service requirements
consisted primarily of $295 million junior subordinated debentures issued to
four subsidiaries which mature starting in 2027. These junior subordinated
debentures have interest rates ranging from 8% to 10.52% and annual debt
service payments of $25.1 million.

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 $110 million unsecured line of credit which is renewable every 364 days
and, if used, carries interest at LIBOR plus 0.625%. At March 31, 2003, our
subsidiary bank had $402.0 million available for dividends that could be paid
without prior regulatory approval. In addition, the parent company had $66.1
million in cash or cash equivalents at March 31, 2003.

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,

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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
federal funds positions, monthly review of balance sheet changes, monthly
review of liquidity ratios, periodic liquidity forecasts and periodic review of
contingent funding plans.

As of March 31, 2003, Banknorth, NA had in the aggregate $3.7 billion of
immediately accessible liquidity, defined as cash that could be raised within
1-3 days through collateralized borrowings or sales of securities. This
represented 21% of retail deposits, as compared to a current policy minimum of
10% of deposits.

Also as of March 31, 2003, Banknorth, NA had in the aggregate potentially
volatile funds of $1.7 billion. These are funds that might flow out of the
bank over a 90-day period in an adverse environment. Management estimates this
figure by applying adverse probabilities to its various credit-sensitive and
economically-sensitive funding sources.

As of March 31, 2003, the ratio of immediately accessible liquidity to
potentially volatile funds was 221%, 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 our liquidity is sufficient to meet current and future funding requirements.

CAPITAL

At March 31, 2003, shareholders equity amounted to $2.5 billion, or 9.52% of
total assets. Tangible equity amounted to $1.4 billion or 5% of tangible
assets. In addition, through subsidiary trusts, we had outstanding at March
31, 2003 $295.1 million of capital securities as follows:

|                                 |  |          |           |        |  |      |         |        |  |          |       |   |  |  |           | 
|-------------------------------- |  | -------- | --------- | ------ |  | ---- | ------- | ------ |  | -------- | ----- | - |  |  | --------- | 
|                                 |  | Issuance |           |        |  |      |         | Stated |  | Maturity
|Name                             |  | Date     |           | Amount |  | Rate |         | Date  
|                                 |  |          |           |        |  |      |         |       
|Peoples Heritage Capital Trust I |  |          | 1/31/1997 |        |  | $    | 61,556  |        |  |          | 9.06  | % |  |  | 2/1/2027  | 
|Banknorth Capital Trust I        |  |          | 5/1/1997  |        |  |      | 30,000  |        |  |          | 10.52 | % |  |  | 5/1/2027  | 
|Ipswich Statutory Trust I        |  |          | 2/22/2001 |        |  |      | 3,500   |        |  |          | 10.20 | % |  |  | 2/22/2031 | 
|Banknorth Capital Trust II       |  |          | 2/22/2002 |        |  |      | 200,000 |        |  |          | 8.00  | % |  |  | 4/1/2032  | 
|                                 |  |          |           |        |  |      |         |        |  |          |       |   |  |  |           | 
|                                 |  |          |           |        |  | $    | 295,056 |        |  |          |       |   |  |  |           | 
|                                 |  |          |           |        |  |      |         |        |  |          |       |   |  |  |           | 

We also have $200 million of 7.625% subordinated notes due in 2011 issued by
our banking subsidiary that qualify as Tier 2 capital.

We paid a $0.16 per share dividend on our common stock during the first quarter
of 2003 compared to a $0.135 per share dividend in the first quarter of 2002.
In February 2002, the Board authorized 8 million shares to be repurchased in
the open market. As of March 31, 2003, a total of 6.6 million shares were
available for repurchase under these authorizations.

Capital guidelines issued by the Federal Reserve Board and the Office of the
Comptroller of Currency of the United States (OCC) respectively require us
and our banking subsidiary to maintain certain ratios, set forth in
Table 12. As indicated in such table, our and our banking subsidiarys
regulatory capital currently exceed all applicable requirements.

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Table 12  Capital Ratios

|                        |                                                   |  |        |           |                      |  |        |       |       |  |        |           |       |  |  |      |   |  |   |         |  |  |  |      |  
|----------------------- | ------------------------------------------------- |  | ------ | --------- | -------------------- |  | ------ | ----- | ----- |  | ------ | --------- | ----- |  |  | ---- | - |  | - | ------- |  |  |  | ---- | -
|                        |                                                   |  | Actual |           | Capital Requirements |  | Excess
|                        |                                                   |  |        |           |                      |  |       
|                        |                                                   |  | Amount |           | Ratio                |  | Amount |       | Ratio |  | Amount |           | Ratio
|                        |                                                   |  |        |           |                      |  |        |       |       |  |        |           |      
|As of March 31, 2003    |                                                   |  |        |           |                      |  |        |       |       |  |        |           |       |  |  |      |   |  |   |         |  |  |  |     
|                       
|Banknorth Group, Inc.   |                                                   |  |        |           |                      |  |        |       |       |  |        |           |       |  |  |      |   |  |   |         |  |  |  |     
|                        | Total capital (to risk weighted assets)           |  | $      | 1,978,928 |                      |  |        | 11.20 | %     |  | $      | 1,413,791 |       |  |  | 8.00 | % |  | $ | 565,137 |  |  |  | 3.20 | %
|                        | Tier 1 capital (to risk weighted assets)          |  |        | 1,557,952 |                      |  |        | 8.82  | %     |  |        | 706,895   |       |  |  | 4.00 | % |  |   | 851,057 |  |  |  | 4.82 | %
|                        | Tier 1 leverage capital ratio (to average assets) |  |        | 1,557,952 |                      |  |        | 6.54  | %     |  |        | 952,932   |       |  |  | 4.00 | % |  |   | 605,020 |  |  |  | 2.54 | %
|Banknorth, NA           |                                                   |  |        |           |                      |  |        |       |       |  |        |           |       |  |  |      |   |  |   |         |  |  |  |     
|                        | Total capital (to risk weighted assets)           |  | $      | 1,900,296 |                      |  |        | 10.78 | %     |  |        | 1,410,510 |       |  |  | 8.00 | % |  |   | 489,786 |  |  |  | 2.78 | %
|                        | Tier 1 capital (to risk weighted assets)          |  |        | 1,482,056 |                      |  |        | 8.41  | %     |  |        | 705,255   |       |  |  | 4.00 | % |  |   | 776,801 |  |  |  | 4.41 | %
|                        | Tier 1 leverage capital ratio (to average assets) |  |        | 1,482,056 |                      |  |        | 6.23  | %     |  |        | 951,152   |       |  |  | 4.00 | % |  |   | 530,904 |  |  |  | 2.23 | %
|                       
|As of December 31, 2002 |                                                   |  |        |           |                      |  |        |       |       |  |        |           |       |  |  |      |   |  |   |         |  |  |  |     
|                       
|Banknorth Group, Inc.   |                                                   |  |        |           |                      |  |        |       |       |  |        |           |       |  |  |      |   |  |   |         |  |  |  |     
|                        | Total capital (to risk weighted assets)           |  | $      | 1,960,869 |                      |  |        | 12.15 | %     |  | $      | 1,291,616 |       |  |  | 8.00 | % |  | $ | 669,253 |  |  |  | 4.15 | %
|                        | Tier 1 capital (to risk weighted assets)          |  |        | 1,558,974 |                      |  |        | 9.66  | %     |  |        | 645,808   |       |  |  | 4.00 | % |  |   | 913,166 |  |  |  | 5.66 | %
|                        | Tier 1 leverage capital ratio (to average assets) |  |        | 1,558,974 |                      |  |        | 7.13  | %     |  |        | 874,180   |       |  |  | 4.00 | % |  |   | 684,794 |  |  |  | 3.13 | %
|Banknorth, NA           |                                                   |  |        |           |                      |  |        |       |       |  |        |           |       |  |  |      |   |  |   |         |  |  |  |     
|                        | Total capital (to risk weighted assets)           |  | $      | 1,822,307 |                      |  |        | 11.31 | %     |  |        | 1,288,562 |       |  |  | 8.00 | % |  |   | 533,745 |  |  |  | 3.31 | %
|                        | Tier 1 capital (to risk weighted assets)          |  |        | 1,421,995 |                      |  |        | 8.83  | %     |  |        | 644,281   |       |  |  | 4.00 | % |  |   | 777,714 |  |  |  | 4.83 | %
|                        | Tier 1 leverage capital ratio (to average assets) |  |        | 1,421,995 |                      |  |        | 6.52  | %     |  |        | 871,830   |       |  |  | 4.00 | % |  |   | 550,165 |  |  |  | 2.52 | %

Net risk weighted assets were $17.7 billion and $16.1 billion at March 31, 2003
and December 31, 2002, respectively, for Banknorth Group, Inc. and $17.6
billion and $16.1 billion at March 31, 2003 and December 31, 2002,
respectively, for Banknorth, NA.

At March 31, 2003, Banknorth
Group, Inc. and Banknorth, NA were deemed
to be well capitalized under the regulations of the Federal Reserve Board and
the OCC, respectively, and in compliance with applicable capital requirements.

The ratio of BOLI to Tier 1 Capital plus loan loss reserves was 26.4% at March
31, 2003 and 21.5% at December 31, 2002. This increase was the result of the
$85.6 million of BOLI acquired in the merger with American on February 14,
2003. Our policy (which is consistent with regulatory guidelines) is a maximum
ratio of 25%, which is monitored monthly. We currently do not anticipate any
additional purchases or sales of BOLI.

CRITICAL ACCOUNTING POLICIES

We consider the following to be our critical accounting policies due to the
potential impact on our results of operations and the carrying value of certain
of our assets based on any changes in judgments and assumptions required to be
made by us in the application of these policies.

Allowance for Loan and Lease Losses

We maintain an allowance for loan and lease losses at a level which we believe
is sufficient to cover potential charge-offs on loans and leases deemed to be
uncollectible based on continuous review of a variety of factors. These
factors consist of the character and size of the loan portfolio, business and
economic conditions, loan growth, charge-off experience, delinquency trends,
nonperforming loan trends, portfolio migration data and other asset quality
factors. The primary means of adjusting the level of this allowance is through
provisions for loan and lease losses, which are established and charged to
income on a quarterly basis. Although we use available information to
establish the appropriate level of the allowance for loan and lease losses,
future additions to the allowance may be necessary because our estimates of the
potential losses in our loan and lease portfolio are susceptible to change as a
result of changes in the factors noted above. Any such increases would
adversely affect our results of operations. At March 31, 2003, our allowance
for loan and lease losses amounted to $226.7 million, and our provisions for
loan and lease losses amounted to $10.9 and $11.8 million for the quarters
ended March 31, 2003 and 2002, respectively. See also Credit Risk Management
below.

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For the commercial business loans and leases and the commercial real estate
loans portfolios, we evaluate specific loan status reports on certain loans
rated substandard or worse in excess of a specified dollar amount. On an
ongoing basis, an independent loan review function reviews classified loans to
ensure the accuracy of the loan classifications. Estimated reserves for each
of these credits are determined by reviewing current collateral value,
financial information, cash flow, payment history and trends and other relevant
facts surrounding the particular credit. In addition, the appraisal function
reviews the reasonableness of the third party appraisals. Provisions for
losses on the remaining commercial 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.

Accounting for Acquisitions and Review of Goodwill and Other Intangible Assets

In connection with acquisitions of other companies, we generally record as
assets on our financial statements both goodwill, an intangible asset which is
equal to the excess of the purchase price which we pay for another company over
the estimated fair value of the net assets acquired, and identifiable
intangible assets such as core deposit intangibles, non-compete agreements and
customer lists. Due to a change in an accounting standard, since January 1,
2002 we are no longer required to amortize the amount of our goodwill through a
charge to expense over the period of its expected life, and instead regularly
evaluate whether the carrying value of our goodwill has become impaired, in
which case we reduce its carrying value through a charge to our earnings.
Goodwill is evaluated for impairment at the following reporting units:
Community Banking, Insurance Brokerage and Investment Management. Core deposit
and other identifiable intangible assets are amortized to expense over their
estimated useful lives and are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of the asset may not
be recoverable. The valuation techniques used by us to determine the carrying
value of tangible and intangible assets acquired in acquisitions and the
estimated lives of identifiable intangible assets involve estimates for
discount rates, projected future cash flows and time period calculations, all
of which are susceptible to change based on changes in economic conditions and
other factors. Any changes in the estimates which we use to determine the
carrying value of our goodwill and identifiable intangible assets or which
otherwise adversely affects their value or estimated lives would adversely
affect our results of operations.

Accounting for Pension Plans

We use a December 31 measurement date to determine our pension expense and
related financial disclosure information. In accordance with SFAS No. 87, we
set the discount rate for our retirement plans by reference to investment grade
bond yields. We use Moodys published AA yield for long-term corporate bonds
for the month of December as an index, and our discount rate is set within 25
basis points of the index. Moodys AA yield dropped from 7.19% for December
2001 to 6.63% for December 2002. Similarly, we evaluate the expected long-term
rate of return on the assets held in our defined benefit pension plan based on
market and economic conditions, the plans asset allocation and other factors.
As a consequence of our most recent annual review, we reduced the discount rate
for all of our employee benefit plans from 7.25% as of December 31, 2001 to
6.75% as of December 31, 2002 and reduced our expected rate of return on our
pension plan assets from 9.0% for 2002 to 8.5% for 2003. Pension expense is
sensitive to changes in the discount rate and the expected return on assets.
For example, a change in the discount rate by 0.25% (while holding other
assumptions constant) would result in a $1.0 million change in our annual
pension expense, and a change in the expected rate of return by 0.25% (while
holding other assumptions constant) would result in a $0.4 million change in
our annual pension expense.

As with the computations on pension expense, cash contribution requirements to
the pension plan are sensitive to changes in the assumed discount rate and the
assumed rate of return on plan assets. We have traditionally contributed the
maximum tax-deductible amount to the pension plan each year, and we do not
anticipate that any increases in contribution requirements generated by recent
poor stock market performance will have a material impact on future cash flows.

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Unrecognized actuarial losses (which occur when investment returns are less
than expected) amounted to $25 and $18 million in 2002 and 2001, respectively,
and will continue to be amortized into pension expense in future periods. For
a discussion of pension expense in recent periods, see Results
of Operations  Noninterest Expense.

IMPACT OF NEW ACCOUNTING STANDARDS

For information on the impact of new accounting standards, see Note 12 to the
consolidated financial statements.

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, we carried out an
evaluation, under the supervision and with the participation of our management,
including our 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 our disclosure controls and procedures
are effective. There were no significant changes in our 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 that
are designed to ensure that the information required to be disclosed by us in
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

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##### Table of Contents



to be disclosed by us in reports filed under the Exchange Act is
accumulated and communicated to our management, including the chief
executive officer and chief financial officer, as appropriate to allow
timely decisions regarding required disclosure.




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.                                                   
| | --- |  | -----------------------------------------------------------------------------------------------------------
|
| |     |  | Exhibit No. 99.1
Certification of Chief Executive Officer Under 18 U.S.C. § 1350.                          
|
| |     |  | Exhibit No. 99.2
Certification of Chief Financial Officer Under 18 U.S.C. § 1350.                          
|
| |     |  |                                                                                                            
|
| | (b) |  | We filed a Current Report on Form 8-K or 8-K/A on January 2,
2003, February 19, 2003 and
February 26, 2003.

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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: May 13, 2003 |  | By:                   |  | /s/ William J. Ryan

William J. Ryan
Chairman, President and
Chief Executive Officer                                                 
|                   |  |                       |  |                                                                                                                                      
|Date: May 13, 2003 |  | By:                   |  | /s/ Stephen J. Boyle

Stephen J. Boyle
Executive Vice President,
Chief Financial Officer
(principal financial and accounting officer)

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PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION 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 officer 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 officer 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 officer 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: May 13, 2003 |  | /s/William J. Ryan

William J. Ryan
Chief Executive Officer

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##### Table of Contents



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

I, Stephen J. Boyle, 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 officer 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 officer 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 officer 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: May 13, 2003 |  | /s/ Stephen J. Boyle

Stephen J. Boyle
Chief Financial Officer

42



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##### Table of Contents






EXHIBIT INDEX

|             |  |                                                              
|------------ |  | -------------------------------------------------------------
|Exhibit 99.1 |  | Certification of Chief Executive Officer, dated May 13, 2003.
|             |  |                                                              
|Exhibit 99.2 |  | Certification of Chief Financial Officer, dated May 13, 2003.

43