-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WvD7Rtz7vYcvqap9l4tftdrtDr40VNB0wqC1I7bNukDoVqZOMPaCBhB9orcDHKXO RY35jueowXsZugm+rhJs8g== 0000950135-00-002882.txt : 20000516 0000950135-00-002882.hdr.sgml : 20000516 ACCESSION NUMBER: 0000950135-00-002882 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANKNORTH GROUP INC/ME CENTRAL INDEX KEY: 0000829750 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 010437984 STATE OF INCORPORATION: ME FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-16947 FILM NUMBER: 635119 BUSINESS ADDRESS: STREET 1: ONE PORTLAND SQ STREET 2: P O BOX 9540 CITY: PORTLAND STATE: ME ZIP: 04112 BUSINESS PHONE: 2077618500 MAIL ADDRESS: STREET 1: P O BOX 9540 CITY: PORTLAND STATE: ME ZIP: 04112-9540 FORMER COMPANY: FORMER CONFORMED NAME: PEOPLES HERITAGE FINANCIAL GROUP INC DATE OF NAME CHANGE: 19920703 10-Q 1 FORM 10-Q DATED 03/31/00 1 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, 2000 OR [ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 0-16947 BANKNORTH GROUP, INC. (formerly Peoples Heritage Financial Group, Inc.) ----------------------------------------------------------------------- (Exact name of Registrant as specified in its charter)
Maine 01-0437984 ------------------------------- ----------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Portland Square, Portland, Maine 04112 - ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code)
(207) 761-8500 ---------------------------------------------------- (Registrant's telephone number, including area code) Peoples Heritage Financial Group, Inc. --------------------------------------------------------------- (Former name, former address and former fiscal year, if changed from last report) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] The number of shares outstanding of the Registrant's common stock as of May 1, 2000 is: Common stock, par value $.01 per share 101,511,514 - -------------------------------------- ------------- (Class) (Outstanding) 2 INDEX BANKNORTH GROUP, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION PAGE --------------------- ---- Item 1. Financial Statements (unaudited) Consolidated Balance Sheets March 31, 2000 and December 31, 1999 3 Consolidated Statements of Income - Three months ended March 31, 2000 and 1999 4 Consolidated Statements of Changes in Shareholders' Equity - Three months ended March 31, 2000 and 1999 5 Consolidated Statements of Cash Flows - Three months ended March 31, 2000 and 1999 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3. Quantitative and Qualitative Disclosures about Market Risk 30 PART II. OTHER INFORMATION Item 1. Legal proceedings 30 Item 2. Changes in securities 30 Item 3. Defaults upon senior securities 30 Item 4. Submission of matters to a vote of security holders 30 Item 5 Other information 30 Item 6 Exhibits and reports on Form 8-K 31 Signatures 31
2 3 BANKNORTH GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
March 31, 2000 December 31,1999 -------------- ---------------- ASSETS (Unaudited) Cash and due from banks $ 318,989 $ 398,759 Federal funds sold and other short term investments 76,566 203,789 Securities available for sale, at market value 4,999,905 5,161,009 Securities held to maturity (fair value of $510,308 and $519,725 at March 31, 2000 and December 31, 1999, respectively) 522,632 541,332 Loans held for sale 15,367 67,220 Loans and leases: Residential real estate mortgages 1,453,688 1,410,494 Commercial real estate mortgages 1,828,637 1,795,763 Commercial business loans and leases 1,391,825 1,291,371 Consumer loans and leases 2,483,879 2,347,031 ------------ ------------ 7,158,029 6,844,659 Less: Allowance for loan and lease losses 107,214 107,871 ------------ ------------ Net loans and leases 7,050,815 6,736,788 ------------ ------------ Premises and equipment 144,018 141,739 Goodwill and other intangibles 110,298 113,264 Mortgage servicing rights 39,284 46,829 Bank-owned life insurance 232,722 228,423 Other assets 292,984 280,376 ------------ ------------ $ 13,803,580 $ 13,919,528 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Regular savings $ 1,244,740 $ 1,237,092 Money market and NOW accounts 2,264,863 2,232,891 Certificates of deposit 3,250,695 3,159,864 Brokered deposits 124,169 173,798 Demand deposits 1,366,269 1,311,112 ------------ ------------ Total deposits 8,250,736 8,114,757 ------------ ------------ Federal funds purchased and securities sold under repurchase agreements 924,896 1,089,316 Borrowings from the Federal Home Loan Bank of Boston 3,596,968 3,667,399 Other borrowings 17,466 31,849 Other liabilities 91,443 96,455 ------------ ------------ Total liabilities 12,881,509 12,999,776 ------------ ------------ Company obligated, mandatory redeemable securities of subsidiary trust holding solely parent junior subordinated debentures 68,775 68,775 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, 200,000,000 shares authorized, 106,647,386 and 106,647,585 shares issued) 1,066 1,066 Paid-in capital 509,234 509,009 Retained earnings 554,583 530,002 Unearned compensation (1,606) (1,690) Accumulated other comprehensive income (loss): Net unrealized loss on securities available for sale (119,402) (105,149) Treasury stock, at cost (5,157,692 shares and 4,465,600 shares) (90,579) (82,261) ------------ ------------ Total shareholders' equity 853,296 850,977 ------------ ------------ $ 13,803,580 $ 13,919,528 ============ ============
See accompanying Notes to Consolidated Financial Statements. 3 4 BANKNORTH GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except share data) (Unaudited)
Three Months Ended March 31, ---------------------------- 2000 1999 ------------ ------------- Interest and dividend income: Interest on loans and leases $ 145,812 $ 154,471 Interest and dividends on securities 95,257 55,777 ------------ ------------ Total interest and dividend income 241,069 210,248 Interest expense: Interest on deposits 62,862 64,976 Interest on borrowed funds 67,873 37,334 ------------ ------------ Total interest expense 130,735 102,310 Net interest income 110,334 107,938 Provision for loan and lease losses 2,815 3,565 ------------ ------------ Net interest income after provision for loan and lease losses 107,519 104,373 Noninterest income: Customer services 14,505 10,812 Mortgage banking services 2,998 4,205 Insurance commissions 5,279 5,282 Trust services 3,701 3,467 Investment advisory services 1,589 978 Bank-owned life insurance income 4,299 2,308 Net securities gains 9 18 Other noninterest income 3,166 2,364 ------------ ------------ 35,546 29,434 Noninterest expenses: Salaries and employee benefits 43,232 40,170 Data processing 6,440 7,006 Occupancy 7,764 6,949 Equipment 5,295 4,807 Distributions on securities of subsidiary trust 1,558 1,986 Amortization of goodwill and other intangibles 2,966 2,968 Special charges 1,583 33,235 Other noninterest expenses 15,558 13,883 ------------ ------------ 84,396 111,004 Income before income tax expense 58,669 22,803 Applicable income tax expense 19,364 9,309 ------------ ------------ Net income $ 39,305 $ 13,494 ============ ============ Weighted average shares outstanding: Basic 101,287,535 103,429,129 Diluted 101,811,677 104,851,511 Earnings per share: Basic $ 0.39 $ 0.13 Diluted 0.39 0.13
See accompanying Notes to Consolidated Financial Statements. 4 5 BANKNORTH GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (In thousands) (Unaudited)
Accumulated Compen- Other Par Paid-in Retained sation Comprehensive Treasury Value Capital Earnings ESOP Income (Loss) Stock Total --------------------------------------------------------------------------- Balances at December 31, 1999 $1,066 $509,009 $530,002 ($1,690) ($105,149) ($82,261) $850,977 Net income -- -- 39,305 -- -- -- 39,305 Unrealized losses on securities, net of reclassification adjustment -- -- -- -- (14,253) -- (14,253) -------- Comprehensive income 25,052 -------- Common stock issued for employee benefit plans -- -- (2,113) -- -- 4,025 1,912 Treasury stock purchased -- -- -- -- -- (12,343) (12,343) Decrease in unearned compensation -- 225 -- 84 -- -- 309 Cash dividends -- -- (12,611) -- -- -- (12,611) ------- -------- -------- ------- --------- -------- -------- Balances at March 31, 2000 $1,066 $509,234 $554,583 ($1,606) ($119,402) ($90,579) $853,296 ======= ======== ======== ======= ========= ======== ======== Balances at December 31, 1998 $1,066 $509,473 $447,438 ($2,027) ($1,651) ($53,171) $901,128 Net income -- -- 13,494 -- -- -- 13,494 Unrealized losses on securities net of reclassification adjustment -- -- -- -- 1,601 -- 1,601 -------- Comprehensive income 15,095 -------- Premium on repurchase of trust preferred securities -- (2,761) -- -- -- -- (2,761) Common stock issued for employee benefit plans -- -- (2,009) -- -- 5,442 3,433 Decrease in unearned compensation -- 244 -- 57 -- -- 301 Payment of fractional shares -- (2) -- -- -- -- (2) Cash dividends -- -- (12,016) -- -- -- (12,016) ------- -------- ------- ------- --------- -------- --------- Balances at March 31, 1999 $1,066 $506,954 $446,907 ($1,970) ($50) ($47,729) $905,178 ======= ======== ======== ======= ========= ======== ========
See accompanying Notes to Consolidated Financial Statements. 5 6 BANKNORTH GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited)
Three Months Ended March 31, ---------------------------- 2000 1999 -------- ------- Cash flows from operating activities: Net income $39,305 $13,494 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan and lease losses 2,815 3,565 Depreciation 4,938 4,600 Amortization of goodwill and other intangibles 2,966 2,968 Provision for deferred tax expense 10,399 (702) ESOP expense 309 301 Net gains realized from sales of securities and consumer loans (9) (18) Net losses realized from sales of loans held for sale (a component of mortgage banking services) 134 74 Earnings from bank owned life insurance (4,299) (2,308) Net (increase) decrease in mortgage servicing rights 7,545 (5,178) Proceeds from sales of loans held for sale 52,537 491,963 Residential loans originated and purchased for sale (818) (271,084) Net decrease (increase) in interest and dividends receivable and other assets (15,325) (8,488) Net increase (decrease) in other liabilities (5,012) (13,745) --------- ----------- Net cash provided (used) by operating activities $95,485 $215,442 --------- ----------- Cash flows from investing activities: Proceeds from sales of securities available for sale $24,507 $20,635 Proceeds from maturities and principal repayments of securities available for sale 189,597 417,523 Purchases of securities available for sale (74,926) (1,338,240) Proceeds from maturities and principal repayments of securities held to maturity 18,700 -- Net (increase) decrease in loans and leases (316,842) 17,011 Purchase of bank owned life insurance -- (150,000) Net additions to premises and equipment (7,217) (4,133) --------- ----------- Net cash provided (used) by investing activities ($166,181) ($1,037,204) --------- ----------- Cash flows from financing activities: Net (decrease) increase in deposits $135,979 ($159,561) Net increase (decrease) in securities sold under repurchase agreements (164,420) (72,169) Proceeds from Federal Home Loan Bank of Boston borrowings 2,839,300 1,020,000 Payments on Federal Home Loan Bank of Boston borrowings (2,909,731) (146,720) Net increase (decrease) in other borrowings (14,383) (1,319) Repurchase of trust preferred securities -- (32,761) Issuance of stock 1,912 3,431 Purchase of treasury stock (12,343) -- Dividends paid (12,611) (12,016) --------- ----------- Net cash provided by financing activities ($136,297) $598,885 --------- ----------- Increase (decrease) in cash and cash equivalents ($206,993) ($222,877) Cash and cash equivalents at beginning of period 602,548 699,313 --------- ----------- Cash and cash equivalents at end of period $395,555 $476,436 ========= =========== For the three months ended March 31, 2000 and 1999, interest of $179,815 and $101,484 and income taxes of $3,494 and $910 were paid, respectively.
See accompanying Notes to Consolidated Financial Statements. 6 7 BANKNORTH GROUP, INC. AND SUBSIDIARIES (FORMERLY PEOPLES HERITAGE FINANCIAL GROUP, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2000 (IN THOUSANDS) (UNAUDITED) NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles and predominant practices within the banking industry. The Company has not changed its accounting and reporting policies from those disclosed in its 1999 Annual Report on Form 10-K. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the consolidated financial statements have been included. The results of operations and other data for the three months ended March 31, 2000 are not necessarily indicative of the results that may be expected for any other interim period or the entire year ending December 31, 2000. Certain amounts in the prior periods have been reclassified to conform to the current presentation. NOTE 2 - OTHER COMPREHENSIVE INCOME (LOSS) The components of total comprehensive income for the Company are net income and unrealized gains (losses) on securities available for sale, net of tax. The following is a reconciliation of comprehensive income for the three months ended March 31, 2000 and 1999.
Three Months Ended March 31, ----------------------- 2000 1999 --------- -------- Net income $39,305 $13,494 Other comprehensive income (loss), net of tax: Unrealized gains (losses) on available for sale securities: Unrealized holding gains (losses) arising during the period (14,247) 1,613 Less: reclassification adjustment for gains included in net income 6 12 --------- ------- Other comprehensive income (loss), net (14,253) 1,601 --------- ------- Comprehensive income $25,052 $15,095 ========= =======
7 8 NOTE 3 - EARNINGS PER SHARE The computations of basic and diluted net income per share and weighted average shares outstanding follow (dollars in thousands, except per share amounts):
Three Months Ended March 31, ---------------------------- 2000 1999 ----------- ----------- Net income $39,305 $13,494 =========== =========== Weighted average shares outstanding Basic: 101,287,535 103,429,129 Effect of dilutive securities: Stock options 524,142 1,422,382 ----------- ----------- Diluted 101,811,677 104,851,511 =========== =========== Net income per share: Basic $0.39 $0.13 Diluted 0.39 0.13
NOTE 4 - COMPLETED ACQUISITION On May 10, 2000, the Company completed the acquisition of Banknorth Group, Inc., which was effected by means of the merger of Banknorth Group, Inc. with and into the Company. The Company changed its name to "Banknorth Group, Inc." as a result of the merger. As a result of the merger and the change in the name of the Company, the Company's symbol on the Nasdaq stock market is now BKNG. Upon consummation of the merger, each share of Banknorth common stock outstanding was automatically converted into the right to receive 1.825 shares of Company common stock, including each attached right issued pursuant to an Amended and Restated Rights Agreement, dated as of September 12, 1989 and amended and restated as of July 27, 1999, with cash in lieu of fractional share interests. The financial statements included herein reflect the historical financial statements of the Company prior to the acquisition. 8 9 BANKNORTH GROUP, INC. AND SUBSIDIARIES (FORMERLY PEOPLES HERITAGE FINANCIAL GROUP, INC.) MANAGEMENT'S DISCUSSION AND ANALYSIS SUMMARY Banknorth Group, Inc. (the "Company"), formerly Peoples Heritage Financial Group, Inc., reported consolidated net income of $39.3 million, or $0.39 per diluted share, for the first quarter of 2000. This compares with $13.5 million, or $0.13 per diluted share, for the first quarter of 1999. Special charges recorded in the first quarter of 2000 consisted of $1.6 million ($1.1 million net of tax) of restructuring costs related to branch closings. Special charges of $33.2 million ($24.1 million net of tax) were recorded in the first quarter of 1999 and consisted of $25.9 million of merger related charges and $7.4 million of costs to discontinue the Company's correspondent mortgage business. (See Table 5 for more information related to special charges.) Excluding the impact of special charges, the Company's operating income for the first quarter of 2000 was $40.4 million, or $0.40 per diluted share, and return on average equity ("ROE") and return on average assets (" ROA") were 19.40% and 1.18%, respectively. Operating income for the first quarter of 1999 was $37.6 million, or $0.36 per diluted share, and ROE and ROA were 17.23% and 1.25%, respectively. Operating results for the first quarter of 2000 represent an 11% increase in diluted earnings per share from the comparable period last year. The improved operating results for the first quarter of 2000 over the first quarter of 1999 were largely due to growth in earning assets levels and strong fee income. Noninterest income increased 21% compared to the first quarter of 1999. The growth in noninterest income was primarily due to a $3.7 million increase in customer service income, a $2.0 million increase in income on bank owned life insurance and an increase in investment advisory services income of $611 thousand. The efficiency ratio (noninterest expense excluding distributions on securities of subsidiary trust and special charges, as a percentage of net interest income and noninterest income, excluding net securities gains) was 55.70% in the first quarter of 2000 compared to 55.17% in the comparable period last year. Selected quarterly data, ratios and per share data, both as reported and on an operating basis, are provided in Table 1. 9 10 TABLE 1 - SELECTED QUARTERLY DATA (Dollars in thousands, except per share data)
2000 1999 1999 1999 1999 First Fourth Third Second First -------- -------- -------- -------- -------- Net interest income $110,334 $114,380 $114,803 $109,126 $107,938 Provision for loan and lease losses 2,815 3,405 3,565 3,565 3,565 -------- -------- -------- -------- -------- Net interest income after loan and lease loss provision 107,519 110,975 111,238 105,561 104,373 Noninterest income (excluding securities transactions) 35,537 33,854 32,117 33,520 29,416 Net securities gains 9 -- 3 260 18 Noninterest expenses (excluding special charges) 82,813 80,945 79,502 79,312 77,769 Special charges (1) 1,583 (3,889) -- -- 33,235 -------- ------- -------- -------- -------- Income before income taxes 58,669 67,773 63,856 60,029 22,803 Income tax expense 19,364 22,192 21,275 19,263 9,309 -------- -------- -------- -------- -------- Net income $39,305 $45,581 $42,581 $40,766 $13,494 ======== ======== ======== ======== ======== Earnings per share: Basic $0.39 $0.45 $0.41 $0.39 $0.13 Diluted 0.39 0.44 0.41 0.39 0.13 Operating earnings per share (excluding special charges): Basic 0.40 0.42 0.41 0.39 0.36 Diluted 0.40 0.42 0.41 0.39 0.36 Return on average assets (2) 1.15% 1.31% 1.23% 1.25% 0.45% Return on average equity (2) 18.88% 21.28% 19.62% 18.08% 6.19% Operating ratios: Return on average assets (excluding special charges)(2) 1.18% 1.24% 1.23% 1.25% 1.25% Return on average equity (excluding special charges)(2) 19.40% 20.16% 19.62% 18.08% 17.23% Efficiency ratio (3) 55.70% 53.56% 53.05% 54.49% 55.17%
- ------------------ (1) Special charges consists of merger-related expenses, one-time charges related to the discontinuance of the Company's correspondent mortgage business and one-time charges related to branch closings. (2) Annualized. (3) Represents operating expenses, excluding distributions on securities of subsidiary trust and special charges, as a percentage of net interest income and noninterest income, excluding net securities gains. 10 11 RESULTS OF OPERATIONS NET INTEREST INCOME The Company's fully taxable equivalent net interest income in the first quarter of 2000 increased $2.5 million compared to the first quarter of 1999. The increase was primarily attributable to increased levels of average earning assets, which were offset in part by lower net interest margins. Commercial real estate, commercial business and consumer loan product lines all experienced significant growth while residential real estate loans declined. Residential real estate loans declined largely due to the Company's discontinuance of the correspondent mortgage business and the securitization of $633 million of residential loans into a real estate investment conduit ("REMIC"), which are now classified as securities held to maturity. Securities increased due primarily to this securitization and additional investments in agency mortgage-backed securities. The Company's net interest margin was 3.49% for the first quarter of 2000 compared to 3.86% for the comparable quarter of 1999. The lower margin was due largely to increased levels of securities as a percent of total assets (41% in the first quarter of 2000 compared to 29% in the first quarter of 1999), purchases of Bank Owned Life Insurance (the earnings from which are recorded as noninterest income) and an increase in average borrowings as a percent of total average interest-bearing liabilities (41% in the first quarter of 2000 compared to 30% in the first quarter of 1999). Table 2 shows quarterly average balances, net interest income by category and rates for the first quarter of 2000 and for each quarter in 1999. Table 3 shows the changes in fully taxable equivalent net interest income by category due to changes in rate and volume. See also "Interest Rate Risk and Asset Liability Management" below. The following table sets forth, for the periods indicated, information regarding (i) the total dollar amount of interest income from interest-earning assets and the resultant average yields; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average cost; (iii) net interest income; (iv) interest rate spread; and (v) net interest margin (net interest income divided by average interest-earning assets). For purposes of the tables and the following discussion, (i) income from interest-earning assets and net interest income is presented on a fully-taxable equivalent basis primarily by adjusting income and yields earned on tax-exempt interest received on loans to qualifying borrowers and on certain of the Company's securities to make them equivalent to income and yields earned on fully-taxable investments, assuming a federal income tax rate of 35%, and (ii) nonaccrual loans have been included in the appropriate average balance loan category, but unpaid interest on nonaccrual loans has not been included for purposes of determining interest income. Average balances are based on average daily balances during the indicated periods. 11 12 TABLE 2 - AVERAGE BALANCES, YIELDS AND RATES (Dollars in thousands)
2000 First Quarter 1999 Fourth Quarter --------------------------------- --------------------------------- Average Yield/ Average Yield/ Balance Interest Rate(1) Balance Interest Rate (1) ----------- -------- ------- ----------- -------- -------- Loans and leases (2): Residential real estate mortgages $1,462,814 $26,745 7.31% $1,480,113 $26,400 7.13% Commercial real estate mortgages 1,820,345 40,202 8.88 1,803,266 40,531 8.92 Commercial loans and leases 1,302,395 28,628 8.84 1,268,226 27,615 8.64 Consumer loans and leases 2,425,053 50,621 8.40 2,294,114 49,116 8.49 ----------- -------- ---------- -------- Total loans and leases 7,010,607 146,196 8.38 6,845,719 143,662 8.34 Securities 5,619,683 94,510 6.73 5,862,306 96,417 6.57 Federal funds sold and other short term investments 66,454 898 5.43 73,230 1,103 5.39 ----------- -------- ----------- -------- Total earning assets 12,696,744 241,604 7.63 12,781,255 241,182 7.51 -------- -------- Nonearning assets 1,020,030 1,004,764 ----------- ----------- Total assets $13,716,774 $13,786,019 =========== =========== Interest-bearing deposits: Regular savings $1,233,945 6,311 2.06 $1,264,795 6,431 2.01 NOW and money market accounts 2,174,872 14,396 2.66 2,176,690 13,552 2.47 Certificates of deposit 3,211,625 40,142 5.03 3,220,391 39,561 4.88 Brokered deposits 131,563 2,013 6.15 143,328 2,062 5.71 ----------- -------- ----------- -------- Total interest-bearing deposits 6,752,005 62,862 3.74 6,805,204 61,606 3.59 Borrowed funds 4,678,559 67,873 5.83 4,676,190 64,610 5.48 ----------- -------- ----------- -------- Total interest-bearing liabilities 11,430,564 130,735 4.60 11,481,394 126,216 4.36 -------- -------- Non-interest bearing deposits 1,298,604 1,325,467 Other liabilities 81,734 60,579 Securities of subsidiary trust 68,775 68,775 Shareholders' equity 837,097 849,804 ----------- ----------- Total liabilities and shareholder's equity $13,716,774 $13,786,019 =========== =========== Net earning assets $1,266,180 $1,299,861 =========== =========== Net interest income (fully-taxable equivalent) 110,869 114,966 Less: fully-taxable equivalent adjustments (535) (586) -------- -------- Net interest income $110,334 $114,380 ======== ======== Net interest rate spread (fully-taxable equivalent) 3.03% 3.15% Net interest margin (fully-taxable equivalent) 3.49% 3.60%
- ---------------------------------------------------- (1) Annualized. (2) Loans and leases include loans held for sale. 12 13 TABLE 2 - Average Balances, Yields and Rates (Dollars in thousands)
2000 First Quarter 1999 Fourth Quarter --------------------------------- --------------------------------- Average Yield/ Average Yield/ Balance Interest Rate(1) Balance Interest Rate (1) ----------- -------- ------- ----------- -------- -------- Loans and leases (2): Residential real estate mortgages $1,653,642 $30,059 7.27% $1,801,616 $32,589 7.24% Commercial real estate mortgages 1,762,761 38,599 8.69 1,689,588 36,952 8.77 Commercial loans and leases 1,267,025 27,045 8.47 1,232,071 26,029 8.47 Consumer loans and leases 2,150,425 46,370 8.55 2,081,520 44,796 8.63 ----------- -------- ----------- -------- Total loans and leases 6,833,853 142,073 8.26 6,804,795 140,366 8.27 Securities 5,846,490 94,115 6.43 5,103,801 78,130 6.12 Federal funds sold and other short term investments 77,451 1,052 5.39 189,798 2,331 4.93 ----------- -------- ----------- -------- Total earning assets 12,757,794 237,240 7.40 12,098,394 220,827 7.31 Nonearning assets 966,829 -------- 950,405 -------- ----------- ----------- Total assets $13,724,623 $13,048,799 =========== =========== Interest-bearing deposits: Regular savings $1,289,605 6,548 2.01 $1,268,159 6,428 2.03 NOW and money market accounts 2,141,901 13,175 2.44 2,078,200 12,464 2.41 Certificates of deposit 3,298,215 40,186 4.83 3,391,976 41,725 4.93 Brokered deposits 163,886 2,275 5.51 201,244 2,811 5.60 ----------- -------- ----------- -------- Total interest-bearing deposits 6,893,607 62,184 3.58 6,939,579 63,428 3.67 Borrowed funds 4,558,071 59,754 5.20 3,769,847 47,796 5.09 ----------- -------- ----------- -------- Total interest-bearing liabilities 11,451,678 121,938 4.22 10,709,426 111,224 4.17 -------- -------- Non-interest bearing deposits 1,285,903 1,284,420 Other liabilities 57,185 80,378 Securities of subsidiary trust 68,775 69,987 Shareholders' equity 861,082 904,588 ----------- ----------- Total liabilities and shareholders' equity $13,724,623 $13,048,799 =========== =========== Net earning assets $1,306,116 $1,388,968 =========== =========== Net interest income (fully-taxable equivalent) 115,302 109,603 Less: fully-taxable equivalent adjustments (499) (477) -------- -------- Net interest income $114,803 $109,126 ======== ======== Net interest rate spread (fully-taxable equivalent) 3.18% 3.14% Net interest margin (fully-taxable equivalent) 3.61% 3.62%
- ---------------------------------------------------- (1) Annualized. (2) Loans and leases include loans held for sale. 13 14 TABLE 2 - AVERAGE BALANCES, YIELDS AND RATES (Dollars in thousands)
1999 First Quarter ------------------------------------ Yield/ Average Balance Interest Rate (1) ---------------- ------- -------- Loans and leases (2): Residential real estate mortgages $2,556,325 $47,050 7.36% Commercial real estate mortgages 1,653,097 36,880 9.05 Commercial loans and leases 1,139,847 25,784 9.17 Consumer loans and leases 2,127,014 45,073 8.59 ----------- -------- Total loans and leases 7,476,283 154,787 8.36 Securities 3,583,507 54,105 6.05 Federal funds sold and other short term investments 186,465 1,820 3.96 ----------- -------- Total earning assets 11,246,255 210,712 7.55 -------- Nonearning assets 912,961 ----------- Total assets $12,159,216 =========== Interest-bearing deposits: Regular savings $1,283,505 6,445 2.04 NOW and money market accounts 2,036,837 12,006 2.39 Certificates of deposit 3,449,865 43,893 5.16 Brokered deposits 211,412 2,632 5.05 ----------- -------- Total interest-bearing deposits 6,981,619 64,976 3.77 Borrowed funds 2,923,476 37,334 5.18 ----------- -------- Total interest-bearing liabilities 9,905,095 102,310 4.19 -------- Non-interest bearing deposits 1,235,688 Other liabilities 46,166 Securities of subsidiary trust 88,000 Shareholders' equity 884,267 ----------- Total liabilities and shareholders' equity $12,159,216 =========== Net earning assets $1,341,160 ========== Net interest income (fully-taxable equivalent) 108,402 Less: fully-taxable equivalent adjustments (464) -------- Net interest income $107,938 ======== Net interest rate spread (fully-taxable equivalent) 3.36% Net interest margin (fully-taxable equivalent) 3.86%
- ---------------------------------------------------- (1) Annualized. (2) Loans and leases include loans held for sale. 14 15 The following table presents certain information on a fully taxable equivalent basis regarding changes in interest income and interest expense of the Company for the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided with respect to changes attributable to (1) changes in rate (change in rate multiplied by old volume), (2) changes in volume (change in volume multiplied by old rate) and (3) changes in rate/volume (change in rate multiplied by change in volume). TABLE 3 - RATE /VOLUME ANALYSIS (Dollars in thousands)
Three Months Ended March 31, 2000 vs. 1999 Increase (decrease) due to -------------------------------------------- Rate & Total Volume Rate Volume (1) Change -------- --------- --------- -------- Interest income: Loans and leases ($ 9,679) $ 372 $ 716 ($ 8,591) Securities 30,629 6,059 3,717 40,405 Federal funds sold and other short term investments (1,182) 682 (422) (922) -------- -------- -------- -------- Total interest income 19,768 7,113 4,011 30,892 -------- -------- -------- -------- Interest expense: Interest-bearing deposits Regular savings (251) 64 53 (134) NOW and money market accounts 820 1,367 203 2,390 Certificates of deposit (3,057) (1,115) 421 (3,751) Brokered deposits (1,003) 578 (194) (619) -------- -------- -------- -------- Total interest-bearing deposits (3,491) 894 483 (2,114) Borrowed funds 22,604 4,725 3,210 30,539 -------- -------- -------- -------- Total interest expense 19,113 5,619 3,693 28,425 Net interest income (fully taxable equivalent) $ 655 $ 1,494 $ 318 $ 2,467 ======== ======== ======== ========
- -------------- (1) Includes changes in interest income and expense not due solely to volume or rate changes. 15 16 NONINTEREST INCOME First quarter noninterest income of $35.5 million increased 21% from the first quarter of 1999. This increase was due to customer service income (up $3.7 million or 34%), investment advisory income (up $611 thousand or 62%) and bank owned life insurance income (up $2.0 million or 86%.) These increases were partially offset by a $1.2 million decline in mortgage banking income due primarily to lower levels of originations as a result of increased interest rates. Noninterest income for the quarter ended March 31, 2000 was 24.4% of total revenue compared to 21.4% for the quarter ended March 31, 1999. Customer services income in the first quarter of 2000 increased 34% from the first quarter of 1999. The increase was primarily attributable to volume driven increases in checking account fees and ATM fees and the conversion of customers of SIS branches to the Company's deposit products. Investment advisory income increased 62% from the first quarter of 1999 due to higher sales of retail investment products during the quarter. Trust income increased 7% over the first quarter of last year reflecting the continued growth in trust assets under management. Assets under management were $3.2 billion and $3.1 billion at March 31, 2000 and 1999, respectively. Bank-owned life insurance ("BOLI") income was $4.3 million for the first quarter of 2000, compared to $2.3 million for the same period in 1999. The increase includes a $1.2 million death benefit receipt in February 2000 and higher average levels of BOLI in 2000. For the first quarter of 2000, the average cash surrender value of BOLI was $232 million compared to $173 million for the first quarter of 1999. BOLI covers certain employees of the Company's bank subsidiaries. Most of the Company's BOLI is invested in the "general account" of quality insurance companies. The majority of such companies were rated AA or better by Standard and Poors at March 31, 2000. Mortgage banking services income of $3.0 million and $4.2 million provided 8% and 14% of non-interest income for the quarters ended March 31, 2000 and 1999, respectively. The 29% decrease from the same quarter of last year was due to a $3.2 million decrease in mortgage sales income resulting primarily from the discontinuance of the correspondent mortgage lending business in January 1999, which was partially offset by a $2.0 million increase in net servicing income. This improvement was due to a $1.4 million gain on the sale of mortgage servicing rights and a lower valuation adjustment on the mortgage servicing rights and interest rate floors that hedge them. The amount of loans serviced for others was $3.1 billion and $4.3 billion at March 31, 2000 and 1999, respectively. See "Special Charges" in Table 5 for a discussion of the costs to discontinue the correspondent mortgage lending business. See Table 4 for a summary of mortgage banking services income by quarter for 2000 and 1999. Capitalized mortgage servicing rights amounted to $39.3 million at March 31, 2000, compared to $46.8 million at December 31,1999. The decrease was due largely to the sale of mortgage servicing rights totaling $6.2 million in the first quarter of 2000. See Table 4 for details. Because mortgage servicing rights are an interest-rate sensitive asset, the value of the Company's mortgage servicing rights and the related mortgage banking income may be adversely impacted if mortgage interest rates decline and actual or expected loan prepayments increase. To mitigate the prepayment risk associated with adverse changes in interest rates and the resultant impairment to capitalized mortgage servicing rights and effects on mortgage banking income, the Company has established a hedge program against a portion of its capitalized mortgage servicing rights to help protect its value and mortgage banking income. Notwithstanding the foregoing, there can be no assurance that significant declines in interest rates will not have a material impact on the Company's mortgage servicing rights and mortgage banking income or that the hedge program will be successful in mitigating the effects of such a decline. 16 17 TABLE 4 - MORTGAGE BANKING SERVICES (Dollars in thousands)
At or for the Three Months Ended ----------------------------------------------------------------------- 3/31/00 12/31/99 9/30/99 6/30/99 3/31/99 ----------- ----------- ----------- ----------- ----------- RESIDENTIAL MORTGAGES SERVICED FOR INVESTORS $ 3,078,580 $ 3,621,848 $ 3,759,247 $ 3,913,525 $ 4,328,668 MORTGAGE BANKING SERVICES INCOME: Sales income: Residential mortgage sales income $ 72 ($ 672) $ 1,252 $ 2,799 $ 3,313 Lower of cost or market adjustment - loans held for sale 30 1,028 731 (1,934) -- ----------- ----------- ----------- ----------- ----------- Total sales income 102 356 1,983 865 3,313 ----------- ----------- ----------- ----------- ----------- Servicing income: Residential mortgage servicing income, net 1,011 1,353 1,189 1,880 1,559 Decrease in impairment reserve on mortgage servicing rights 1,005 485 1,343 2,382 950 Valuation adjustments - interest rate floor (545) 78 (953) (1,475) (1,600) Gain (loss) on sale of capitalized mortgage servicing rights 1,425 (207) (66) 2,924 (17) ----------- ----------- ----------- ----------- ----------- Total servicing income 2,896 1,709 1,513 5,711 892 ----------- ----------- ----------- ----------- ----------- Total $ 2,998 $ 2,065 $ 3,496 $ 6,576 $ 4,205 =========== =========== =========== =========== =========== MORTGAGE SERVICING RIGHTS: Balance at beginning of period $ 46,829 $ 48,103 $ 47,314 $ 45,266 $ 40,088 Mortgage servicing rights capitalized and purchased 323 1,001 2,985 2,747 7,535 Amortization charged against mortgage servicing fee income (2,655) (2,760) (2,697) (2,736) (2,828) Change in impairment reserve 1,005 485 1,343 2,382 950 Mortgage servicing rights sold (6,218) -- (842) (345) (479) ----------- ----------- ----------- ----------- ----------- Balance at end of period $ 39,284 $ 46,829 $ 48,103 $ 47,314 $ 45,266 =========== =========== =========== =========== ===========
17 18 NON-INTEREST EXPENSE Excluding special charges, amortization of intangibles and distribution on securities of subsidiary trust, non-interest expense was $78.3 million and $72.8 million for the quarters ended March 31, 2000 and 1999, respectively, an increase of 7.5%. The efficiency ratio was 55.70% and 55.17% for the quarters ended March 31, 2000 and 1999, respectively, excluding special charges, distributions on securities of subsidiary trust and net securities gains. Salaries and benefits expense of $43.2 million for the quarter ended March 31, 2000 increased $3.1 million or 7.6% from the same quarter of last year. The increase was due to normal salary increases as well as increased cost of benefits. Data processing expense of $6.4 million for the quarter ended March 31, 2000 decreased $566 thousand or 8% from the same quarter a year ago, mostly due to Year 2000 costs incurred in 1999. Occupancy expense of $7.8 million increased $815 thousand from the first quarter of 1999 due primarily to a $370 thousand increase in rent expense in the first quarter of 2000 and a $300 thousand gain on sale of property recorded in the first quarter of 1999. Equipment expense increased $488 thousand from the first quarter of last year due to depreciation on new equipment. Advertising and marketing expense decreased $564 thousand from the first quarter of 1999 due to the timing of campaigns and efficiencies from the acquisition of SIS Bancorp, Inc. ("SIS") on January 1, 1999. Amortization of goodwill and other intangibles was $3.0 million for the quarters ended March 31, 2000 and 1999. Restructuring charges of $1.6 million pre-tax were incurred in the first quarter of 2000 related to the closing of 11 branches. Special charges of $33.2 million in the first quarter of 1999 included merger-related expenses of $25.9 million incurred in connection with the acquisition of SIS and $7.4 million related to the discontinuance of the Company's correspondent mortgage lending business. On an after-tax basis, special charges amounted to $1.1 million and $24.1 million for the three months ended March 31, 2000 and 1999, respectively. 18 19 The following table summarizes activity related to special charges recorded from December 31, 1999 through March 31, 2000. TABLE 5 - SPECIAL CHARGES (Dollars in Thousands) BRANCH CLOSINGS
Non-Cash Amount Reductions Balance Included in Cash Applied to Balance at 12/31/99 Expense Payments Reserve 3/31/2000 ----------- ----------- ---------- ----------- ----------- Severance and salary costs $ -- $ 68 $ -- $ -- $ 68 Asset write-downs/lease termination -- 1,259 -- -- 1,259 Other costs -- 256 -- -- 256 ------------ ------------ ----------- ------------- ------------ $ -- $ 1,583 $ -- $ -- $ 1,583 ============ ============ =========== ============= ============
MERGER CHARGES(1) Non-Cash Amount Reductions Balance Included in Cash Applied to Balance at 12/31/99 Expense Payments Reserve 3/31/2000 --------- ---------- -------- ---------- ---------- Asset write-downs / lease terminations $ 766 $ -- $ 281 $ -- $ 485 Other costs 862 -- 266 -- 596 ------------ ------------ ----------- ------------- ------------ $ 1,628 $ -- $ 547 $ -- $ 1,081 ============ ============ =========== ============= ============
(1) The acquisitions of SIS and CFX Corporation were consummated on January 1, 1999 and April 10, 1998, respectively. 19 20 Other non-interest expenses for the first quarter of 2000 increased $1.7 million from the first quarter of 1999. The following table summarizes the principal components of other non-interest expenses by quarter. TABLE 6 - OTHER NON-INTEREST EXPENSES (Dollars in thousands)
2000 1999 1999 1999 1999 First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter ------- -------- ------- ------- -------- Miscellaneous loan costs $2,037 $835 $2,149 $1,952 $1,934 Telephone 2,296 2,375 2,888 2,566 2,561 Postage and freight 1,965 1,813 1,737 1,771 2,103 Advertising and marketing 1,769 2,644 2,158 2,320 2,333 Office supplies 1,472 1,467 1,546 1,805 1,471 Deposits and other assessments 711 840 862 727 668 Collection and carrying costs of non-performing assets 555 57 359 313 701 Other 4,753 3,965 3,316 4,714 2,112 ------- ------- ------- ------- ------- Total $15,558 $13,996 $15,015 $16,168 $13,883 ======== ======= ======= ======= =======
TAXES The effective tax rate, excluding the effect of special charges, was 33% for each of the quarters ended March 31, 2000 and 1999. OTHER COMPREHENSIVE INCOME FASB Statement No. 130 requires disclosure of "Other comprehensive income." Unlike net income, "other comprehensive income" includes the after-tax change in unrealized gains and losses on securities. As a result of an increase in interest rates during the first quarter of 2000, the unrealized loss on the Company's securities portfolio increased $14.3 million, net of taxes and gains and losses realized on sales of securities. At March 31, 2000, the net unrealized loss of $183.7 million, before related tax effect, represented 3.5% of securities available for sale. The Company attempts to balance the interest rate risk of its assets with its liabilities (see "Interest Rate Risk and Asset Liability Management"). However, the change in value of its liabilities, which tends to improve in rising interest rate environments, is not included in "other comprehensive income." FINANCIAL CONDITION LOANS AND LEASES Total loans and leases (including loans held for sale) averaged $7.0 billion during the first quarter of 2000, a decrease of $466 million or 6.3% from the first quarter of 1999. The decrease was primarily in residential real estate mortgages. Loans as a percent of average earning assets were 55% at March 31, 2000 compared to 66% at March 31, 1999. Average residential real estate loans (which includes mortgage loans held for sale) of $1.5 billion during the first quarter of 2000 declined $1.1 billion from the first quarter of last year. The decline was primarily attributable to the $633 million securitization of single-family residential real estate loans into a REMIC in April, 1999 which is classified as securities held to maturity, as well as to decreased originations resulting from the discontinuance of the Company's correspondent mortgage business. Mortgage loans held for sale amounted to $15 million and $297 million at March 31, 2000 and 1999, respectively, and $67 million at December 31, 1999. The decline in loans held for sale was due primarily to the discontinuance of the correspondent mortgage business in the first quarter of 1999 and the retention of a portion of residential real estate loan originations in portfolio. Average commercial real estate loans of $1.8 billion increased 10% from the first quarter of last year. The average yield on commercial real estate loans during the first quarter of 2000 was 8.88%, as compared to 9.05% in the first quarter of 1999. 20 21 Commercial loans and leases averaged $1.3 billion during the first quarter of 2000, an increase of 14% over the first quarter of 1999. The yield on commercial loans and leases decreased to 8.84% in the first quarter of 2000 from 9.17% in the first quarter of 1999. Average consumer loans and leases of $2.4 billion during the first quarter of 2000 increased 14% from the first quarter of 1999. The increase was primarily in indirect automobile, student and home equity loans. The average yield on consumer loans and leases declined from 8.59% in the first quarter of 1999 to 8.40% in the first quarter of 2000. SECURITIES AND OTHER EARNING ASSETS The Company's securities portfolio averaged $5.6 billion during the first quarter of 2000, as compared to $3.6 billion in the first quarter of 1999, and consisted primarily of mortgage-backed securities, most of which are seasoned 15 year federal agency securities and U.S. Treasury securities. Other securities consisted of collateralized mortgage obligations, asset-backed securities and securitized residential real estate loans held in a REMIC. With the exception of such securitized loans, which are classified as held to maturity and carried at cost, all of the Company's securities are classified as available for sale and carried at market value. The majority of securities available for sale are rated AAA or equivalently rated. A significant portion of the increase in securities was to replace the decline in residential real estate loans. The average yield on securities was 6.73% and 6.05% for the quarters ended March 31, 2000 and 1999, respectively. The increased yield was due in part to the addition of the REMIC securities which had a weighted average yield of 7.60%. Securities available for sale are carried at fair value and had an after-tax unrealized loss of $119.4 million and $105.1 million at March 31, 2000 and December 31, 1999, respectively. The unrealized loss was 3.5% of total securities available for sale at March 31, 2000. ASSET QUALITY As shown in Table 7, nonperforming assets were $55.3 million at March 31, 2000, or 0.40% of total assets, compared to $60.1 million at March 31, 1999. The decline was attributable to declines in nonperforming residential and commercial real estate loans as well as consumer loans. The Company continues to monitor asset quality with regular reviews of its portfolio in accordance with its lending and credit policies. The Company's residential loan portfolio accounted for 20% of the total loan portfolio at March 31, 2000, as compared with 21% at December 31, 1999. The Company's residential loans are generally secured by single-family homes (one to four units) and have a maximum loan to value ratio of 80%, unless they are protected by mortgage insurance. At March 31, 2000, 0.62% of the Company's residential loans were nonperforming, as compared with 0.78% at December 31, 1999 and .48% at March 31, 1999. The Company's commercial real estate loan portfolio accounted for 25% of the total loan portfolio at March 31, 2000 compared to 26% at December 31, 1999. At March 31, 2000, 0.71% of the Company's commercial real estate loans were nonperforming, as compared with 0.82% at December 31, 1999 and 1.08% at March 31, 1999. The Company's commercial business loan and lease portfolio accounted for 19% of the total loan portfolio at March 31, 2000 and December 31, 1999. Commercial business loans and leases are not concentrated in any particular industry, but reflect the broad-based economies of Maine, New Hampshire, Massachusetts and, to a lesser extent, Connecticut. The Company's commercial business loans and leases are generally to small and medium size businesses located within its geographic market area. At March 31, 2000, 1.29% of the Company's commercial business loans and leases were non-performing, as compared with 1.16% at December 31, 1999 and 1.06% at March 31, 1999. The Company's consumer loan and lease portfolio accounted for 35% of the total loan portfolio at March 31, 2000 and 34% at December 31, 1999. The Company has a diversified consumer loan and lease portfolio consisting of home equity, automobile, mobile home, boat and recreational vehicles and education loans. At March 31, 2000, 0.17% of the Company's consumer loans and leases were nonperforming, as compared with 0.22% at December 31, 1999 and .36% at March 31, 1999. 21 22 At March 31, 2000, the Company had $6.7 million of accruing loans which were 90 days or more delinquent, as compared to $10.5 million of such loans at December 31, 1999. The decrease was primarily attributable to a decrease in residential real estate loans over 90 days delinquent, which the Company believes are well secured and in the process of collection. TABLE 7 - NONPERFORMING ASSETS (Dollars in thousands)
3/31/00 12/31/99 9/30/99 6/30/99 3/31/99 ------- ------- ------- ------ -------- Residential real estate loans: Nonaccrual loans $ 9,047 $11,046 $10,855 $11,643 $10,124 ------- ------- ------- ------- ------- Commercial real estate loans: Nonaccrual loans 12,110 13,699 13,211 14,494 16,657 Troubled debt restructurings 961 1,002 1,282 1,391 1,110 ------- ------- ------- ------- ------- Total 13,071 14,701 14,493 15,885 17,767 ------- ------- ------- ------- ------- Commercial business loans and leases: Nonaccrual loans 17,874 14,944 17,712 18,600 12,694 Troubled debt restructurings 39 82 83 80 40 ------- ------- ------- ------- ------- Total 17,913 15,026 17,795 18,680 12,734 ------- ------- ------- ------- ------- Consumer loans and leases: Nonaccrual loans 4,151 5,115 5,639 5,531 7,566 ------- ------- ------- ------- ------- Total nonperforming loans: Nonaccrual loans 43,182 44,804 47,417 50,268 47,041 Troubled debt restructurings 1,000 1,084 1,365 1,471 1,150 ------- ------- ------- ------- ------- Total 44,182 45,888 48,782 51,739 48,191 ------- ------- ------- ------- ------- Other nonperforming assets: Other real estate owned, net of related reserves 8,393 7,642 7,764 7,170 7,468 Repossessions, net of related reserves 2,712 2,826 2,773 3,411 4,446 ------- ------- ------- ------- ------- Total other nonperforming assets 11,105 10,468 10,537 10,581 11,914 ------- ------- ------- ------- ------- Total nonperforming assets $55,287 $56,356 $59,319 $62,320 $60,105 ======= ======= ======= ======= ======= Accruing loans which are 90 days overdue $ 6,674 $10,484 $13,764 $17,990 $24,967 ======= ======= ======= ======= ======= Total nonperforming loans as a percentage of total loans 0.62% 0.67% 0.73% 0.78% 0.68% Total nonperforming assets as a percentage of total assets 0.40% 0.40% 0.43% 0.46% 0.48% Total nonperforming assets as a percentage of total loans and leases (1) and total other nonperforming assets 0.77% 0.82% 0.89% 0.94% 0.85%
- -------------- (1) Total loans and leases are exclusive of loans held for sale. 22 23 PROVISION/ALLOWANCE FOR LOAN LOSSES The Company provided $2.8 million for loan and lease losses in the first quarter of 2000, compared to $3.6 million in the first quarter of 1999. As shown in Table 8, net charge-offs for the first quarter of 2000 were $3.5 million, or .20% of average loans outstanding, compared to $3.6 million, or .19% of average loans outstanding, for the first quarter of 1999. With the exception of the fourth quarter of 1999, net quarterly charge-offs have remained relatively flat since the first quarter of 1999. The provisions for loan and lease losses during the first quarter of 2000 and the fourth quarter of 1999 were less than the net charge-offs during these periods because of management's overall evaluation of the adequacy of the total allowance for loan and lease losses, as discussed below. At March 31, 2000, the allowance for loan and lease losses amounted to $107.2 million or 1.50% of total portfolio loans and leases, as compared to $110.6 million or 1.56% at March 31, 1999. The ratio of the allowance for loan and lease losses to nonperforming loans was 243% at March 31, 2000 and 229% at March 31, 1999. Management considers the allowance appropriate and adequate to cover potential losses inherent in the loan portfolio based on the current economic environment. Provisions for loan losses are attributable to management's ongoing evaluation of the adequacy of the allowance for loan and lease losses, which includes, among other procedures, consideration of the character and size of the loan portfolio, such as internal risk ratings and credit concentrations, trends in nonperforming loans, delinquent loans and net charge-offs, the volume of new loan originations and other asset quality factors. Although management utilizes its best judgment in providing for possible losses, there can be no assurance that the Company will not have to change its provisions for loan and lease losses in subsequent periods. Changing economic and business conditions in northern New England, fluctuations in local markets for real estate, future changes in nonperforming asset trends, large movements in market-based interest rates or other reasons could affect the Company's future provisions for loans losses. 23 24 TABLE 8 - ALLOWANCE FOR LOAN AND LEASE LOSSES (Dollars in thousands)
2000 First 1999 Fourth 1999 Third 1999 Second 1999 First Quarter Quarter Quarter Quarter Quarter ---------- ----------- ----------- ----------- ----------- Average loans and leases outstanding during the period (1) $ 7,010,607 $ 6,845,718 $ 6,833,853 $ 6,804,795 $ 7,476,283 =========== =========== =========== =========== =========== Allowance at beginning of period $ 107,871 $ 110,788 $ 110,639 $ 110,573 $ 110,561 Charge-offs: Real estate mortgages 887 2,175 790 1,982 530 Commercial business loans and leases 708 1,627 1,043 346 1,137 Consumer loans and leases 3,854 3,565 3,260 3,904 3,550 ----------- ----------- ----------- ----------- ----------- Total loans charged off 5,449 7,367 5,093 6,232 5,217 ----------- ----------- ----------- ----------- ----------- Recoveries: Real estate mortgages 864 62 452 1,402 550 Commercial business loans and leases 533 487 694 688 627 Consumer loans and leases 580 496 531 643 487 ----------- ----------- ----------- ----------- ----------- Total loans recovered 1,977 1,045 1,677 2,733 1,664 ----------- ----------- ----------- ----------- ----------- Net charge-offs 3,472 6,322 3,416 3,499 3,553 Additions charged to operating expenses 2,815 3,405 3,565 3,565 3,565 ----------- ----------- ----------- ----------- ----------- Allowance at end of period $ 107,214 $ 107,871 $ 110,788 $ 110,639 $ 110,573 =========== =========== =========== =========== =========== Ratio of net charge-offs to average loans and leases outstanding during the period, annualized 0.20% 0.37% 0.20% 0.21% 0.19% Ratio of allowance to total loans and leases at end of period (2) 1.50% 1.58% 1.66% 1.67% 1.56% Ratio of allowance to nonperforming loans at end of period 243% 235% 227% 214% 229% Ratio of net charge-offs (recoveries) as a percent of average outstanding loans, annualized (1): Real estate mortgages 0.003% 0.255% 0.039% 0.067% (0.002%) Commercial business loans and leases 0.054% 0.357% 0.109% (0.111%) 0.181% Consumer loans and leases 0.543% 0.960% 0.503% 0.628% 0.584%
- ---------------------------------- (1) Average loans and leases include portfolio loans and loans held for sale. (2) Total loans and leases are exclusive of loans held for sale. 24 25 DEPOSITS Average deposits of $8.1 billion during the first quarter of 2000 decreased $167 million from the first quarter of 1999. Excluding brokered deposits, average total deposits decreased $87 million compared to the first quarter of 1999. The ratio of portfolio loans to retail deposits was 88% and 86% at March 31, 2000 and December 31, 1999, respectively. Average non-interest bearing deposit accounts of $1.3 billion during the first quarter of 2000 increased $62.9 million or 5% from the first quarter of 1999. The increase in these non-interest bearing deposits is consistent with the Company's marketing of these lower-cost accounts. Average interest-bearing deposit accounts, excluding brokered deposits, of $6.6 billion during the first quarter of 2000 decreased $150 million from the first quarter of 1999 primarily due to declines in certificates of deposit. The average rates paid on all deposit types decreased from 3.77% in the first quarter of 1999 to 3.74% in the first quarter of 2000. OTHER FUNDING SOURCES The Company's primary source of funding, other than deposits, are securities sold under repurchase agreements and advances from the Federal Home Loan Bank of Boston ("FHLB"). Average borrowed funds for the first quarter of 2000 were $4.7 billion, an increase of $1.8 billion from the first quarter of 1999. The increase in borrowings was utilized to fund asset growth. Average FHLB borrowings for the first quarter of 2000 were $3.6 billion, which increased $1.3 billion or 54% from the first quarter of 1999 in order to fund the growth in earning assets. FHLB collateral consists primarily of first mortgage loans secured by 1 - 4 family properties, certain unencumbered securities and other qualified assets. At March 31, 2000, the Company's FHLB borrowings amounted to $3.6 billion and its additional borrowing capacity from the FHLB was $809 million. Average balances for securities sold under repurchase agreements were $1.0 billion and $574 million for the quarters ended March 31, 2000 and 1999, respectively, an increase of $448 million. These borrowings, with a cost of 5.30% for the quarter ended March 31, 2000, are secured by mortgage-backed securities and U.S. Government obligations. ASSET-LIABILITY MANAGEMENT The goal of asset-liability management is the prudent control of market risk, liquidity and capital. Asset-liability management is governed by policies reviewed and approved annually by the Company's Board of Directors (the "Board") and monitored periodically by a committee of the Board. The Board delegates responsibility for asset-liability management to the Liquidity and Funds Management Committee ("LFMC"), which is comprised of members of senior management who set strategic directives that guide the day-to-day asset-liability management activities of the Company. The LFMC also reviews and approves all major risk, liquidity and capital management programs. Market Risk Market risk is the sensitivity of income to changes in interest rates, foreign exchange rates, commodity prices and other market-driven rates or prices. The Company has no trading operations and thus is only exposed to non-trading market risk. Interest-rate risk, including mortgage prepayment risk, is by far the most significant non-credit risk to which the Company in 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, affect net interest income, the Company's primary source of revenue. This risk arises directly from the Company's core banking activities - lending, deposit gathering and loan servicing. In addition to directly impacting net interest income, changes in the level of interest rates can also affect (i) the amount of loans originated and sold by the institution, (ii) the ability of borrowers to repay adjustable or variable rate loans, (iii) the average maturity of loans, (iv) the rate of amortization of capitalized mortgage servicing rights and premiums paid on securities, (v) the amount of unrealized gains and losses on securities available for sale and (vi) the value of an institution's investment securities and mortgage loans and the resultant ability to realize gains on the sale of such assets. 25 26 The primary objective of interest-rate risk management is to control the Company's exposure to interest-rate risk both within limits approved by the Board of Directors and guidelines established by the LFMC. These limits and guidelines reflect the Company's tolerance for interest-rate risk over both short-term and long-term horizons. The Company controls interest-rate risk by identifying, quantifying and, where appropriate, hedging its exposure. The Company quantifies and measures interest-rate exposures using a model to dynamically simulate net interest income under various interest rate scenarios over 12 months. 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, the growth or shrinkage of product balances and the behavior of the Company's deposit and loan customers. The most material assumption relates to the prepayment of mortgage assets (including mortgage loans, 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 management's efforts to measure interest rate risk is the uncertainty of the maturity, repricing and/or runoff of some of the Company's assets and liabilities. To cope with these uncertainties, management gives careful attention to its assumptions. For example, many of the Company's interest-bearing deposit products (e.g. interest checking, savings and money market deposits) have no contractual maturity and based on historical experience have only a limited sensitivity to movements in market rates. Because management believes it has some control with respect to the extent and timing of rates paid on non-maturity deposits, certain assumptions regarding rate changes are built into the model. In the case of prepayment of mortgage assets, assumptions are derived from published dealer median prepayment estimates for comparable mortgage loans. The Company manages the interest-rate risk inherent in its core banking operations primarily using on-balance sheet instruments that sometimes contain embedded options, mainly fixed-rate portfolio securities and borrowed fund maturities. When appropriate, the Company will utilize off-balance sheet interest rate instruments such as interest-rate swaps, forward-rate agreements, options, options on swaps and exchange traded futures and options. The Company's policy on interest-rate risk simulation specifies that if interest rates were to immediately shift up or down 200 basis points, estimated net interest income for the subsequent 12 months should decline by less than 10%. The Company was in compliance with this limit at March 31, 2000. The Company also monitors gradual changes in market interest rates which it believes better represents its exposure to net interest income. The following table reflects the estimated percentage exposure of the Company's net interest income for the 12 months following the date indicated assuming a gradual shift in market interest rates of 100 and 200 basis points, respectively.
200 Basis Point 100 Basis Point 100 Basis Point 200 Basis Point Rate Decrease Rate Decrease Rate Increase Rate Increase ---------------- --------------- ---------------- ----------------- March 31, 2000 1.26% 1.84% (2.30%) (3.11%) ====== ==== ====== ====== March 31, 1999 (2.37%) 0.37% (0.98%) (2.42%) ====== ==== ====== ======
The results implied in the above table indicate estimated changes in simulated net interest income for the subsequent 12 months assuming a gradual shift up or down in market rates of 100 and 200 basis points across the entire yield curve. Assuming a downward shift in rates, savings, money market and NOW accounts have implied interest rate floors and it is assumed that the related interest expense on these accounts will not decrease in proportion to the downward shift in rates. Assuming an upward shift in rates of 200 basis points, the simulated increase in interest income would be less than the simulated increase in interest expense as the Company's fixed-rate earning assets exceed its fixed-cost paying liabilities. It should be emphasized, however, that the results are dependent on material assumptions such as those discussed above. The Company uses interest rate floors, U.S. Treasury debt instruments and principal only strips to mitigate the prepayment risk associated with mortgage servicing rights (see "Non-Interest Income" for further details). At March 31, 2000, the Company had $200 million notional amount in interest rate floors, $20 million in U.S. Treasury bonds and $20 million in principal only strips. The U.S. Treasury Bonds, noted in the carrying value of mortgage servicing rights table below, were sold in April 2000 as the amount of the hedge was decreased. For mortgage servicing rights, the adverse impact of current movements in interest rates on expected future cash flows must be recognized immediately through an adjustment to their 26 27 carrying value. If interest rates decline, estimated future fee income from mortgage servicing rights is reduced because of an expected increase in mortgage prepayments. The following table sets forth the net exposure at March 31, 2000 of the economic value of mortgage servicing rights and identified hedging instruments, assuming an immediate shift by the indicated amount in market interest rates.
200 Basis Point 100 Basis Point 100 Basis Point 200 Basis Point Rate Decrease Rate Decrease Rate Increase Rate Increase --------------- --------------- --------------- ---------------- (Dollars in thousands) Mortgage servicing rights ($18,585) ($8,000) $5,900 $10,620 Interest rate floors 5,800 1,600 (400) (600) U.S. Treasury bonds 6,055 2,647 (2,145) (3,979) Principal only strips 5,049 2,000 (1,600) (1,989) -------- ------- ------ ------ Net exposure ($1,681) ($1,753) $1,755 $4,052 ======== ======= ====== ======
The foregoing estimates of the effects of specified changes in interest rates on the Company's net interest income and the carrying value of its mortgage servicing rights are based on various assumptions, as discussed above, which approximate actual experience and which management of the Company considers to be reasonable. The effects of changes in interest rates on the Company could vary substantially if different assumptions were used or actual experience differs from the historical experience on which the assumptions are based. The most significant factors affecting market risk exposure of net interest income in the past 12 months has been (i) the increase in interest rates, (ii) changes in the yield curve for U.S. Government securities, (iii) changes in the composition of mortgage assets (iv) increases in adjustable rate borrowings with embedded interest rate caps and (v) the increase and diversification of assets and off-balance sheet interest-rate instruments used to hedge mortgage servicing rights. The Company's earnings are not directly and materially impacted by movements in foreign currency rate or commodity prices. Virtually all transactions are denominated in the U.S. dollar. Movements in equity prices may have an indirect but modest impact on earnings by affecting the volume of activity or the amount of fees from investment-related businesses. LIQUIDITY Parent Company On a parent-only basis, the Company does not have substantial commitments or debt service requirements. At March 31, 2000, such commitments consisted primarily of junior subordinated debentures issued to a subsidiary, Peoples Heritage Capital Trust I, in connection with that subsidiary's issuance of 9.06% Capital Securities due 2027. The principal sources of funds for the Company to meet parent-only obligations are dividends from its banking subsidiaries, which are subject to regulatory limitations. Other potential sources include public and private borrowings. Banking Subsidiaries For banking subsidiaries of the Company, liquidity represents the ability to fund asset growth and accommodate deposits withdrawals. Liquidity risk is the danger that the banks cannot meet anticipated or unexpected funding requirements or can meet them only at excessive cost. Liquidity is measured by the ability to raise cash when needed at a reasonable cost. Many factors affect a bank's ability to meet liquidity needs, including variations in the markets served, its asset-liability mix, its reputation and credit standing in the market and general economic conditions. In addition to traditional retail deposits, the banks have various other liquidity sources including proceeds from maturing securities and loans, the sale of securities, asset securitizations and borrowed funds such as FHLB advances, reverse repurchase agreements and brokered deposits 27 28 The Company continually monitors and forecasts its liquidity position. There are several interdependent methods including daily review of fed funds positions, monthly review of balance sheet changes, monthly review of liquidity ratios, periodic liquidity forecasts and periodic review of contingent funding plans. As of March 31, 2000 the banks had $1.3 billion of "immediately accessible liquidity" defined as cash that could be raised within 1-3 days through collateralized borrowings or security sales. This represents 15% of deposits or 9% of assets. The Company's current policy minimum is 10% of deposits. Also as of March 31, 2000 the banks had "potentially volatile funds" of $894 million. These are funds that might flow out of the banks over a 90-day period in an adverse environment. Management estimates this figure by applying adverse probabilities to its various credit-sensitive and economically-sensitive funding sources. As of March 31, 2000 the ratio of "immediately accessible liquidity" to "potentially volatile funds" was 144%, versus a policy minimum of 100%. In addition to the liquidity sources discussed above, management believes that its consumer loan portfolios provide a significant amount of contingent liquidity that could be accessed in a reasonable time period through sale or securitization. The banks also have significant untapped access to the national brokered deposit market. Both of these sources are contemplated as secondary liquidity in the Company's contingent funding plan. Management believes that the level of liquidity is sufficient to meet current and future funding requirements. CAPITAL At March 31, 2000, shareholders' equity amounted to $853.3 million. In addition, through a subsidiary trust, the Company had outstanding $68.8 million of Capital Securities which mature in 2027 and qualify as Tier 1 Capital. The Company paid a $0.125 per share dividend on its common stock during the first quarter of 2000. In July 1999, the Company authorized a 4,000,000 share repurchase program. As of March 31, 2000, the Company completed this repurchase program at a total cost of $66.1 million, having repurchased 912,500 shares for $12.3 million, or an average price of $13.53 per share, in the first quarter of 2000. Capital guidelines issued by the Federal Reserve Board require the Company to maintain certain ratios, set forth in Table 9. As indicated in such table, the Company's regulatory capital currently substantially exceeds all applicable requirements. TABLE 9 - REGULATORY CAPITAL REQUIREMENTS (Dollars in thousands)
For Capital Adequacy Actual Purposes Excess --------------------- ----------------- ------------------ Amount Ratio Amount Ratio Amount Ratio ---------- ------- ------- ----- --------- ----- As of March 31, 2000: Total capital (to risk weighted assets) $1,031,438 12.23% 337.304 8.00% $ 694,134 4.23% Tier 1 capital (to risk weighted assets) 926,031 10.98% 337,304 4.00% 588,727 6.98% Tier 1 leverage capital ratio (to average assets) 926,031 6.75% 546,525 4.00% 379,506 2.75% As of December 31, 1999: Total capital (to risk weighted assets) 1,015,125 12.38% 656,097 8.00% 359,028 4.38% Tier 1 capital (to risk weighted assets) 912,544 11.13% 328,048 4.00% 584,496 7.13% Tier 1 leverage capital (to average assets) 912,544 6.60% 552,173 4.00% 360,371 2.60%
Net risk weighted assets were $8.4 billion and $8.2 billion at March 31, 2000 and December 31, 1999, respectively. The Company's banking subsidiaries are also subject to federal, and in certain cases state, regulatory capital requirements. At March 31, 2000, each of the Company's banking subsidiaries was deemed to be "well capitalized" under the regulations of the applicable federal banking agency and in compliance with applicable state capital requirements. 28 29 IMPACT OF THE YEAR 2000 The Company has not experienced any significant disruptions to its financial or operating activities caused by a failure of its computerized systems resulting from Year 2000 issues. Year 2000 expenses incurred in 1999 were funded out of the Company's operating cash flow. COMPLETED ACQUISITION On May 10, 2000, the Company completed the acquisition of Banknorth Group, Inc., which was effected by means of the merger of Banknorth Group, Inc. with and into the Company. The Company changed its name to "Banknorth Group, Inc." as a result of the merger. As a result of the merger and the change in the name of the Company, the Company's symbol on the Nasdaq stock market is now BKNG. Upon consummation of the merger, each share of Banknorth common stock outstanding was automatically converted into the right to receive 1.825 shares of Company common stock including each attached right issued pursuant to an Amended and Restated Rights Agreement, dated as of September 12, 1989 and amended and restated as of July 27, 1999, with cash in lieu of fractional share interests. The financial statements included herein reflect the historical financial statements of the Company prior to the acquisition. IMPACT OF NEW ACCOUNTING STANDARDS In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which sets accounting and reporting standards for derivative instruments and hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. This Statement currently is scheduled to be effective for the Company for years beginning January 1, 2001, and is not expected to have a significant impact on the Company's financial condition or results of operations. FORWARD LOOKING STATEMENTS Certain statements contained herein are not based on historical facts and are "forward-looking statements" within the meaning of Section 21A of the Securities Exchange Act of 1934. Forward-looking statements, which are based on various assumptions (some of which are beyond the Company's control), may be identified by reference to a future period or periods, or by the use of forward-looking terminology, such as "may," "will," "believe," "expect," "estimate," "anticipate," "continue" or similar terms or variations on those terms or the negative of those terms. Actual results could differ materially from those set forth in forward-looking statements due to a variety of factors, including, but not limited to, those related to the economic environment, particularly in the market areas in which the Company operates, competitive products and pricing, fiscal and monetary policies of the U.S. Government, changes in government regulations affecting financial institutions, including regulatory fees and capital requirements, changes in prevailing interest rates, acquisitions and the integration of acquired businesses, credit risk management, asset/liability management, the financial and securities markets and the availability of and costs associated with sources of liquidity. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements. 29 30 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information contained in the section captioned "Management's Discussion and Analysis of Financial Condition and Results of Operations - Interest Rate Risk and Asset - Liability Management" is incorporated herein by reference. PART II - OTHER INFORMATION Item 1. Legal Proceedings The Company is involved in routine legal proceedings occurring in the ordinary course of business which in the aggregate are believed by management to be immaterial to the financial condition and results of operations of the Company. Item 2. Changes in securities - not applicable. Item 3. Defaults upon senior securities - not applicable. Item 4. Submission of matters to a vote of security holders. (a) A special meeting of shareholders was held on March 7, 2000. (b) Not applicable. (c) The item voted on at the meeting was the adoption of the agreement and plan of merger, dated June 1, 1999, between the Peoples Heritage Financial Group, Inc. and Banknorth Group, Inc., as amended, which provided, among other things, for (i) the merger of Banknorth with and into Peoples Heritage Financial Group, Inc. under the name "Banknorth Group, Inc." and (ii) the conversion of each share of Banknorth common stock outstanding into the right to receive 1.825 shares of Peoples Heritage Financial Group, Inc., plus cash in lieu of fractional share interests. The result was as follows: FOR AGAINST ABSTAIN BROKER NON-VOTES --- ------- ------- ---------------- 69,053,408 1,684,317 632,543 1,354,539 ITEM 5. OTHER INFORMATION. The Company recently entered into revised severance agreements with William J. Ryan, Peter J. Verrill, R. Scott Bacon, David J. Ott and other executive officers of the Company. Pursuant to these agreements, each of these officers would receive specified benefits in the event that his employment was terminated by the Company other than for cause, disability, retirement or death following a "change in control" of the Company, as defined, or the officer terminated his employment under such circumstances for "good reason," as defined. The benefits payable under such circumstances to each officer include a lump sum payment equal to three times (in the case of the above-named executive officers) and three or two times (in the case of other executive officers) the sum of (i) the officer's annual salary at the rate in effect at the specified time and (ii) the greatest of the bonuses paid to such officer or accrued on his behalf in either the year in which the change in control occurred or the immediately preceding year. The agreements also generally provide each officer with an additional three years (in the case of the above-named executive officers) and three or two years (in the case of other executive officers) of benefits under the Company's various employee benefit plans under such circumstances, as well as accelerated vesting of an officer's rights under any equity or long-term incentive plan of the Company. The agreements also provide that in the event that any of the payments to be made thereunder or otherwise upon termination of employment are deemed to constitute "excess parachute payments" within the meaning of Section 280G of the Internal Revenue Code, and payments will cause the executive officer to incur an excise tax under the Internal Revenue Code, the Company shall pay the executive officer an amount such that after payment of all federal, state and local income tax and any additional excise tax, the executive officer will be fully reimbursed for the amount of such excise tax. Excess parachute payments generally are payments in excess of three times the recipient's average annual compensation from the employer includable in the recipient's gross income during the most recent five taxable years ending before the date of a change in control of the employer ("base amount"). Recipients of excess parachute payments are subject to a 20% federal excise tax on the amount by which such payments exceed the base amount, in addition to regular income taxes, and 30 31 payments in excess of the base amount are not deductible by the employer as compensation expense for federal income tax purposes. The form of the severance agreement between the Company and the above-named executive officers is included as an exhibit to this report. Item 6. Exhibits and reports on Form 8-K. (a) Exhibit 10 - Form of severance agreement between the Company and each of William J. Ryan, Peter J. Verrill, R. Scott Bacon and David J. Ott. Exhibit 27 - Financial Data Schedule. (b) The Company filed a Current Report on Form 8-K on January 19, 2000. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BANKNORTH GROUP, INC. Date: May 15, 2000 By: /s/ William J. Ryan ------------------------------- William J. Ryan Chairman, President and Chief Executive Officer Date: May 15, 2000 By: /s/ Peter J. Verrill ------------------------------- Peter J. Verrill Executive Vice President, Operating Officer and Chief Financial Officer Date: May 15, 2000 By: /s/ Stephen J. Boyle ------------------------------- Stephen J. Boyle Executive Vice President and Controller (principal accounting officer) 31 EX-10 2 FORM OF SERVERANCE AGREEMENT 1 EXHIBIT 10 BANKNORTH GROUP, INC.* SEVERANCE AGREEMENT This AGREEMENT, made and entered into as of the ___ day of ________, by and among BANKNORTH GROUP, INC. (the "Company") and __________ (the "Executive"). W I T N E S S E T H: WHEREAS, the Executive is employed by the Company in a key executive capacity and possesses intimate knowledge of the business and affairs of the Company; and WHEREAS, the Company desires to ensure, insofar as possible, that it will continue to have the benefit of the Executive's services and to protect its confidential information and goodwill; and WHEREAS, the Company recognizes that circumstances may arise in which a change in the control of the Company occurs, thereby causing uncertainty of employment without regard to the Executive's competence or past contributions; and WHEREAS, the Company and the Executive wish to provide reasonable security to the Executive against changes in the Executive's relationship with the Company in the event of such change in control; NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements hereinafter set forth, the parties hereto agree as follows: 1. DEFINITIONS (a) Accrued Benefits means: (i) All salary earned or accrued through the date the Executive's employment is terminated; (ii) reimbursement for any and all monies advanced in connection with the Executive's employment for reasonable and necessary expenses incurred by the Executive through the date the Executive's employment is terminated; (iii) any and all other compensation previously earned and deferred at the election of the Executive or pursuant to any deferred compensation plans then in effect together with any interest or desired earnings thereon; (iv) annual bonus, if any, accrued for a Year prior to the Year in which employment terminates, but not yet paid to the Executive, under any bonus or incentive compensation plan or plans in which the Executive is a participant; (v) a pro rata portion of the maximum bonus payable to the Executive for the Year in which employment terminates under any bonus or incentive compensation plan or plans in which the Executive is a participant, determined as if the Executive had remained in employment for the full Year and prorated based upon weeks, including partial weeks, of employment during that Year; (vi) all other payments and benefits to which the Executive may be entitled under the terms of any applicable compensation arrangement or benefit plan or program of the Company. (b) Act means the Securities Exchange Act of 1934, as amended. (c) Affiliate of any specified persons means any other person that, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under direct or indirect common control with such specified person. For the purposes of this definition, "control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. (d) Annual Compensation shall mean the sum of: (i) the Executive's annual base salary at the rate in effect on the date of a termination of employment as described in Section 3 or in Section 7(d) (or, in the event of a termination for Good Reason under Section 1(l)(i)(A) below, the annual base salary as in effect immediately before the actions giving rise to Good Reason); plus - -------------------------- *This form reflects the change of the Company's name from Peoples Heritage Financial Group, Inc. to Banknorth Group, Inc., effective as of May 10, 2000. 1 2 (ii) the greatest of the bonuses either paid or accrued in either the Year of the Change in Control or the immediately preceding Year. (e) Base Amount means an amount equal to the Executive's Annualized Includable Compensation for the Base Period as defined in Section 280G(d)(1) and (2) of the Code (as hereinafter defined). (f) Cause means (i) the executive's conviction of, or plea of nolo contendere to, a felony; or (ii) willful and intentional misconduct, willful neglect, or gross negligence, in the performance of the Executive's duties, which has caused a demonstrable and serious injury to the Company, monetary or otherwise. The Executive shall be given written notice that the Company intends to terminate his employment for Cause. Such written notice shall specify the particular acts, or failures to act, on the basis of which the decision to so terminate employment was made. In the case of a termination for Cause as described in Clause (ii), above, the Executive shall be given the opportunity within 30 days of the receipt of such notice to meet with the Board to defend such acts, or failures to act, prior to termination. The Company may suspend the Executive's title and authority pending such meeting, and such suspension shall not constitute "Good Reason," as defined in subsection (l) below. (g) Change in Control of the Company shall mean a Change in Control of a nature that would be required to be reported in response to Item 5(f) of Schedule 14A of Regulation 14A promulgated under the Act or any successor thereto, provided that without limiting the foregoing, a Change in Control of the Company also shall mean the occurrence of any of the following events: (i) any "person" (as defined under Section 3(a)(9) of the Act) or "group" of persons (as provided under Rule 13d-3 of the Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 or otherwise under the Act), directly or indirectly (including as provided in Rule 13d-3(d)(1) of the Act), of capital stock of the Company the holders of which are entitled to vote for the election of directors ("voting stock") representing that percentage of the Company's then outstanding voting stock (giving effect to the deemed ownership of securities by such person or group, as provided in Rule 13d-3(d)(1) of the Act, but not giving effect to any such deemed ownership of securities by another person or group) equal to or greater than twenty-five percent (25%) of all such voting stock; (ii) During any period of twenty four consecutive months, individuals who at the beginning of such period constituted the Board of Directors of the Company (including for this purpose any new director whose election or nomination for election by the Company's shareholders was approved by a vote of at least a majority of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board of Directors of the Company (excluding any Board seat that is vacant or otherwise unoccupied). (iii) There shall be consummated any consolidation, merger, stock for stock exchange or similar transaction (collectively, "Merger Transactions") involving securities of the Company in which holders of voting stock of the Company immediately prior to such consummation own, as a group, immediately after such consummation, voting stock of the Company (or, if the Company does not survive the Merger Transaction, voting securities of the corporation surviving such transaction) having less than 50% of the total voting power in an election of directors of the Company (or such other surviving corporation). (h) Code means the Internal Revenue Code of 1986, including any amendments thereto. (i) Company Retirement Plan is defined in Section 1(q) below. (j) Effective Date means the date this Agreement is executed by the parties. (k) Employment Period means a period commencing on the date of a Change in Control of the Company and ending on the earlier of (i) the last day of the twenty-fourth month following the month in which the Change in Control occurs, or (ii) the Executive's Normal Retirement Date. (l) Good Reason means: (i) any breach of this Agreement by the Company, including without limitation (A) any reduction during the employment period in the amount of the Executive's base salary or aggregate benefits as in effect from time to time, (B) failure to provide the Executive with the same fringe benefits that were provided to the Executive immediately prior to a Change in Control of the Company, or with a package of fringe benefits (including paid vacations) that, though one or more of such benefits may vary from those in effect immediately prior to such a Change in Control, is substantially comparable in all material respects to such fringe benefits taken as a whole, or (C) any other breach by the Company of its obligations contained in Section 6 below; (ii) without the Executive's express written consent, the assignment to the Executive of any duties which are materially inconsistent with the Executive's positions, duties, responsibilities and status immediately prior to the Change in Control of the Company, a material change in the Executive's reporting responsibilities, titles or offices as an employee and as in effect immediately prior to the Change in Control, or a significant reduction, in the Executive's title, duties or responsibilities, or in the level of his support services; 2 3 (iii) the relocation of the Executive's principal place of employment, without the Executive's written consent, to a location outside the same metropolitan area in which the Executive was employed at the time of such Change in Control, or the imposition of any requirement that the Executive spend more than ninety business days per year at a location other than such principal place of employment; or (iv) any purported termination of the Executive's employment for Cause, Disability or Retirement which is not effected pursuant to a Notice of Termination satisfying the requirements of paragraph (n) below. Upon the occurrence of any of the events described in (i), (ii), (iii), or (iv) above, the Executive shall give the Company written notice that such event constitutes Good Reason, and the Company shall thereafter have thirty (30) days in which to cure. If the Company has not cured in that time, the event shall constitute Good Reason. (m) Normal Retirement Date means Normal Retirement Date as defined in the Banknorth Group, Inc. Retirement Plan. (n) Notice of Termination shall mean a notice which shall indicate the specific termination provision relied upon in this Agreement and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated. (o) Person or Group means a "person" or "group," as defined in Section 1(g)(i) hereof. (p) Plan Year with respect to any of the Retirement Plan, the Thrift Plan (as defined below) or the Employee Stock Ownership Plan, the "plan year" as defined in such plan. (q) Retirement Plan means the Banknorth Group, Inc. Retirement Plan or any successor plan. (r) SERP Agreement means the Supplemental Retirement Agreement between the Executive and the Company. (s) Year means a calendar year unless otherwise specifically provided. 2. TERM OF AGREEMENT. This Agreement shall begin on the Effective Date and shall continue until the third anniversary of such date, provided that, on the first anniversary of the Effective Date, and on each succeeding anniversary, the term shall be renewed for an additional period of one year unless either party has given written notice that the term is not so renewed, which notice must be delivered to the other party at least ninety (90) days prior to the date of any such renewal, and further provided that if a Change in Control of the Company occurs during such term, the term shall in all events continue through the last day of the Employment Period. This Agreement is also subject to earlier termination as provided in Section 3 below. All rights and obligations hereunder shall survive to the extent necessary to the intended enforcement thereof. 3. TERMINATION OF EMPLOYMENT PRIOR TO A CHANGE IN CONTROL. (a) The Company and the Executive shall each retain the right to terminate the employment of the Executive at any time prior to a Change in Control of the Company. In the event the Executive's employment is terminated prior to a Change in Control of the Company, this Agreement shall, except as provided in Subsection (b) below, be terminated and of no further force and effect, and any and all rights and obligations of the parties hereunder shall cease. (b) If the Executive's employment is terminated by the Company prior to the occurrence of a Change in Control of the Company, and if it can be shown that the Executive's termination (i) was at the direction or request of a third party that had taken steps reasonably calculated to effect the Change in Control of the Company thereafter, or (ii) otherwise occurred in connection with, or in anticipation of, the Change in Control of the Company, the Executive shall have the rights described in Section 7(d) below, as if a Change in Control of the Company had occurred on the date immediately preceding such termination. 4. EMPLOYMENT FOLLOWING A CHANGE IN CONTROL. If a Change in Control of the Company occurs when the Executive is employed by the Company, the Company will continue thereafter to employ the Executive, and the Executive will remain in the employ of the Company, during the Employment Period, in accordance with the terms and provisions of this Agreement. 5. DUTIES. During the Employment Period, the Executive shall serve in such capacities and positions as may be assigned by the Company consistent with the Executive's capacities and positions on the Effective Date and shall devote the Executive's best efforts and all of the Executive's business time, attention and skill to the business and affairs of the Company, as such business and affairs now exist and as they may hereafter be conducted. 6. COMPENSATION. During the Employment Period, the Executive shall be compensated by the Company as follows: (a) the Executive shall receive, at such intervals and in accordance with such standard policies as in effect on the date of the Change in Control of the Company, an annual base salary not less than the Executive's annual base salary as in effect on the date of the Change in Control of the Company, subject to adjustment as hereinafter provided; (b) the Executive shall be included in all plans providing incentive compensation to executives, including but not limited to bonus, deferred compensation, annual or other incentive compensation, supplemental pension, stock ownership, stock option, stock appreciation, stock bonus and similar or comparable plans as any such plans are 3 4 extended by the Company from time to time to senior corporate officers, key employees and other employees of comparable status; (c) the Executive shall be reimbursed, at such intervals and in accordance with such standard policies as may be in effect on the date of the Change in Control of the Company, for any and all monies advanced in connection with the Executive's employment for reasonable and necessary expenses incurred by the Executive on behalf of the Company, including travel expenses; (d) the Executive shall be included, to the extent eligible thereunder, in any and all plans providing but not limited to, group life insurance, hospitalization, disability, medical, dental, pension, profit sharing and stock bonus plans, and shall be provided any and all other benefits and perquisites made available to other employees of comparable status and position at the expense of the Company on a comparable basis; (e) the Executive shall receive annually not less than the amount of paid vacation and not fewer than the number of paid holidays received annually immediately prior to the Change in Control of the Company or available annually to other employees of comparable status and position with the Company; and (f) During the Employment Period the Board of Directors of the Company, or an appropriate committee thereof, will consider and appraise, at least annually, the contributions of the Executive to the Company's operating efficiency, growth, production and profits and, in accordance with past practice, due consideration shall be given to the upward adjustment of the Executive's compensation rate, at least annually, commensurate with increases generally given to other senior corporate officers and key employees and as the scope of the Executive's duties expands. 7. TERMINATION OF EMPLOYMENT. Any termination by the Company or the Executive of the Executive's employment during the Employment Period shall be communicated by written Notice of Termination to the Executive if such notice is delivered by the Company and to the Company if such notice is delivered by the Executive. The Notice of Termination shall comply with the requirements of Section 1(n). (a) TERMINATION FOR DISABILITY. If during the Employment Period, the Executive's employment is terminated on account of the Executive's disability, as determined under the Company's long-term disability plan (as in effect on the date of a Change in Control of the Company), the Executive shall receive all Accrued Benefits, if any, and shall remain eligible for all benefits as provided pursuant to the terms of any long-term disability programs of the Company in effect at the time of such termination. (b) TERMINATION ON THE EXECUTIVE'S DEATH. If, during the Employment Period, the Executive's employment is terminated on account of the Executive's death, the Executive's estate or his designated beneficiary (or beneficiaries), as applicable, shall receive the Accrued Benefits. (c) VOLUNTARY TERMINATION OR TERMINATION FOR CAUSE. If, during the Employment Period, (i) the Executive shall terminate employment with the Company other than for Good Reason, or (ii) the Executive's employment is terminated for Cause, the Executive shall receive from the Company only the Accrued Benefits. (d) TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY THE EXECUTIVE FOR GOOD REASON. If, during the Employment Period, the Executive's employment with the Company is terminated by the Company other than for Cause, or by the Executive for Good Reason, then: (i) the Executive shall be entitled to receive from the Company the Accrued Benefits, except that, for this purpose, Accrued Benefits shall not include any entitlement to severance under any Company severance policy generally applicable to the Company's salaried employees; (ii) the Executive shall receive from the Company, no less than ten (10) days following termination of his employment, a lump sum payment (the "Termination Payment") equal to three times the Annual Compensation; (iii) for purposes of determining the Executive's benefit under the SERP Agreement, the Executive shall be credited with 36 additional months of age and of service determined as follows: (A) The additional 36 months of age and service shall be applied for purposes of benefit accrual, vesting, eligibility for early retirement, subsidized early retirement factors, actuarial equivalence and any other purposes under the Retirement Plan and the SERP Agreement. (B) Any provision under the Retirement Plan or the SERP Agreement prohibiting the accrual of any additional benefits after the Executive has been credited with more than a stated number of years of service shall be disregarded. (C) For purposes of determining the amount of the Executive's benefit under the SERP Agreement, the reduction in respect of the benefit paid under the Retirement Plan shall be based on the Executive's actual Retirement Plan benefit (that is, without any additional deemed service). (D) For purposes of determining the Early Retirement Benefit (as defined in the SERP Agreement) and other optional forms of benefit under the SERP Agreement, if the Executive is less than fifty-five 4 5 (55) years of age, the Executive shall be deemed to be at least fifty-five (55) years of age on the date his employment with the Company terminates, notwithstanding the Executive's actual age, if less. (E) the Benefit Computation Base (as defined in the SERP Agreement) shall be determined as if it were being calculated at the end of the 36 month period of service credited to the Executive under this Section 7(d)(iii) and as if during such 36 additional month period the Executive's annualized compensation was the same as such compensation for (I) the Year during which the Executive's employment is terminated, or, (II) any Year before the Change in Control occurred, whichever is greater. (F) Any amendment to the Retirement Plan within the twelve (12) month period prior to the termination of the Executive's employment shall be disregarded to the extent that the application of such amendment would decrease the total amount of the benefits provided for in this Section 7(d)(iii). (G) The Executive shall be entitled to a lump sum distribution of his SERP in all events, and the Company shall not be entitled to require payment over a longer period. If the Executive elects a lump sum payment (i) the actuarial equivalent benefit shall be determined in accordance with the provisions of the Retirement Plan as in effect immediately prior to the Change in Control, or as in effect on termination of the Executive's employment, whichever creates the greater benefit, and (ii) payment shall be made within thirty (30) days following the later of (A) termination of the Executive's employment, or (B) the date the Executive gives written notice of the Executive's intent to elect a lump sum. (iv) the Executive shall be paid a lump sum amount equal to (A) the sum of (I) the aggregate contributions and forfeitures allocated to the Executive's account under the Banknorth Group, Inc. Profit Sharing and Employee Stock Ownership Plan (the "Employee Stock Ownership Plan") for the Plan Year ending immediately prior to the Change of Control, or, if different, the Plan Year ending immediately prior to the termination of the Executive's employment, whichever Plan Year would produce the greater aggregate value, (II) the total aggregate value of all contributions, other than elective contributions by the Executive and employer matching contributions relating thereto, and forfeitures allocated to the Executive's account under the Banknorth Group, Inc. Thrift Incentive Plan (the "Thrift Plan") for the Plan Year ending immediately prior to the Change of Control, or, if different, the Plan Year ending immediately prior to the termination of the Executive's employment, whichever Plan Year would produce the greater aggregate value, and (III) (A) the matching contributions under the Thrift Plan (or its successor) which would have been credited under such plan on Executive's behalf, if the Executive had contributed the maximum salary deferral contribution allowable under Section 402(g) of the Code, for the calendar year in which he terminated employment with the Company, multiplied by (B) three (3). (v) all rights under any equity or long-term incentive plan shall be fully vested; (vi) the Executive shall (A) continue to be covered at the expense of the Company by the same or equivalent hospital, medical, dental, accident, disability and life insurance coverage as in effect for the Executive immediately prior to termination of his employment, until the earlier of (I) 36 months following termination of employment, or (II) the date the Executive has commenced new employment and has thereby become eligible for comparable benefits; provided that, with respect to any of the coverages described above, if such coverage is provided through an insurance policy with an insurance company unaffiliated with the initial Company, and if under the terms of the applicable policy, it is not possible to provide continued coverage (including if continued coverage under the policy would increase the Company's cost allocable to the Executive by more than 100%), then the Company shall pay the Executive a lump sum cash amount, no later than sixty (60) days following termination of employment an amount equal to twice the aggregate allocable cost of such coverage as applicable immediately prior to termination of employment, such payment to be made without any discount for present value. 8. CERTAIN SUPPLEMENTAL PAYMENTS BY THE COMPANY. (a) In the event the Executive's employment is terminated pursuant to Section 7(d) above, and if in connection therewith it is determined that (i) part or all of the compensation and benefits to be paid to the Executive constitute "parachute payments" under Section 280G of the Code, and (ii) the payment thereof will cause the Executive to incur excise tax under Section 4999 of the Code, the Company, on or before the date for payment of such excise tax, shall pay the Executive, in lump sum, an amount (the "Gross-Up Amount") such that, after payment of all federal, state and local income tax and any additional excise tax under Section 4999 of the Code in respect of the Gross-Up Amount payment, the Executive will be fully reimbursed for the amount of such excise tax. (b) The determination of the Parachute Amount, the Base Amount and the Gross-Up Amount, as well as any other calculations necessary to implement this Section 8 shall be made by a nationally recognized accounting or benefits consulting firm selected by the Executive and reasonably satisfactory to the Company and which has not performed services, other than minor indirect or incidental services, for either the Company or the Executive for three years prior to the date the Consultant is retained for this purpose. The Consultant's fee shall be paid by the Company. (c) As promptly as practicable following such determination and the elections hereunder, the Company shall pay to or distribute to or for the benefit of the Executive such amounts as are then due to the Executive 5 6 under this Agreement and shall promptly pay to or distribute for the benefit of the Executive in the future such amounts as become due to the Executive under this Agreement. (d) As a result of the uncertainty in the application of Section 280G of the Code at the time of an initial determination hereunder, it is possible that payments will not have been made by the Company which should have been made under clause (a) of this Section 8 ("Underpayment"). In the event that there is a final determination by the Internal Revenue Service, or a final determination by a court of competent jurisdiction, that an Underpayment has been made and the Executive thereafter is required to make any payment of an excise tax, income tax, any interest or penalty, the accounting or benefits consulting firm selected under clause (b) above shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. 9. FURTHER OBLIGATIONS OF THE EXECUTIVE. (a) CONFIDENTIALITY. During and following the Executive's employment by the Company, the Executive shall hold in confidence and not directly or indirectly disclose or use or copy or make lists of any confidential information or proprietary data of the Company, except to the extent authorized in writing by the Board of Directors of the Company or required by any court or administrative agency, other than to an employee of the Company or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by the Executive of duties as an executive of the Company. Confidential information shall not include any information known generally to the public or any information of a type not otherwise considered confidential by persons engaged in the same business or a business similar to that of the Company. All records, files, documents and materials or copies thereof, relating to the Company's business which the Executive shall prepare, or use, or come into contact with, shall be and remain the sole property of the Company and shall be promptly returned to the Company upon termination of employment with the Company. (b) NON-SOLICITATION. For the period from the Effective Date until the second anniversary of the termination of the Executive's employment, the Executive will not, directly or indirectly, contact, approach or solicit for the purpose of offering employment to or hiring (whether as an employee, consultant, agent, independent contractor or otherwise) any officer of the Company, or its affiliates, other than on the Company's behalf, without the prior written consent of the Company. 10. EQUITABLE RELIEF. Executive acknowledges and agrees that in the event of a breach by Executive of any of the provisions of Section 9 hereof, the Company shall suffer irreparable harm for which monetary damages alone will constitute an insufficient remedy. Consequently, in the event of any such breach, the Company may, in addition to other rights and remedies existing in its favor, apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce or prevent any violations of the provisions hereof, in each case without the requirement of posting a bond or proving actual damages. 11. EXPENSES AND INTEREST. If, after a Change in Control of the Company, a good faith dispute arises with respect to the enforcement of the Executive's rights under this Agreement, or if any legal or arbitration proceeding shall be brought in good faith to enforce or interpret any provision contained herein, or to recover damages for breach hereof, the Executive shall recover from the Company any reasonable attorney's fees and necessary costs and disbursements incurred as a result of such dispute, and prejudgment interest on any money judgment or arbitration award obtained by the Executive calculated at the rate of interest announced by Peoples Heritage Bank, or the successor thereto, from time to time as its prime rate from the date that payments to him should have been made under this Agreement. 12. PAYMENT OBLIGATIONS ABSOLUTE. The Company's obligation during and after the Employment Period to pay the Executive the compensation and to make the arrangements provided herein shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any setoff, counterclaim, recoupment, defense or other right which the Company may have against him or anyone else. All amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final and the Company will not seek to recover all or any part of such payment from the Executive or from whomsoever may be entitled thereto, for any reason whatever except as provided in Section 8(d) above. 13. SUCCESSORS. (a) If the Company sells, assigns, or transfers all or substantially all of its business and assets to any Person, excluding Affiliates of the Company, or if the Company merges into or consolidates or otherwise combines with any Person which is a continuing or successor entity, then the Company shall assign all of its rights, title and interest in this Agreement as of the date of such event to the Person which is either the acquiring or successor Company, and such Person shall assume in writing and perform from and after the date of such written assignment all of the terms, conditions and provisions imposed by this Agreement upon the Company. Failure of the Company to obtain such written assignment shall be a breach of this Agreement. In case of such assignment by the Company and of written assumption and agreement by such Person, all further rights as well as all other obligations of the Company under this Agreement thenceforth shall 6 7 cease and terminate and thereafter the expression "the Company" wherever used herein shall be deemed to mean such Person or Persons. (b) This Agreement and all rights of the Executive shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, estates, executors, administrators, heirs and beneficiaries. All amounts payable to the Executive hereunder shall be paid, in the event of the Executive's death, to the Executive's estate, heirs and representatives. This Agreement shall inure to the benefit of, be binding upon and be enforceable by, any successor, surviving or resulting Company or other entity to which all or substantially all of the Company's business and assets shall be transferred. This Agreement shall not be terminated by the voluntary or involuntary dissolution of the Company. 14. ENFORCEMENT. The provisions of this Agreement shall be regarded as divisible, and if any such provisions or any part hereof are declared invalid or unenforceable by a court of competent jurisdiction, the validity and enforceability of the remainder of such provisions or parts hereof and the applicability thereof shall not be affected thereby. 15. AMENDMENT. This Agreement may not be amended or modified at any time except by a written instrument executed bythe Company and the Executive if such amendment or modification occurs before any Change in Control, or by the Executive and the Company after any Change in Control. 16. WITHHOLDING. The Company shall be entitled to withhold from amounts to be paid to the Executive hereunder any federal, state or local withholding or other taxes, or charge which it is from time to time required to withhold. The Company shall be entitled to rely on an opinion of counsel if any question as to the amount or requirement of any such withholding shall arise. 17. GOVERNING LAW. This Agreement and the rights and obligations hereunder shall be governed by and construed in accordance with the laws of the State of Maine. 18. ARBITRATION. Any dispute arising out of this Agreement shall be determined by arbitration in the State of Maine under the rules of the American Arbitration Association then in effect and judgment upon any award pursuant to such arbitration may be enforced in any court having jurisdiction thereof. 19. NOTICE. Notices given pursuant to this Agreement shall be in writing and shall be deemed given when received and, if mailed, shall be mailed by United States registered or certified mail, return receipt requested, addressee only postage prepaid, to the Company at: Banknorth Group, Inc. P.O. Box 9540 One Portland Square Portland, ME 04112 Attn: Clerk or if to the Executive, at the address included in the Company's records, or to such other address as the party to be notified shall have given to the other. 20. NO WAIVER. No waiver by any party at any time of any breach by another party of, or compliance with, any condition or provision of this Agreement to be performed by another party shall be deemed a waiver of similar or dissimilar provisions or conditions at any time. 21. HEADINGS. The headings herein contained are for reference only and shall not affect the meaning or interpretation of any provision of this Agreement. 22. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof. All prior correspondence and proposals (including but not limited to summaries of proposed terms) and all prior promises, representations, understandings, arrangements and agreements relating to such subject matter are merged herein and superseded hereby; provided however, that the terms of the SERP Agreement, the Retirement Plan, the Thrift Plan, the Employee Stock Ownership Plan, and any effective applicable employment agreement shall be incorporated herein and made a part hereof to the extent not inconsistent with the terms hereof. 7 8 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first written above. BANKNORTH GROUP, INC. ____________________________ By:____________________________________ Witness William J. Ryan Chairman, president and Chief Executive Officer - ----------------------------- --------------------------------------- Witness 8 EX-27 3 FINANCIAL DATA SCHEDULE
9 U.S. DOLLARS 3-MOS DEC-31-2000 MAR-31-2000 1 318,989 5,913 70,653 0 4,999,905 522,632 0 7,158,029 107,214 13,803,580 8,250,736 308,444 91,443 3,288,524 68,775 0 1,066 852,230 13,803,580 145,812 95,257 0 241,069 62,862 67,873 110,334 2,815 9 84,396 58,669 58,669 0 0 39,305 0.39 0.39 3.49 43,182 6,674 1,000 0 107,871 5,449 1,977 107,214 107,214 0 0
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