10-Q

FORM 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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

For the Quarterly Period Ended September 30, 2003

OR

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

Commission File Number: 001-31251

BANKNORTH GROUP, INC.

(Exact name of Registrant as specified in its charter)

Maine	01-0437984
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Two Portland Square, Portland, Maine	04112
(Address of principal executive offices)	(Zip Code)

(207) 761-8500

(Registrant’s telephone number, including area code)

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

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

The number of shares outstanding of the Registrant’s common stock and related stock purchase rights as of October 31, 2003 is:

Common stock, par value $.01 per share	161,657,187
(Class)	(Outstanding)

Available on the Web @ www.banknorth.com

TABLE OF CONTENTS

		CONSOLIDATED BALANCE SHEETS
		CONSOLIDATED STATEMENTS OF INCOME
		CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
		CONSOLIDATED STATEMENTS OF CASH FLOWS
		Notes to Consolidated Financial Statements
	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	Item 3. Quantitative and Qualitative Disclosures about Market Risk
	Item 4. Controls and Procedures
Part II - Other Information
	Item 1. Legal Proceedings
	Item 2. Changes in Securities and Use of Proceeds
	Item 3. Defaults Upon Senior Securities
	Item 4. Submission of Matters to a Vote of Security Holders
	Item 5. Other Information
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
EXHIBIT INDEX
EX-3.(II) BYLAWS
EX-31.1 SECT. 302 CERTIFICATION OF C.E.O.
EX-31.2 SECT. 302 CERTIFICATION OF C.F.O.
EX-32.1 SECT. 906 CERTIFICATION OF C.E.O.
EX-32.2 SECT. 906 CERTIFICATION OF C.F.O.

INDEX
BANKNORTH GROUP, INC. AND SUBSIDIARIES

			PAGE
PART I.	FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Consolidated Balance Sheets	3
		Consolidated Statements of Income	4
		Consolidated Statements of Changes in Shareholders’ Equity	5
		Consolidated Statements of Cash Flows	6
		Notes to Consolidated Financial Statements	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	44
	Item 4.	Controls and Procedures	44
PART II.	OTHER INFORMATION
	Item 1.	Legal proceedings	44
	Item 2.	Changes in securities and use of proceeds	44
	Item 3.	Defaults upon senior securities	44
	Item 4.	Submission of matters to a vote of security holders	44
	Item 5.	Other information	44
	Item 6.	Exhibits and reports on Form 8-K	44
	Signatures		45
	Exhibits		46

2

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

				September 30, 2003			December 31, 2002
Assets
Cash and due from banks				$	559,056		$	690,250
Federal funds sold and other short term investments					31,645			79,753
Securities available for sale, at market value					6,938,938			6,731,467
Securities held to maturity (fair value of $141,049 and $221,571 at September 30, 2003 and December 31, 2002, respectively)					141,626			216,409
Loans held for sale					74,696			128,622
Loans and leases:
	Residential real estate mortgages				2,702,895			2,382,197
	Commercial real estate mortgages				5,310,179			4,792,049
	Commercial business loans and leases				3,265,795			2,968,474
	Consumer loans and leases				4,646,983			3,913,288
		Total loans and leases			15,925,852			14,056,008
	Less: Allowance for loan and lease losses				229,581			208,273
			Net loans and leases		15,696,271			13,847,735
Premises and equipment, net					264,752			271,677
Goodwill					1,094,334			660,684
Identifiable intangible assets					37,340			34,474
Mortgage servicing rights					3,802			3,598
Bank-owned life insurance					482,255			380,405
Other assets					416,222			373,867
	Total assets			$	25,740,937		$	23,418,941
Liabilities and Shareholders’ Equity
Deposits:
	Savings accounts			$	2,473,397		$	1,940,195
	Money market access and NOW accounts				6,922,924			6,091,429
	Certificates of deposit				4,943,292			4,658,778
	Demand deposits				3,444,084			2,974,199
		Total deposits			17,783,697			15,664,601
Short-term borrowings					1,048,499			1,276,467
Long-term debt					3,911,469			4,156,114
Other liabilities					521,692			258,274
	Total liabilities				23,265,357			21,355,456
Shareholders’ Equity:
Preferred stock (par value $0.01 per share, 5,000,000 shares authorized, none issued)					—			—
Common stock (par value $0.01 per share, 400,000,000 shares authorized, Issued 2003 - 182,292,973; Issued 2002 - 168,892,284)					1,823			1,689
Paid-in capital					1,434,169			1,059,778
Retained earnings					1,447,961			1,269,422
Treasury stock, at cost (20,749,748 shares in 2003 and 18,313,517 shares in 2002)					(444,073	)		(382,350	)
Accumulated other comprehensive income					35,700			114,946
	Total shareholders’ equity				2,475,580			2,063,485
		Total liabilities and shareholders’ equity		$	25,740,937		$	23,418,941

See accompanying Notes to unaudited Consolidated Financial Statements.

3

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

			Three Months Ended				Nine Months Ended
			September 30,				September 30,
			2003		2002		2003		2002
Interest and dividend income:
	Interest and fees on loans and leases		$	219,215	$	221,534	$	665,309	$	662,298
	Interest and dividends on securities			71,535		91,622		237,246		266,251
		Total interest and dividend income		290,750		313,156		902,555		928,549
Interest expense:
	Interest on deposits			45,164		62,335		147,290		188,642
	Interest on borrowed funds			35,754		49,825		127,722		142,952
		Total interest expense		80,918		112,160		275,012		331,594
		Net interest income		209,832		200,996		627,543		596,955
Provision for loan and lease losses				10,500		10,829		31,901		33,486
		Net interest income after provision for loan and lease losses		199,332		190,167		595,642		563,469
Noninterest income:
	Deposit services			25,167		20,816		71,441		59,712
	Insurance brokerage commissions			10,930		11,670		34,235		31,885
	Merchant and electronic banking income, net			11,115		10,108		31,235		27,267
	Trust and investment management services			8,178		7,791		23,486		24,587
	Bank-owned life insurance			5,785		5,107		16,952		14,477
	Investment planning services			3,761		2,770		10,928		8,452
	Net securities gains			3,573		208		39,778		578
	Other noninterest income			20,147		7,035		54,668		23,109
				88,656		65,505		282,723		190,067
Noninterest expenses:
	Compensation and employee benefits			82,230		79,718		245,170		230,763
	Occupancy			14,520		12,715		44,584		37,999
	Equipment			11,668		9,986		35,344		29,623
	Data processing			10,466		9,763		31,059		30,188
	Advertising and marketing			5,553		4,301		16,569		12,515
	Amortization of identifiable intangible assets			2,320		1,684		6,622		4,422
	Merger and consolidation costs			808		2,168		6,788		11,433
	Prepayment penalties on borrowings			—		—		30,490		—
	Other noninterest expenses			24,082		21,242		68,968		64,322
				151,647		141,577		485,594		421,265
Income before income tax expense				136,341		114,095		392,771		332,271
Applicable income tax expense				46,063		37,233		133,574		110,771
		Net income	$	90,278	$	76,862	$	259,197	$	221,500
Basic earnings per share			$	0.56	$	0.52	$	1.61	$	1.49
Diluted earnings per share			$	0.55	$	0.51	$	1.59	$	1.48
Weighted average shares outstanding:
		Basic		161,517		148,099		160,498		148,208
		Diluted		164,446		149,662		162,789		149,935

See accompanying Notes to unaudited Consolidated Financial Statements.

4

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

		Common
		Shares			Common		Paid-in			Retained
		Outstanding			Stock		Capital			Earnings
Balances at December 31, 2002			150,579		$	1,689	$	1,059,778		$	1,269,422
Net income			—			—		—			259,197
Unrealized loss on available for sale securities, net of tax and reclassification adjustment			—			—		—			—
Unrealized gain on cash flow hedges, net of tax and reclassification adjustment			—			—		—			—
	Comprehensive income
Issuance of stock and options exchanged for acquisitions			13,401			134		382,669			—
Treasury stock issued for employee benefit plans			1,980			—		(7,328	)		—
Treasury stock purchased			(4,417	)		—		—			—
Distribution of restricted stock			—			—		(950	)		—
Cash dividends declared			—			—		—			(80,658	)
Balances at September 30, 2003			161,543		$	1,823	$	1,434,169		$	1,447,961
Balances at December 31, 2001			151,221		$	1,651	$	958,764		$	1,056,678
Net income			—			—		—			221,500
Unrealized gain on available for sales securities, net of tax and reclassification adjustment						—		—			—
Unrealized loss on cash flow hedges, net of tax and reclassification adjustment			—			—		—			—
	Comprehensive income
Issuance of stock and options exchanged for acquisitions			1,052			11		25,810			—
Treasury stock issued for employee benefit plans			1,892			—		(6,895	)		—
Treasury stock purchased			(6,228	)		—		—			—
Distribution of restricted stock			—			—		(893	)		—
Decrease in unearned compensation-ESOP			—			—		5,300			—
Cash dividends declared			—			—		—			(63,748	)
Balances at September 30, 2002			147,937		$	1,662	$	982,086		$	1,214,430

[Additional columns below]

[Continued from above table, first column(s) repeated]

								Accumulated
		Unearned						Other
		Compen-			Treasury			Comprehensive
		sation			Stock			Income (Loss)			Total
Balances at December 31, 2002		$	—		($	382,350	)	$	114,946		$	2,063,485
Net income			—			—			—			259,197
Unrealized loss on available for sale securities, net of tax and reclassification adjustment			—			—			(80,290	)		(80,290	)
Unrealized gain on cash flow hedges, net of tax and reclassification adjustment			—			—			1,044			1,044
	Comprehensive income											179,951
Issuance of stock and options exchanged for acquisitions			—			—			—			382,803
Treasury stock issued for employee benefit plans			—			40,349			—			33,021
Treasury stock purchased			—			(103,662	)		—			(103,662	)
Distribution of restricted stock			—			1,590			—			640
Cash dividends declared			—			—			—			(80,658	)
Balances at September 30, 2003		$	—		($	444,073	)	$	35,700		$	2,475,580
Balances at December 31, 2001		($	1,017	)	($	267,529	)	$	40,568		$	1,789,115
Net income			—			—			—			221,500
Unrealized gain on available for sales securities, net of tax and reclassification adjustment			—			—			67,556			67,556
Unrealized loss on cash flow hedges, net of tax and reclassification adjustment			—			—			(1,478	)		(1,478	)
	Comprehensive income											287,578
Issuance of stock and options exchanged for acquisitions			—			—			—			25,821
Treasury stock issued for employee benefit plans			—			36,569			—			29,674
Treasury stock purchased			—			(151,286	)		—			(151,286	)
Distribution of restricted stock			—			1,719			—			826
Decrease in unearned compensation-ESOP			879			—			—			6,179
Cash dividends declared			—			—			—			(63,748	)
Balances at September 30, 2002		($	138	)	($	380,527	)	$	106,646		$	1,924,159

See accompanying Notes to unaudited Consolidated Financial Statements.

5

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

			Nine Months Ended
			September 30,
			2003			2002
Cash flows from operating activities:
	Net income		$	259,197		$	221,500
	Adjustments to reconcile net income to net cash provided by operating activities:
		Provision for loan and lease losses		31,901			33,486
		Depreciation of banking premises and equipment		32,481			26,126
		Net amortization of premium and discounts		45,968			26,262
		Amortization of other intangibles		6,622			4,422
		Provision for deferred tax expense		17,100			8,539
		ESOP expense		—			6,179
		Distribution of restricted stock units		640			826
		Net (gains) realized from sales of securities		(39,778	)		(578	)
		Prepayment penalties on borrowings		30,490			—
		Net (gains) realized from sales of loans held for sale		(11,418	)		(6,330	)
		Increase in cash surrender value of bank owned life insurance		(16,952	)		(14,477	)
		Net decrease in mortgage servicing rights		268			3,489
		Proceeds from sales of loans held for sale		757,404			526,694
		Residential loans originated and purchased for sale		(690,453	)		(481,341	)
		Net decrease (increase) in other assets		65,308			(16,067	)
		Net (decrease) increase in other liabilities		(100,267	)		40,428
Net cash provided by operating activities				388,511			379,158
Cash flows from investing activities:
	Proceeds from sales of securities available for sale			2,890,179			746,317
	Proceeds from maturities and principal repayments of securities available for sale			2,674,338			1,515,446
	Purchases of securities available for sale			(5,207,824	)		(2,879,713	)
	Proceeds from maturities and principal repayments of securities held to maturity			74,783			86,492
	Net (increase) in loans and leases			(465,465	)		(520,100	)
	Net additions to premises and equipment			(13,937	)		(25,438	)
	Purchases of bank owned life insurance			—			(40,000	)
	Cash (paid) for acquisitions, net of cash acquired			48,354			(27,197	)
Net cash provided (used) by investing activities				428			(1,144,193	)
Cash flows from financing activities:
	Net increase in deposits			207,044			351,796
	Net increase in securities sold under repurchase agreements			553,357			347,841
	Proceeds from Federal Home Loan Bank borrowings			1,900			3,555
	Payments on Federal Home Loan Bank borrowings			(1,276,817	)		(316,711	)
	Net (decrease) increase in other borrowings			(1,119	)		49,591
	Issuance of senior notes, net			148,693			—
	Issuance of securities of subsidiary trusts, net			—			190,950
	Issuance of common stock			33,021			29,674
	Purchase of treasury stock			(103,662	)		(151,286	)
	Cash dividends paid to shareholders			(80,658	)		(63,748	)
Net cash (used) provided by financing activities				(518,241	)		441,662
Decrease in cash and cash equivalents				(129,302	)		(323,373	)
Cash and cash equivalents at beginning of period				717,003			871,211
Cash and cash equivalents at end of period			$	587,701		$	547,838
For the nine months ended September 30, 2003 and 2002, interest of $276,928 and $324,901 and income taxes of $111,055 and $59,833 were paid, respectively

See accompanying Notes to unaudited Consolidated Financial Statements.

6

BANKNORTH GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2003
(In thousands, except per share data and as noted) (Unaudited)

Note 1 – Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and predominant practices within the banking industry. We, Banknorth Group, Inc., have not changed our significant accounting and reporting policies from those disclosed in our 2002 Annual Report. There have been no significant changes in the methods or assumptions used in the accounting policies which require material estimates and assumptions.

In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the unaudited consolidated financial statements have been included herein. The results of operations for the three and nine months ended September 30, 2003 are not necessarily indicative of the results that may be expected for any other interim period or the entire year ending December 31, 2003. Certain amounts in the prior periods have been reclassified to conform to the current presentation. All significant intercompany balances and transactions have been eliminated in the accompanying unaudited consolidated financial statements.

Note 2 – Acquisitions

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

							Transaction-Related Items
			Balance at
			Acquisition Date						Other						Total
	Acquisition								Identifiable		Cash		Shares		Purchase
(Dollars and shares in millions)	Date		Assets		Equity		Goodwill		Intangibles		Paid		Issued		Price
American Financial Holdings, Inc.		2/14/2003	$	2,690.3	$	408.2	$	426.8	$	9.2	$	328.5		13.4	$	711.3
Insurance agency acquisitions		2003		1.2		0.1		2.4		0.7		3.2		—		3.2
Warren Bancorp, Inc.		12/31/2002		466.1		45.3		91.8		2.7		59.8		2.7		136.6
Bancorp Connecticut, Inc.		8/31/2002		661.7		61.4		97.4		8.7		161.2		—		154.2
Ipswich Bancshares, Inc.		7/26/2002		318.0		13.9		23.1		4.8		19.9		0.9		40.1
Insurance agency acquisition		2002		2.5		—		5.6		2.2		—		0.2		7.4

7

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

Assets:
Investments		$	608,291
Loans and leases, net			1,437,279
Premises and equipment			11,764
Mortgage servicing rights			472
Goodwill			426,794
Other intangibles			9,241
Other assets			543,031
	Total assets acquired		3,036,872
Liabilities:
Deposits			1,923,154
Borrowings			399,960
Other liabilities			2,412
	Total liabilities assumed		2,325,526
	Net assets acquired	$	711,346

We expect that some adjustments of the estimated fair values assigned to the assets acquired and liabilities assumed at the acquisition date will be recorded after September 30, 2003, although such adjustments are not expected to be significant.

On February 14, 2003, the date of acquisition of American, we accrued $13.0 million of merger-related costs for severance, contract terminations, and asset write-downs with an offsetting charge to goodwill. Total merger charges related to the American acquisition recorded as an expense by us totaled $5.6 million, of which $4.8 million was recorded in 2003.

Note 3 – Stock Compensation Plans

Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation” encourages all entities to adopt a fair value based method of accounting for employee stock compensation plans, whereby compensation cost is measured at the grant date based on the fair value of the award and is recognized over the service period, which is usually the vesting period. However, it also allows an entity to continue to measure compensation cost for those plans using the intrinsic value based method of accounting prescribed by APB Opinion No. 25, “Accounting for Stock Issued to Employees,” whereby compensation cost is the excess, if any, of the quoted market price of the underlying stock at the grant date (or other measurement date) over the amount an employee must pay to acquire the stock upon exercise of the stock option. We have elected to continue using the intrinsic value method in APB Opinion No. 25 and, as a result, must make pro forma disclosures of net income and earnings per share as if the fair value based method of accounting had been applied. The pro forma disclosures include the effects of all awards granted and the effects of our employee stock purchase plan. There were 287,700 and 229,725 stock options granted under our stock option plans during the nine months ended September 30, 2003 and 2002, respectively. Had we determined compensation cost based on the fair value at the grant date for all stock options and recorded expense related to our employee stock purchase plan under SFAS No. 123, our net income and earnings per share would have been reduced to the pro forma amounts indicated as follows:

8

			Three Months Ended September 30,						Nine Months Ended September 30,
			2003			2002			2003			2002
Net income, as reported			$	90,278		$	76,862		$	259,197		$	221,500
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards				(3,833	)		(2,310	)		(12,253	)		(8,561	)
	Less tax effect			1,224			721			3,855			2,572
	Net of related tax effects			(2,609	)		(1,589	)		(8,398	)		(5,989	)
Proforma net income			$	87,669		$	75,273		$	250,799		$	215,511
Earnings per share
	Basic -	As reported	$	0.56		$	0.52		$	1.61		$	1.49
		Proforma	$	0.54		$	0.51		$	1.56		$	1.45
	Diluted -	As reported	$	0.55		$	0.51		$	1.59		$	1.48
		Proforma	$	0.53		$	0.50		$	1.54		$	1.44

On April 22, 2003, the Financial Accounting Standards Board (“FASB”) concluded that all companies should expense the fair value of employee stock options. On May 7, 2003, the FASB concluded that stock-based compensation should be accounted for using the modified grant-date measurement approach as defined in SFAS 123; as a result, compensation cost would be adjusted to reflect actual forfeitures and outcomes of performance conditions. We have used the Black Scholes model to calculate the expense of the fair value of stock options shown above. We have not determined the effect on expense using alternative valuation models. The FASB plans to issue an exposure draft later this year, which could become effective in 2004. Until a new Statement is issued, the provisions of SFAS No. 123 remain in effect.

Note 4 – Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill and identifiable intangible assets for the nine months ended September 30, 2003 are summarized as follows:

						Indentifiable Intangible Assets
						Core Deposit			Other			Total
						Intangibles			Identifiable			Identifiable
			Goodwill			(“CDI”)			Intangibles			Intangibles
Balance, December 31, 2002			$	660,684		$	28,438		$	6,036		$	34,474
Recorded during the year				429,223			6,443			5,381			11,824
Adjust Warren’s estimated CDI to actual				2,244			(2,244	)		—			(2,244	)
Amortization expense				—			(3,441	)		(3,181	)		(6,622	)
Massachusetts REIT adjustment (see Note 12)				2,473			—			—			—
Other adjustments of purchase accounting estimates				(290	)		—			(92	)		(92	)
Balance, September 30, 2003			$	1,094,334		$	29,196		$	8,144		$	37,340
Estimated amortization expense for the year ending:
	Remaining	2003				$	1,134		$	1,193		$	2,327
		2004					3,841			2,258			6,099
		2005					3,550			1,101			4,651
		2006					3,364			353			3,717
		2007					3,245			353			3,598
		thereafter					14,062			975			15,037

9

The components of identifiable intangible assets are as follows:

		September 30, 2003
		Gross Carrying		Accumulated		Net Carrying
		Amount		Amortization		Amount
Identifiable intangible assets:
Core deposit intangibles		$	54,781	$	25,585	$	29,196
Other identifiable intangibles			12,405		4,261		8,144
	Total	$	67,186	$	29,846	$	37,340

Note 5 – Short-term Borrowings

A summary of short-term borrowings follows:

	September 30, 2003		December 31, 2002
Securities sold under agreements to repurchase - retail	$	1,045,249	$	1,222,466
Federal funds purchased		3,000		53,000
Treasury, tax and loan notes		250		1,001
	$	1,048,499	$	1,276,467

Note 6 – Long-term Debt

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

	September 30, 2003		December 31, 2002
Federal Home Loan Bank advances	$	1,557,390	$	2,482,582
Securities sold under agreements to repurchase - wholesale		1,692,560		1,171,049
Capital trust securities		295,056		295,056
Subordinated long-term debt 7.625%, due 2011		200,000		200,000
Senior notes 3.75%, due 2008		149,739		—
Hedge-related basis adjustments on long-term debt		9,665		—
Other long-term debt		7,059		7,427
Total	$	3,911,469	$	4,156,114

Callable borrowings amounted to $1.9 billion and $1.0 billion at September 30, 2003 and December 31, 2002, respectively, the majority of which are long-term in nature.

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

On April 30, 2003, we issued $150 million of 3.75% senior notes due May 1, 2008. Interest on the notes is scheduled to be paid semi-annually on May 1 and November 1 of each year and the notes are not redeemable prior to their maturity. There are no sinking fund provisions for the notes. Also on April 30, 2003, we entered into an interest rate swap agreement for $150 million to hedge the fair value of the $150 million senior notes (fixed rate of 3.75% due in 2008). The effect of the hedge, which is accounted for as a fair value hedge, was to synthetically convert this fixed rate debt to a variable rate set at 3-month LIBOR plus 0.41%.

On July 23, 2003, Banknorth entered into interest rate swap agreements for $216.5 million to hedge the fair value of $216.5 million of FHLB advances. The effect of the hedges, which are accounted for as fair value hedges, was to synthetically convert this fixed rate debt to a variable rate set at an average of 1-month

10

LIBOR plus 3.82%. These FHLB advances had a weighted average cost of 5.47% and an average term of 2 years.

Note 7 – Share Repurchases

During the nine months ended September 30, 2003, we repurchased 4.4 million shares of our outstanding common stock at an average price of $23.47. At September 30, 2003, there were a total of 2.9 million shares remaining under existing repurchase authorizations. There were no repurchases during the quarter ended September 30, 2003.

Note 8 - Comprehensive Income

The following table presents the reconciliation of transactions affecting accumulated other comprehensive income included in shareholders’ equity for the periods indicated.

	Three Months Ended									Three Months Ended
	September 30, 2003									September 30, 2002
	Pre-tax			Tax			Net of			Pre-tax			Tax			Net of
	Amount			Effect			Tax			Amount			Effect			Tax
Unrealized gain (loss) on securities available for sale	($	90,449	)	$	31,656		($	58,793	)	$	48,588		($	17,006	)	$	31,582
Unrealized gain (loss) on cash flow hedges		1,819			(636	)		1,183			(6,492	)		2,272			(4,220	)
Reclassification adjustment for gains (losses) realized in net income		(5,562	)		1,947			(3,615	)		5,202			(1,821	)		3,381
Net change in unrealized gains (losses)	($	94,192	)	$	32,967		($	61,225	)	$	47,298		($	16,555	)	$	30,743

	Nine Months Ended								Nine Months Ended
	September 30, 2003								September 30, 2002
	Pre-tax			Tax		Net of			Pre-tax			Tax			Net of
	Amount			Effect		Tax			Amount			Effect			Tax
Unrealized gain (loss) on securities available for sale	($	83,495	)	$	29,061	($	54,434	)	$	104,511		($	36,579	)	$	67,932
Unrealized gain (loss) on cash flow hedges		(6,018	)		2,106		(3,912	)		(8,177	)		2,862			(5,315	)
Reclassification adjustment for gains (losses) realized in net income		(32,153	)		11,253		(20,900	)		5,325			(1,864	)		3,461
Net change in unrealized gains (losses)	($	121,666	)	$	42,420	($	79,246	)	$	101,659		($	35,581	)	$	66,078

Note 9 - Other Noninterest Income

Other noninterest income consisted of the following for the periods indicated.

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2003			2002			2003			2002
Covered call premiums	$	7,152		$	1,128		$	21,390		$	5,107
Loan fee income		7,376			5,206			19,456			15,728
Mortgage banking services income (expense)		3,087			(455	)		9,328			1,710
Venture capital write-downs		(374	)		(469	)		(989	)		(2,171	)
Miscellaneous income		2,906			1,625			5,483			2,735
Total	$	20,147		$	7,035		$	54,668		$	23,109

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Note 10 – Earnings Per Share

The computations of basic and diluted earnings per share and weighted average shares outstanding are as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2003		2002		2003		2002
Net income	$	90,278	$	76,862	$	259,197	$	221,500
Weighted average basic common shares outstanding		161,517		148,099		160,498		148,208
Effect of dilutive stock options		2,929		1,563		2,291		1,727
Weighted average diluted common shares outstanding		164,446		149,662		162,789		149,935
Basic earnings per share	$	0.56	$	0.52	$	1.61	$	1.49
Diluted earnings per share	$	0.55	$	0.51	$	1.59	$	1.48

Note 11 - New Accounting Standards

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” This Statement applies generally to freestanding financial instruments that embody obligations of the issuing entity to redeem the instrument or to settle the obligation by repurchasing its equity shares through the transfer of assets or through issuance of its own shares. Such freestanding instruments must be classified as liabilities or, in some cases, assets. SFAS No. 150 requires that financial instruments containing obligations to repurchase the issuing entity’s equity shares and, under certain circumstances, obligations that are settled by delivery of the issuer’s shares, be classified as liabilities. This statement is effective for financial instruments entered into or modified after May 31, 2003 and for contracts in existence at the start of the first interim period beginning after June 15, 2003. The adoption of this standard on July 1, 2003 did not have a material impact on our financial condition, results of operations, earnings per share or cash flows.

In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” resulting in more consistent reporting of contracts as either derivatives or hybrid instruments. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003, and should be applied prospectively. Implementation issues that have been effective for fiscal quarters that began prior to June 15, 2003 should continue to be applied in accordance with their respective effective dates. The adoption of this standard on July 1, 2003 did not have a material impact on our financial condition, results of operations, earnings per share or cash flows.

In January 2003, the FASB issued FASB Interpretation No. 46, “Consolidation of Variable Interest Entities, an interpretation of ARB No. 51” (“FIN 46”). FIN 46 provides a new framework for identifying variable interest entities (“VIEs”) and determining when a company should include the assets, liabilities, noncontrolling interests and results of activities of a VIE in its consolidated financial statements. FIN 46 is effective immediately for VIEs created after January 31, 2003; this has had no significant impact on our financial condition, results of operations, earnings per share or cash flows. For VIEs created prior to January 31, 2003, we must apply the provisions of FIN 46 by December 31, 2003. At present, we believe that this will not have a significant impact on our financial condition, results of operations, earnings per share or cash flows. However, due to the complexity of the new guidance and the evolving interpretations among accounting professionals, we continue to assess the disclosure requirements of FIN 46 on all of our

12

relationships with variable interest entities. We, as well as other bank holding companies, are currently evaluating whether trusts established prior to the adoption of FIN 46 to issue preferred securities which are included in Tier 1 capital for regulatory purposes may continue to be treated as consolidated subsidiaries under FIN 46 after October 1, 2003. For information regarding an ongoing evaluation of the effects of FIN 46 on the treatment of capital securities issued by consolidated subsidiary trusts for regulatory purposes, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Capital.”

In November 2002, the FASB issued FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” This Interpretation requires the recording at fair value of the issuance of guarantees which would include the issuance of standby letters of credit. Banknorth adopted the provisions of FASB Interpretation No. 45 beginning January 1, 2003. At September 30, 2003, the approximate fair value of standby letters of credit was $912 thousand, of which $448 thousand was unamortized and included in other liabilities on the balance sheet. Adoption of the Interpretation did not materially affect our financial condition, results of operations, earnings per share or cash flows.

Note 12 – State Tax Assessment

During the second quarter of 2003, we entered into a settlement with the Massachusetts Department of Revenue (“DOR”) concerning the dividends received deduction relating to certain banks that we had acquired prior to 2003. Legislation was enacted on March 5, 2003, which disallowed the dividends-received deduction for dividends received from a Real Estate Investment Trust (“REIT”) retroactive to 1999.

The aggregate assessment of $5.9 million (net of Federal income tax benefit) was recorded in the first quarter of 2003 as an increase to goodwill related to the acquired banks. During the second quarter of 2003, we entered into (and paid) a settlement of $2.5 million, net of Federal income tax benefit, to the DOR, which was part of a global settlement negotiated by approximately 50 similarly-situated financial institutions doing business in Massachusetts with the DOR. Goodwill was reduced to reflect the final settlement.

Note 13 – Pending Acquisition

On September 3, 2003, we entered into a definitive agreement to acquire First & Ocean BanCorp for $51 million in cash. First & Ocean is located in Newburyport, Massachusetts and had $274 million in assets at June 30, 2003. The acquisition is expected to be completed in the fourth quarter of 2003.

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BANKNORTH GROUP, INC. AND SUBSIDIARIES

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

(In thousands, except per share data and as noted)

OVERVIEW

Our financial statements for the three and nine months ended September 30, 2003 reflect the acquisition of American Financial Holdings, Inc. (“American”) from the date of acquisition on February 14, 2003. American had total assets of $2.7 billion at the date of acquisition. We also had two insurance agency acquisitions in the third quarter of 2003 with annual premium revenues of approximately $1.6 million. In addition, the financial statements reflect the acquisitions of Community Insurance Agencies, Inc. (“Community”), which closed on July 2, 2002, Ipswich Bancshares, Inc. (“Ipswich”), which closed on July 26, 2002, Bancorp Connecticut, Inc. (“Bancorp”), which closed on August 31, 2002, and Warren Bancorp (“Warren”), which closed on December 31, 2002. These 2002 acquisitions increased total assets (including intangible assets) by $1.7 billion. All of these mergers were accounted for under the purchase method of accounting and, as a result, the assets and liabilities of these companies and their results of operations have been included in our financial statements since the date of acquisition.

In April 2003, we completed a deleveraging program which benefited our net interest margin, mitigated interest rate risk and reduced the level of assets subject to prepayment risk. Under this deleveraging program, we sold $901 million of investment securities (which had a weighted average yield of 5.05%) and used the proceeds to prepay $853 million of borrowings (which had a weighted average rate of 4.49%). The gain on sale of these securities totaled $29.2 million, while the prepayment charges on the borrowings which were prepaid totaled $28.5 million. The reduction in assets freed up approximately $54 million of Tier 1 capital, which was used to repurchase shares of our common stock in the open market. These stock repurchases had the effect of making the reduction in net interest income resulting from the deleveraging program neutral in terms of our earnings per share.

SUMMARY

Consolidated net income was $90.3 million, or $0.55 per diluted share, for the third quarter of 2003 as compared with $76.9 million, or $0.51 per diluted share, for the third quarter of 2002, a per share increase of 8%. Our growth in net income for the quarter ended September 30, 2003 over the same quarter last year was due in part to acquisitions completed in 2003 and 2002. Results were diminished by the effect of merger and consolidation costs of $808 thousand for the three months ended September 30, 2003 and $2.2 million for the three months ended September 30, 2002.

Annualized return on average equity (“ROE”) and return on average assets (“ROA”) were 14.85% and 1.39%, respectively, for the quarter ended September 30, 2003 and were 16.25% and 1.40%, respectively, for the comparable quarter last year. The decline in ROE related primarily to the intangible equity created in the acquisition of American in February 2003.

Results for the third quarter of 2003 improved over the third quarter of 2002 due primarily to strong fee income and expense control. Net interest income increased by $8.8 million (or 4%) over the third quarter of last year as increased volume more than offset a 40 basis point decline in net interest margin. Noninterest income was $88.7 million and $65.5 million for the quarters ended September 30, 2003 and 2002, respectively, a 35% increase. The increase in noninterest income was mostly attributable to increases in deposit services income, net securities gains and other noninterest income. Noninterest expenses totaled $151.6 million and $141.6 million for the quarters ended September 30, 2003 and 2002, respectively, an increase of 7%. Acquisitions in 2003 and 2002 were factors in the increased noninterest income and noninterest expense. The efficiency ratio was 50.81% in the third quarter of 2003 compared to 53.12% in the comparable period last year. For a description of the methodology we use to calculate the efficiency ratio, see Note 3 to Table 1.

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For the nine months ended September 30, 2003, consolidated net income was $259.2 million, or $1.59 per diluted share, as compared with $221.5 million, or $1.48 per diluted share, for the same period in the prior year, a per share increase of 7%. Results in each period were diminished by the effect of merger and consolidation costs, which totaled $6.8 million for the nine months ended September 30, 2003 and $11.4 million for the nine months ended September 30, 2002. (See Table 6 for merger and consolidation costs detail for the nine months ended September 30, 2003 and 2002).

ROE and ROA were 14.45% and 1.36%, respectively, for the nine months ended September 30, 2003, and 16.46% and 1.41% for the nine months ended September 30, 2002. The decline in ROE related primarily to the intangible equity created in the acquisition of American in February 2003.

Net interest income for the nine months ended September 30, 2003 increased by $30.6 million or 5% from the same period last year. The increase was primarily attributable to increases in the volume of interest-earning assets, primarily due to acquisitions, which more than offset the effects of decreases in interest rates. The provision for loan and lease losses for the nine months ended September 30, 2003 decreased $1.6 million over the same period last year, primarily due to lower levels of net charge-offs and a higher coverage ratio of the allowance to non-performing loans and leases (see Table 4). Noninterest income was $282.7 million and $190.1 million for the nine months ended September 30, 2003 and 2002, respectively, a 49% increase. The increase in noninterest income for the nine months ended September 30, 2003 was primarily attributable to $39.8 million of gains from the sale of securities, of which $29.2 million related to our deleveraging program in the second quarter, an increase of $16.3 million in income from covered call premiums, an increase of $11.7 million in deposit services income related to both new accounts (including those of acquired banks) and increased transactions and an increase of $7.6 million in mortgage banking services income. Noninterest expenses totaled $485.6 million and $421.3 million for the nine months ended September 30, 2003 and 2002, respectively, an increase of 15%. The increase in noninterest expense was primarily due to $28.5 million of prepayment penalties on borrowings related to our deleveraging program in the second quarter and compensation and employee benefits and occupancy expenses related to acquisitions, which were mitigated by lower merger and consolidations costs and incentive expense.

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

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TABLE 1 - Selected Quarterly Data

				2003
				Third			Second			First
Net interest income		(A	)	$	209,832		$	211,574		$	206,137
Provision for loan and lease losses					10,500			10,500			10,901
Net interest income after loan and lease loss provision					199,332			201,074			195,236
Noninterest income		(B	)		88,656			115,828			78,238
Noninterest expenses		(C	)		151,647			184,039			149,908
Income before income taxes					136,341			132,863			123,566
Income tax expense					46,063			45,338			42,173
Net income				$	90,278		$	87,525		$	81,393
Weighted average shares outstanding:
	Basic				161,517			162,312			157,667
	Diluted				164,446			164,559			159,328
Basic earnings per share:				$	0.56		$	0.54		$	0.52
Diluted earnings per share:				$	0.55		$	0.53		$	0.51
Return on average assets (1)					1.39	%		1.38	%		1.32	%
Return on average equity (1)					14.85	%		14.24	%		14.26	%
Net interest margin (fully-taxable equivalent) (1)					3.63	%		3.71	%		3.66	%
Noninterest income as a percent of total income (2)					29.70	%		35.38	%		27.51	%
Efficiency ratio (3)					50.81	%		56.21	%		52.71	%

[Additional columns below]

[Continued from above table, first column(s) repeated]

		2002
		Fourth			Third			Second			First
Net interest income		$	199,563		$	200,996		$	199,473		$	196,486
Provision for loan and lease losses			10,829			10,829			10,829			11,828
Net interest income after loan and lease loss provision			188,734			190,167			188,644			184,658
Noninterest income			84,441			65,504			62,986			61,576
Noninterest expenses			158,126			141,577			136,791			142,897
Income before income taxes			115,049			114,094			114,839			103,337
Income tax expense			37,911			37,232			38,680			34,859
Net income		$	77,138		$	76,862		$	76,159		$	68,478
Weighted average shares outstanding:
	Basic		148,226			148,099			147,233			149,347
	Diluted		149,389			149,662			149,064			151,116
Basic earnings per share:		$	0.52		$	0.52		$	0.52		$	0.46
Diluted earnings per share:		$	0.52		$	0.51		$	0.51		$	0.45
Return on average assets (1)			1.35	%		1.40	%		1.46	%		1.36	%
Return on average equity (1)			15.75	%		16.25	%		17.45	%		15.73	%
Net interest margin (fully-taxable equivalent) (1)			3.86	%		4.03	%		4.18	%		4.23	%
Noninterest income as a percent of total income (2)			29.73	%		24.58	%		24.00	%		23.86	%
Efficiency ratio (3)			55.68	%		53.12	%		52.12	%		55.37	%

(1)	Annualized.
(2)	Represents noninterest income as a percentage of net interest income and noninterest income. Noninterest income as a percent of total income is calculated as (B) divided by (A+B).
(3)	Represents noninterest expenses as a percentage of net interest income and noninterest income. Efficiency ratio is calculated as (C) divided by (A+B).

RESULTS OF OPERATIONS

Net Interest Income

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

Fully-taxable equivalent net interest income for the third quarter of 2003 increased $9.2 million, or 5%, compared to the third quarter of 2002. This increase was primarily attributable to increases in the volume of interest-earning assets and interest-bearing liabilities. Average earning assets increased $3.2 billion, or 16%, for the three months ended September 30, 2003 compared to the same period in the prior year, primarily as a result of acquisitions. Average loans and leases increased by $2.5 billion, or 19%, compared to the third quarter of 2002 due primarily to acquisitions and, to a lesser extent, internal loan growth. Average loans as a percent of average earning assets was 69% and 67% for the quarters ended September 30, 2003 and 2002, respectively. Net interest margin, which represents fully-taxable equivalent net interest income as a percentage of average interest-earning assets, decreased from 4.03% to 3.63% during the three months ended September 30, 2002 and 2003, respectively, a decline of 10% (or 40 basis points). The primary reasons for this margin compression were the effects of acquisitions (18 basis points, including cash paid and lower margins at acquired banks), a heavier weighting of U. S. agency securities in our investment portfolio versus mortgage-backed securities (11 basis points) and the impact of prepayments and repricing on loans, securities, deposits and borrowings in a declining rate environment (11 basis points). The change in the investment portfolio from mortgage-backed securities to U.S. agency securities was to reduce the exposure to the loan prepayments inherent in mortgage-related assets. Interest rate spread, which represents the difference between the yield earned on our interest-earning assets and the rate paid on our interest-bearing liabilities, decreased from 3.64% to 3.39% on a fully-taxable equivalent basis during the three months ended September 30, 2002 and 2003, respectively, primarily due to a 123 basis point decrease in interest rates earned on interest-earning assets compared to a 98 basis point decrease in rates paid on interest-bearing liabilities.

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Our net interest margin benefited from interest rate swap agreements that synthetically converted fixed rate debt to variable rate debt. From March 2003 to July 2003 we entered into $566.5 million of notional amount swap agreements on fixed rate debt, where we are paying variable (based on LIBOR plus a margin) and receiving a fixed rate. The combined effect of these interest rate swaps was to lower interest expense by $2.5 million in the third quarter of 2003. See “Other Funding Sources” for more detailed discussion.

Our fully-taxable equivalent net interest income for the nine months ended September 30, 2003 increased $31.1 million compared to the nine months ended September 30, 2002. The net interest margin decreased from 4.14% for the nine months ended September 30, 2002 to 3.67% for the nine months ended September 30, 2003, and the fully-taxable equivalent interest rate spread decreased from 3.75% to 3.40% during the same period, respectively, primarily due to a 116 basis point decrease in interest rates earned on interest-earning assets compared to an 81 basis point decrease in rates paid on interest-bearing liabilities. Average net earning assets increased $440.2 million from the nine months ended September 30, 2002 compared to the nine months ended September 30, 2003, primarily as a result of acquisitions. The margin compression was mitigated somewhat by the positive impact of the deleveraging program completed in the second quarter of 2003. Table 2 shows average balances, net interest income by category and rates for each of the quarters in 2003 and 2002 and for the nine months ended September 30, 2003 and 2002. Table 3 shows the changes in fully-taxable equivalent net interest income by category due to changes in rate and volume. See also “Asset-Liability Management” below.

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

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TABLE 2 - Average Balances, Yields and Rates

					2003 Third Quarter								2003 Second Quarter
										Yield/								Yield/
					Average Balance		Interest			Rate (1)			Average Balance		Interest			Rate (1)
Loans and leases (2):
	Residential real estate mortgages				$	2,852,568	$	38,740			5.43	%	$	2,996,485	$	43,147			5.76	%
	Commercial real estate mortgages					5,263,002		77,962			5.88			5,074,540		78,342			6.19
	Commercial business loans and leases					3,216,254		40,837			5.04			3,154,085		41,105			5.23
	Consumer loans and leases					4,577,421		62,684			5.43			4,463,057		64,145			5.76
				Total loans and leases		15,909,245		220,223			5.50			15,688,167		226,739			5.79
Investment securities (3)						7,270,800		72,037			3.96			7,280,880		77,177			4.24
Federal funds sold and other short-term investments						16,113		55			1.36			18,077		54			1.20
		Total earning assets				23,196,158		292,315			5.02			22,987,124		303,970			5.30
Bank owned life insurance						478,572								472,853
Noninterest-earning assets						2,139,519								2,040,703
		Total assets			$	25,814,249							$	25,500,680
Interest-bearing deposits:
	Regular savings				$	2,474,169	$	2,502			0.40		$	2,468,244		3,089			0.50
	NOW and money market accounts					6,815,603		13,727			0.80			6,582,004		15,908			0.97
	Certificates of deposit					5,053,277		28,935			2.27			5,243,908		31,737			2.43
	Brokered deposits					—		—			—			—		—			0.00
			Total interest-bearing deposits			14,343,049		45,164			1.25			14,294,156		50,734			1.42
Borrowed funds						5,407,580		35,754			2.63			5,459,725		40,170			2.95
			Total interest-bearing liabilities			19,750,629		80,918			1.63			19,753,881		90,904			1.85
Non-interest bearing deposits						3,388,018								3,099,420
Other liabilities						263,171								181,765
Shareholders’ equity						2,412,431								2,465,614
		Total liabilities and shareholders’ equity			$	25,814,249							$	25,500,680
Net earning assets					$	3,445,529							$	3,233,243
Net interest income (fully-taxable equivalent)							$	211,397								213,066
Less: fully-taxable equivalent adjustments								(1,565	)							(1,492	)
		Net interest income					$	209,832							$	211,574
Net interest rate spread (fully-taxable equivalent)											3.39	%							3.45	%
Net interest margin (fully-taxable equivalent)											3.63	%							3.71	%

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

18

TABLE 2 – Average Balances, Yields and Rates

					2003 First Quarter								2002 Fourth Quarter
										Yield/								Yield/
					Average Balance		Interest			Rate (1)			Average Balance		Interest			Rate (1)
Loans and leases (2):
	Residential real estate mortgages				$	2,792,615	$	41,652			5.97	%	$	2,641,957	$	42,420			6.42	%
	Commercial real estate mortgages					4,913,188		77,810			6.42			4,504,625		76,131			6.71
	Commercial business loans and leases					3,006,370		39,475			5.32			2,844,994		39,940			5.57
	Consumer loans and leases					4,186,917		62,178			6.02			3,830,542		62,237			6.45
				Total loans and leases		14,899,090		221,115			6.00			13,822,118		220,728			6.35
Investment securities (3)						7,879,925		89,449			4.54			6,896,813		86,959			5.04
Federal funds sold and other short-term investments						4,535		25			2.21			22,576		88			1.54
		Total earning assets				22,783,550		310,589			5.50			20,741,507		307,775			5.91
Bank owned life insurance						425,136								376,857
Noninterest-earning assets						1,858,791								1,527,324
		Total assets			$	25,067,477							$	22,645,688
Interest-bearing deposits:
	Regular savings				$	2,173,771		3,075			0.57		$	1,835,068		3,213			0.69
	NOW and money market accounts					6,217,880		15,707			1.02			5,889,603		18,944			1.28
	Certificates of deposit					5,012,351		32,609			2.64			4,624,776		33,753			2.90
	Brokered deposits					—		—			0.00			22,431		96			1.70
			Total interest-bearing deposits			13,404,002		51,391			1.55			12,371,878		56,006			1.80
Borrowed funds						6,272,657		51,799			3.34			5,296,244		51,000			3.83
			Total interest-bearing liabilities			19,676,659		103,190			2.13			17,668,122		107,006			2.41
Non-interest bearing deposits						2,905,737								2,837,369
Other liabilities						170,732								196,567
Shareholders’ equity						2,314,349								1,943,630
		Total liabilities and shareholders’ equity			$	25,067,477							$	22,645,688
Net earning assets					$	3,106,891							$	3,073,385
Net interest income (fully-taxable equivalent)								207,399								200,769
Less: fully-taxable equivalent adjustments								(1,262	)							(1,206	)
		Net interest income					$	206,137							$	199,563
Net interest rate spread (fully-taxable equivalent)											3.37	%							3.50	%
Net interest margin (fully-taxable equivalent)											3.66	%							3.86	%

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

19

TABLE 2 - Average Balances, Yields and Rates

					2002 Third Quarter								2002 Second Quarter
										Yield/								Yield/
					Average Balance		Interest			Rate (1)			Average Balance		Interest			Rate (1)
Loans and leases (2):
	Residential real estate mortgages				$	2,657,333	$	44,205			6.65	%	$	2,569,964	$	43,946			6.84	%
	Commercial real estate mortgages					4,347,508		75,210			6.86			4,216,766		74,347			7.07
	Commercial business loans and leases					2,754,430		40,327			5.81			2,595,548		39,333			6.08
	Consumer loans and leases					3,662,187		62,624			6.78			3,530,040		62,158			7.06
				Total loans and leases		13,421,458		222,366			6.58			12,912,318		219,784			6.82
Investment securities (3)						6,487,448		91,518			5.64			6,276,523		90,804			5.79
Federal funds sold and other short-term investments						118,281		510			1.71			25,856		52			0.81
		Total earning assets				20,027,187		314,394			6.25			19,214,697		310,640			6.48
Bank owned life insurance						371,552								366,488
Noninterest-earning assets						1,399,012								1,309,697
		Total assets			$	21,797,751							$	20,890,882
Interest-bearing deposits:
	Regular savings				$	1,773,402		4,207			0.94		$	1,716,942		4,061			0.95
	NOW and money market accounts					5,608,231		21,649			1.53			5,246,053		19,897			1.52
	Certificates of deposit					4,736,817		36,307			3.04			4,652,499		37,273			3.21
	Brokered deposits					37,000		173			1.85			50,741		235			1.86
			Total interest-bearing deposits			12,155,450		62,336			2.03			11,666,235		61,466			2.11
Borrowed funds						4,885,461		49,825			4.05			4,784,197		48,448			4.06
			Total interest-bearing liabilities			17,040,911		112,161			2.61			16,450,432		109,914			2.68
Non-interest bearing deposits						2,684,263								2,520,968
Other liabilities						196,573								168,403
Shareholders’ equity						1,876,004								1,751,079
		Total liabilities and shareholders’ equity			$	21,797,751							$	20,890,882
Net earning assets					$	2,986,276							$	2,764,265
Net interest income (fully-taxable equivalent)								202,233								200,726
Less: fully-taxable equivalent adjustments								(1,237	)							(1,253	)
		Net interest income					$	200,996							$	199,473
Net interest rate spread (fully-taxable equivalent)											3.64	%							3.80	%
Net interest margin (fully-taxable equivalent)											4.03	%							4.18	%

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

20

TABLE 2 - Average Balances, Yields and Rates

					2002 First Quarter
										Yield/
					Average Balance		Interest			Rate (1)
Loans and leases (2):
	Residential real estate mortgages				$	2,675,415	$	47,265			7.07	%
	Commercial real estate mortgages					4,101,873		72,724			7.19
	Commercial business loans and leases					2,464,378		38,661			6.36
	Consumer loans and leases					3,539,213		63,952			7.33
				Total loans and leases		12,780,879		222,602			7.04
Investment securities (3)						5,943,057		84,296			5.68
Federal funds sold and other short-term investments						72,107		415			2.33
		Total earning assets				18,796,043		307,313			6.59
Bank owned life insurance						324,376
Noninterest-earning assets						1,347,407
		Total assets			$	20,467,826
Interest-bearing deposits:
	Regular savings				$	1,646,822		3,964			0.98
	NOW and money market accounts					5,099,310		18,895			1.50
	Certificates of deposit					4,762,399		41,694			3.55
	Brokered deposits					63,594		288			1.84
			Total interest-bearing deposits			11,572,125		64,841			2.27
Borrowed funds						4,511,945		44,679			4.01
			Total interest-bearing liabilities			16,084,070		109,520			2.76
Non-interest bearing deposits						2,446,539
Other liabilities						171,449
Shareholders’ equity						1,765,768
		Total liabilities and shareholders’ equity			$	20,467,826
Net earning assets					$	2,711,973
Net interest income (fully-taxable equivalent)								197,793
Less: fully-taxable equivalent adjustments								(1,307	)
		Net interest income					$	196,486
Net interest rate spread (fully-taxable equivalent)											3.83	%
Net interest margin (fully-taxable equivalent)											4.23	%

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

21

TABLE 2 - Average Balances, Yields and Rates

					Nine Months Ended								Nine Months Ended
					September 30, 2003								September 30, 2002
										Yield/								Yield/
					Average Balance		Interest			Rate (1)			Average Balance		Interest			Rate (1)
Loans and leases (2):
	Residential real estate mortgages				$	2,880,776	$	123,538			5.72	%	$	2,634,050	$	135,417			6.85	%
	Commercial real estate mortgages					5,084,858		234,115			6.16			4,222,861		222,281			7.04
	Commercial business loans and leases					3,126,338		121,416			5.19			2,605,746		118,320			6.07
	Consumer loans and leases					4,410,562		189,007			5.73			3,577,483		188,734			7.05
				Total loans and leases		15,502,534		668,076			5.76			13,040,140		664,752			6.81
Investment securities (3)						7,474,971		238,664			4.26			6,237,668		266,617			5.70
Federal funds sold and other short-term investments						12,922		134			1.39			72,133		977			1.81
		Total earning assets				22,990,427		906,874			5.27			19,349,941		932,346			6.43
Bank owned life insurance						459,049								354,311
Noninterest earning assets						2,016,447								1,356,848
		Total assets			$	25,465,923								21,061,100
Interest-bearing deposits:
	Regular savings				$	2,373,161		8,667			0.49		$	1,712,748		12,232			0.95
	NOW and money market accounts					6,540,686		45,342			0.93			5,319,602		60,441			1.52
	Certificates of deposit					5,103,328		93,281			2.44			4,716,914		115,274			3.27
	Brokered deposits					—		—			0.00			50,348		696			1.85
			Total interest-bearing deposits			14,017,175		147,290			1.40			11,799,612		188,643			2.14
Borrowed funds						5,710,875		127,722			2.99			4,728,125		142,951			4.04
			Total interest-bearing liabilities			19,728,050		275,012			1.87			16,527,737		331,594			2.68
Non-interest bearing deposits						3,132,825								2,551,397
Other liabilities						206,378								182,536
Shareholders’ equity						2,398,670								1,799,430
		Total liabilities and shareholders’ equity			$	25,465,923							$	21,061,100
Net earning assets					$	3,262,377							$	2,822,204
Net interest income (fully-taxable equivalent)								631,862								600,752
Less: fully-taxable equivalent adjustments								(4,319	)							(3,797	)
		Net interest income					$	627,543							$	596,955
Net interest rate spread (fully-taxable equivalent)											3.40	%							3.75	%
Net interest margin (fully-taxable equivalent)											3.67	%							4.14	%

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

22

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

TABLE 3 - Rate /Volume Analysis

		Three Months Ended
		September 30, 2003 vs. September 30, 2002
		Increase (decrease) due to
								Rate and			Total
		Volume (1)			Rate			Volume (2)			Change
Interest income:
Loans and leases		$	41,260		($	36,536	)	($	6,867	)	($	2,143	)
Investment securities			11,136			(27,471	)		(3,146	)		(19,481	)
Federal funds sold and other short-term investements			(440	)		(104	)		89			(455	)
Total interest income			51,956			(64,111	)		(9,924	)		(22,079	)
Interest expense:
Interest-bearing deposits:
	Regular savings		1,660			(2,414	)		(951	)		(1,705	)
	NOW and money market accounts		4,656			(10,319	)		(2,259	)		(7,922	)
	Certificates of deposit		2,425			(9,193	)		(604	)		(7,372	)
	Brokered deposits		(173	)		(173	)		173			(173	)
Total interest-bearing deposits			8,568			(22,099	)		(3,641	)		(17,172	)
Borrowed funds			5,330			(17,486	)		(1,915	)		(14,071	)
Total interest expense			13,898			(39,585	)		(5,556	)		(31,243	)
Net interest income (fully taxable equivalent)		$	38,058		($	24,526	)	($	4,368	)	$	9,164

[Additional columns below]

[Continued from above table, first column(s) repeated]

		Nine Months Ended
		September 30, 2003 vs. September 30, 2002
		Increase (decrease) due to
								Rate and			Total
		Volume (1)			Rate			Volume (2)			Change
Interest income:
Loans and leases		$	125,422		($	102,410	)	($	19,688	)	$	3,324
Investment securities			52,750			(67,182	)		(13,521	)		(27,953	)
Federal funds sold and other short-term investements			(802	)		(227	)		186			(843	)
Total interest income			177,370			(169,819	)		(33,023	)		(25,472	)
Interest expense:
Interest-bearing deposits:
	Regular savings		4,693			(5,893	)		(2,365	)		(3,565	)
	NOW and money market accounts		13,882			(23,475	)		(5,506	)		(15,099	)
	Certificates of deposit		9,451			(29,282	)		(2,162	)		(21,993	)
	Brokered deposits		(697	)		(697	)		698			(696	)
Total interest-bearing deposits			27,329			(59,347	)		(9,335	)		(41,353	)
Borrowed funds			29,696			(37,132	)		(7,793	)		(15,229	)
Total interest expense			57,025			(96,479	)		(17,128	)		(56,582	)
Net interest income (fully taxable equivalent)		$	120,345		($	73,340	)	($	15,895	)	$	31,110

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

Provision and Allowance for Loan and Lease Losses

We provided $10.5 million and $10.8 million for loan and lease losses in the quarters ended September 30, 2003 and 2002, respectively. For the nine months ended September 30, 2003 and 2002, we provided $31.9 million and $33.5 million for loan and lease losses, respectively. The lower provisions were due to lower levels of net-charge-offs, a higher coverage ratio of the allowance to non-performing loans and leases and lower delinquency ratios. As shown in Table 12, nonperforming assets amounted to $70.4 million at September 30, 2003 compared to $68.8 million at September 30, 2002. At September 30, 2003, the allowance for loan and lease losses amounted to $229.6 million, or 1.44% of total portfolio loans and leases, as compared to $208.3 million, or 1.48%, at December 31, 2002. The 4 basis point decrease in this ratio was primarily attributable to allowance for loan and lease losses established by acquired banks. The ratio of the allowance for loan and lease losses to nonperforming loans was 344% at September 30, 2003, as compared to 319% at December 31, 2002 and 311% at September 30, 2002.

23

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

TABLE 4 - Allowance for Loan and Lease Losses

			2003 Third			2003 Second			2003 First			2002 Fourth
			Quarter			Quarter			Quarter			Quarter
Allowance at beginning of period			$	227,240		$	226,677		$	208,273		$	201,689
Additions due to acquisitions				—			—			16,346			4,972
Charge-offs:
Residential real estate mortgages				63			53			55			(263	)
Commercial real estate mortgages				27			202			262			459
Commercial business loans and leases				3,011			5,754			3,205			5,060
Consumer loans and leases				8,782			6,959			7,609			7,597
	Total loans and leases charged off			11,883			12,968			11,131			12,853
Recoveries:
Residential real estate mortgages				5			22			22			12
Commercial real estate mortgages				296			676			534			70
Commercial business loans and leases				2,493			1,286			689			2,628
Consumer loans and leases				930			1,047			1,043			927
	Total loans and leases recovered			3,724			3,031			2,288			3,637
Net charge-offs				8,159			9,937			8,843			9,216
Provision for loan and lease losses				10,500			10,500			10,901			10,828
Allowance at end of period			$	229,581		$	227,240		$	226,677		$	208,273
Average loans and leases outstanding during the period (1)			$	15,841,521		$	15,634,071		$	14,829,108		$	13,750,316
Ratio of net charge-offs to average loans and leases outstanding during the period, annualized (1)				0.20	%		0.25	%		0.24	%		0.27	%
Ratio of allowance to total loans and leases at end of period (1)				1.44	%		1.44	%		1.46	%		1.48	%
Ratio of allowance to nonperforming loans and leases at end of period				344	%		374	%		288	%		319	%
Ratio of net charge-offs (recoveries) as a percent of average outstanding loans and leases, annualized (1):
Residential real estate mortgages				0.008	%		0.004	%		0.005	%		(0.042	%)
		Commercial real estate mortgages		(0.020	%)		(0.037	%)		(0.022	%)		0.034	%
		Commercial business loans and leases		0.064	%		0.568	%		0.339	%		0.339	%
		Consumer loans and leases		0.681	%		0.531	%		0.636	%		0.691	%

[Additional columns below]

[Continued from above table, first column(s) repeated]

			2002 Third			2002 Second			2002 First
			Quarter			Quarter			Quarter
Allowance at beginning of period			$	193,444		$	190,890		$	189,837
Additions due to acquisitions				7,822			—			—
Charge-offs:
Residential real estate mortgages				56			201			(134	)
Commercial real estate mortgages				(76	)		273			635
Commercial business loans and leases				8,703			5,319			5,374
Consumer loans and leases				5,922			5,834			7,042
	Total loans and leases charged off			14,605			11,627			12,917
Recoveries:
Residential real estate mortgages				65			21			23
Commercial real estate mortgages				(7	)		27			27
Commercial business loans and leases				3,108			2,136			1,101
Consumer loans and leases				1,033			1,168			991
	Total loans and leases recovered			4,199			3,352			2,142
Net charge-offs				10,406			8,275			10,775
Provision for loan and lease losses				10,829			10,829			11,828
Allowance at end of period			$	201,689		$	193,444		$	190,890
Average loans and leases outstanding during the period (1)			$	13,375,980		$	12,871,386		$	12,723,083
Ratio of net charge-offs to average loans and leases outstanding during the period, annualized (1)				0.31	%		0.26	%		0.34	%
Ratio of allowance to total loans and leases at end of period (1)				1.47	%		1.48	%		1.50	%
Ratio of allowance to nonperforming loans and leases at end of period				311	%		289	%		268	%
Ratio of net charge-offs (recoveries) as a percent of average outstanding loans and leases, annualized (1):
Residential real estate mortgages				(0.001	%)		(0.029	%)		(0.024	%)
		Commercial real estate mortgage		(0.006	%)		0.023	%		0.060	%
		Commercial business loans and leases		0.806	%		0.492	%		0.703	%
		Consumer loans and leases		0.530	%		0.530	%		0..693	%

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

Noninterest Income

Noninterest income for the third quarter ended September 30, 2003 totaled $88.7 million, an increase of $23.2 million, or 35%, from the third quarter of 2002. The increase was primarily due to increases in deposit services income, net securities gains and other noninterest income (primarily covered call premium income and mortgage banking services income). Noninterest income, including net securities gains, as a percent of total income was 30% and 25% for the quarters ended September 30, 2003 and 2002, respectively. For the nine months ended September 30, 2003 and 2002, noninterest income amounted to $282.7 million and $190.1 million, respectively, an increase of 49%. Included in this increase was $29.2 million of gains from the sale of securities related to the deleveraging program in the second quarter of 2003.

Deposit services income amounted to $25.2 million for the third quarter of 2003 compared to $20.8 million for the same period in 2002, an increase of $4.4 million, or 21%. For the nine months ended September 30, 2003 and 2002, deposit services income amounted to $71.4 million and $59.7 million, respectively, an increase of 20%. These increases were primarily attributable to an increased number of deposit accounts and an increase in cash

24

management and overdraft fees. Acquisitions in 2002 and 2003 comprised a significant portion of the increased number of deposit accounts and increased overdraft fees.

Insurance brokerage commissions income amounted to $10.9 million for the third quarter of 2003 compared to $11.7 million for the same period in 2002, a decrease of 6%. The decline was due to increased competition and market pressures on policy renewals in all of our market areas. For the nine months ended September 30, 2003 and 2002, insurance brokerage commissions amounted to $34.2 million and $31.9 million, respectively, an increase of 7%. This year to date increase was mostly attributable to the insurance acquisitions in the third quarter of 2002 and 2003 and higher annual bonus and profit sharing commissions from carriers recorded in 2003 compared to 2002.

Merchant and electronic banking income was $11.1 million for the third quarter of 2003 compared to $10.1 million for the third quarter of 2002, an increase of 10%. For the nine months ended September 30, 2003 and 2002, merchant and electronic banking income amounted to $31.2 million and $27.3 million, respectively, an increase of 15%. This income represents fees and interchange income generated by the use of our ATMs and debit cards issued by us along with charges to merchants for credit card transactions processed, net of third-party costs directly attributable to handling these transactions. The increases were due primarily to increases in the volume of transactions processed and increased market share from acquisitions.

Trust and investment management services income amounted to $8.2 million for the quarter ended September 30, 2003 compared to $7.8 million for the third quarter of 2002, an increase of 5%. For the nine months ended September 30, 2003 and 2002, trust and investment management services income amounted to $23.5 million and $24.6 million, respectively, a decrease of 4%. Assets under management increased to $8.7 billion at September 30, 2003 from $7.8 billion at September 30, 2002, an increase of $849 million primarily due to improvements in the financial markets and new accounts. Trust and investment management services income is largely based on the market value of assets under management which increased modestly as the market performance improved in the second and third quarters of 2003.

Bank-owned life insurance (“BOLI”) income was $5.8 million for the third quarter of 2003, compared to $5.1 million for the same period in 2002, an increase of 13%. For the nine months ended September 30, 2003 and 2002, BOLI income amounted to $17.0 million and $14.5 million, respectively, an increase of 17%. The increase related to BOLI purchased in 2002 and $85.6 million of BOLI acquired in the American merger in the first quarter of 2003. Income from BOLI represents the increase in the cash surrender value of life insurance policies on the lives of certain employees who have provided a consent allowing the Bank to be the beneficiary of such policies. Most of the BOLI is invested in the “general account” of quality insurance companies. Standard and Poors rated all such general account carriers AA- or better at September 30, 2003. The BOLI investment provides a means to mitigate increasing employee benefit costs. For the third quarter of 2003, the average carrying value of BOLI was $479 million compared to $372 million for the third quarter of 2002.

Investment planning services income in the third quarter of 2003 amounted to $3.8 million compared to $2.8 million in the third quarter of 2002, an increase of $991 thousand, or 36%. For the nine months ended September 30, 2003 and 2002, investment planning services income amounted to $10.9 million and $8.5 million, respectively, an increase of 29%. These increases were primarily attributable to commissions earned from increased sales of third party mutual funds and annuities resulting from our acquisition of American in 2003.

Net securities gains amounted to $3.6 million and $208 thousand during the quarters ended September 30, 2003 and 2002, respectively. For the nine months ended September 30, 2003 and 2002, net securities gains were $39.8 million and $578 thousand, respectively. During the second quarter of 2003, we sold $901 million in securities as part of the deleveraging program discussed above. The gains on sales of these securities amounted to $29.2 million, which were substantially offset by prepayment penalties of $28.5 million related to borrowings which were prepaid in connection with the deleveraging program. Gains from the sale of securities are subject to market and economic conditions and, as a result, there can be no assurance that gains reported in prior periods will be achieved in the future.

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

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Table 5 - Other noninterest income

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2003			2002			2003			2002
Covered call premiums	$	7,152		$	1,128		$	21,390		$	5,107
Loan fee income		7,376			5,206			19,456			15,728
Mortgage banking services income (expense)		3,087			(455	)		9,328			1,710
Venture capital write-downs		(374	)		(469	)		(989	)		(2,171	)
Miscellaneous income		2,906			1,625			5,483			2,735
Total	$	20,147		$	7,035		$	54,668		$	23,109

Other noninterest income amounted to $20.1 million and $7.0 million for the quarters ended September 30, 2003 and 2002. For the nine months ended September 30, 2003 and 2002, other noninterest income amounted to $54.7 million and $23.1 million, respectively. These increases were mostly due to increases in covered call premium income resulting from call options written on securities we own as well as securities we had committed to buy. Loan fee income included $1.8 million and $3.8 million of fees to arrange for pass-through swaps between commercial borrowers and third parties for the three and nine months ended September 30, 2003, respectively. We did not have a commercial loan swap program during the nine months ended September 30, 2002. Mortgage banking income, which consist primarily of gains from sale of loans, also contributed to the increase in other income as a result of higher levels of mortgage refinancings driven by lower interest rates.

Noninterest Expense

Noninterest expense was $151.6 million and $141.6 million for the quarters ended September 30, 2003 and 2002, respectively, which represented an increase of $10.0 million, or 7%. This increase included higher compensation and employee benefits expense ($2.5 million), occupancy expense ($1.8 million) and equipment expense ($1.7 million). For the nine months ended September 30, 2003 and 2002, noninterest expenses amounted to $485.6 million and $421.3 million, respectively. Included in this increase was $28.5 million of prepayment penalties on borrowings related to the aforementioned deleveraging program in the second quarter. This amount represented 44% of the total increase of $64.3 million. The remaining increases in noninterest expense for the quarter and nine months ended September 30, 2003 over the comparable periods last year were primarily attributable to acquisitions.

Compensation and employee benefits expense of $82.2 million for the quarter ended September 30, 2003 increased $2.5 million, or 3%, from the same quarter of last year. For the nine months ended September 30, 2003 and 2002, compensation and employee benefits expense amounted to $245.2 million and $230.8 million, respectively. These increases were primarily due to additional employees from acquisitions and increased benefit costs, which were partially offset by lower incentive expense. The total number of full-time equivalent employees was approximately 6,700 at September 30, 2003 compared to 6,500 at September 30, 2002. Pension expense under the defined benefit pension plan (which is included in compensation and employee benefits expense) was $3.3 million and $1.2 million for the three months ended September 30, 2003 and 2002, respectively, and increased primarily due to a lower discount rate and a lower expected rate of return on plan assets. The fair value of plan assets as of September 30, 2003 was $179.8 million as compared to $154.9 million at December 31, 2002.

Data processing expense amounted to $10.5 million and $9.8 million for the quarters ended September 30, 2003 and 2002, respectively, an increase of $703 thousand, or 7%. The increase was primarily due to increased transaction volume (core processing and data lines) and other expenses related to acquisitions and software licensing costs. The increase was partially offset by lower bank card expenses due to lower fees charged by a new third-party processor. For the nine months ended September 30, 2003 and 2002, data processing expense amounted to $31.1 million and $30.2 million, respectively. Beginning in July 2002, check processing was insourced and the primary costs are now

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recorded in compensation and employee benefits. Previously, a third-party vendor handled check processing and its charges were recorded as data processing costs.

Occupancy expense of $14.5 million during the three months ended September 30, 2003 increased $1.8 million, or 14%, from the same quarter in 2002, primarily due to the cost of a new back-office facility in West Falmouth, Maine and the cost of facilities assumed in acquisitions. For the nine months ended September 30, 2003 and 2002, occupancy expense amounted to $44.6 million and $38.0 million, respectively, an increase of 17%.

Equipment expense of $11.7 million during the three months ended September 30, 2003 increased $1.7 million, or 17%, from the third quarter of last year. For the nine months ended September 30, 2003 and 2002, equipment expense amounted to $35.3 million and $29.6 million, respectively. These increases were primarily due to depreciation expense on new technology equipment and software (e.g., check imaging and e-commerce) and depreciation/maintenance of equipment obtained through acquisitions.

Advertising and marketing expense amounted to $5.6 million and $4.3 million for the three months ended September 30, 2003 and 2002, respectively. The $1.3 million, or 29%, increase was largely due to new advertising promotions and corporate sponsorships and additional expenses for the introduction of our products in new market areas. For the nine months ended September 30, 2003 and 2002, advertising and marketing expense amounted to $16.6 million and $12.5 million, respectively, an increase of 32% primarily for the same reasons described above.

Amortization of identifiable intangible assets of $2.3 million during the three months ended September 30, 2003 increased $636 thousand from the third quarter of last year. This increase was primarily due to amortization of core deposit intangibles and other identifiable intangibles recorded in connection with acquisitions. For the nine months ended September 30, 2003 and 2002, amortization of identifiable intangible assets amounted to $6.6 million and $4.4 million, respectively. For additional information, see Note 4 to the unaudited Consolidated Financial Statements included herein.

Merger and consolidation costs amounted to $808 thousand and $2.2 million for the three months ended September 30, 2003 and 2002, respectively. For the nine months ended September 30, 2003 and 2002, merger and consolidation costs amounted to $6.8 million and $11.4 million, respectively. The following table summarizes merger and consolidation costs for the three and nine months ended September 30, 2003 and 2002.

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Table 6 - Merger and Consolidation Costs

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2003			2002			2003			2002
American Merger Charges
Personnel costs	$	24		$	—		$	1,068		$	—
Systems conversion and integration/customer communications		413			—			2,318			—
Other costs		(5	)		1			1,393			1
		432			1			4,779			1
Warren Merger Charges
Personnel costs		61			—			898			—
Systems conversion and integration/customer communications		268			—			1,138			—
Other costs		16			5			363			5
		345			5			2,399			5
Bancorp Connecticut Merger Charges
Personnel costs		4			5			(10	)		42
Systems conversion and integration/customer communications		—			500			24			536
Other costs		12			227			107			233
		16			732			121			811
Ipswich Merger Charges
Personnel costs		—			78			14			102
Systems conversion and integration/customer communications		—			913			—			1,486
Other costs		—			181			127			219
		—			1,172			141			1,807
Andover/MetroWest Merger Charges
Personnel costs		—			—			1			635
Systems conversion and integration/customer communications		—			90			—			3,142
Other costs		15			63			5			1,921
		15			153			6			5,698
Charter Consolidation Costs
Personnel costs		—			—			—			770
Branch signage		—			143			—			872
Customer notices		—			24			—			591
Forms and documents		—			2			—			578
Other costs		—			1			—			781
		—			170			—			3,592
Other Costs
Branch decommissioning costs		—			16			—			82
Reverse auto lease reserves (Banknorth - Vermont)		—			—			(615	)		—
Other costs		—			(81	)		(43	)		(563	)
		—			(65	)		(658	)		(481	)
Total Merger and Consolidation Costs	$	808		$	2,168		$	6,788		$	11,433

The following table summarizes activity in the accrual account for merger and consolidation costs from December 31, 2002 through September 30, 2003.

TABLE 7 - Merger and Consolidation Costs - Activity in the Accrual Account

											Non-cash Write
	Balance		Accrued					Cash			Downs and Other			Balance
	12/31/02		at Acquisition		Charges			Payments			Adjustments			9/30/03
American Merger	$	—	$	13,600	$	4,779			($16,978	)		($1,135	)	$	266
Warren Merger		2,052		—		2,399			(4,641	)		221			31
Bancorp Connecticut Merger		3,097		—		122			(791	)		(1,798	)		630
Ipswich Merger		—		—		141			(141	)		—			—
Andover / MetroWest Mergers		321		—		6			(52	)		(189	)		86
Other Merger and Consolidation Costs		84		—		(659	)		(25	)		615			15
Total	$	5,554	$	13,600	$	6,788			($22,628	)		($2,286	)	$	1,028

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Prepayment penalties on borrowings amounted to $30.5 million for the nine months ended September 30, 2003, $28.5 million of which was incurred in connection with the above-discussed deleveraging program in the second quarter, and $2.0 million of which was incurred in connection with the early payoff of other borrowings. There were no prepayment penalties during the third quarter.

Other noninterest expenses amounted to $24.1 million and $21.2 million during the three months ended September 30, 2003 and 2002, respectively. For the nine months ended September 30, 2003 and 2002, other noninterest expenses amounted to $69.0 million and $64.3 million, respectively. The following table summarizes the principal components of other noninterest expenses for the periods indicated.

TABLE 8 - Other Noninterest Expenses

	2003						2002
	Third		Second		First		Fourth		Third		Second		First
	Quarter		Quarter		Quarter		Quarter		Quarter		Quarter		Quarter
Telephone	$	3,666	$	2,595	$	3,468	$	3,600	$	3,276	$	3,332	$	3,189
Office supplies		2,611		2,523		2,794		2,594		2,726		2,597		2,819
Postage and freight		2,246		3,223		3,074		2,490		2,402		2,206		2,609
Miscellaneous loan costs		1,729		1,563		948		1,178		239		1,706		1,167
Deposits and other assessments		963		974		899		871		969		901		799
Collection and carrying costs of non-performing assets		709		947		308		595		662		807		649
Other		12,158		11,689		9,880		13,698		10,968		10,518		9,791
Total	$	24,082	$	23,514	$	21,371	$	25,026	$	21,242	$	22,067	$	21,023

	Nine Months Ended
	9/30/2003		9/30/2002
Telephone	$	9,729	$	9,797
Office supplies		7,928		8,142
Postage and freight		8,543		7,217
Miscellaneous loan costs		4,240		3,112
Deposits and other assessments		2,836		2,669
Collection and carrying costs of non-performing assets		1,964		2,118
Other		33,728		31,267
Total	$	68,968	$	64,322

Taxes

The effective tax rate was 34% and 33% for the three months ended September 30, 2003 and 2002, respectively and 34% and 33% for the nine months ended September 30, 2003 and 2002, respectively. The increase in the effective tax rates was primarily the result of an increase in state taxes during 2003.

Comprehensive Income

Comprehensive income amounted to $29.1 million and $107.6 million during the three months ended September 30, 2003 and 2002, respectively and $180.0 million and $287.6 million for the nine months ended September 30, 2003 and 2002, respectively. Comprehensive income was different from our net income during the respective periods as a result of changes in the amount of unrealized gains and losses on our portfolio of securities available for sale and on our derivative contracts (primarily forward sales commitments related to loans held for sale) that are accounted for as cash flow hedges. For additional information, see Note 8 to the unaudited Consolidated Financial Statements.

Our available for sale investment portfolio had net unrealized gains, net of applicable income tax effects, of $37.4 million, $118.0 million and $108.2 million at September 30, 2003, December 31, 2002 and September 30, 2002,

29

respectively. At September 30, 2003, the net unrealized gains of $57.6 million, before related tax effect, represented 1% of securities available for sale. We attempt to balance the interest rate risk of interest-earning assets and interest-bearing liabilities (see “Interest Rate Risk and Asset Liability Management”). However, the change in fair value of our interest-bearing liabilities which would tend to offset the change in fair value of available for sale securities is not included in “other comprehensive income.”

FINANCIAL CONDITION

Our consolidated total assets amounted to $25.7 billion and $23.4 billion at September 30, 2003 and December 31, 2002, respectively. Total average assets were $25.8 billion and $21.8 billion for the three months ended September 30, 2003 and 2002, respectively. These increases were largely due to the acquisitions in 2003 and 2002, which added $4.7 billion in assets. Shareholders’ equity totaled $2.5 billion at September 30, 2003 and $2.1 billion at December 31, 2002.

Securities

The securities portfolio (including securities classified as held to maturity) averaged $7.3 billion during the third quarter of 2003, as compared to $6.5 billion in the third quarter of 2002. The net increase in the securities portfolio resulted from the acquisitions in 2003 and 2002. The securities portfolio consists primarily of mortgage-backed securities and U.S. Government and agency securities. Other securities in the portfolio are collateralized mortgage obligations, which included securitized residential real estate loans held in a REMIC, and asset-backed securities. The majority of securities available for sale were rated AAA or equivalently rated at September 30, 2003. At September 30, 2003 and December 31, 2002, we had $614.7 million and $830.1 million of securities available for sale with call provisions. The average yield on securities was 3.96% for the quarter ended September 30, 2003 and 5.64% for the quarter ended September 30, 2002. With the exception of securitized residential real estate loans held in a REMIC that were classified as held to maturity and carried at cost, all of our securities are classified as available for sale and carried at market value. Securities available for sale had an after-tax unrealized gain of $37.4 million and $118.0 million at September 30, 2003 and December 31, 2002, respectively. These unrealized gains do not impact net income or regulatory capital but are recorded as adjustments to shareholders’ equity, net of related deferred income taxes. Unrealized gains, net of related deferred income taxes, are a component of “Comprehensive Income” contained in the unaudited Consolidated Statement of Changes in Shareholders’ Equity.

Loans and Leases

Total loans and leases (including loans held for sale) averaged $15.9 billion during the third quarter of 2003, an increase of $2.5 billion, or 19%, from the third quarter of 2002. This increase was primarily attributable to acquisitions. Average loans and leases as a percent of average earning assets was 69% during the quarter ended September 30, 2003 compared to 67% during the quarter ended September 30, 2002.

Average residential real estate loans (which include mortgage loans held for sale) of $2.9 billion during the third quarter of 2003 increased $195 million from the average amount of such loans during the third quarter of last year. Excluding acquisitions, average residential loans decreased approximately $892 million, or 24%, as a result of increased refinancing activity and prepayments in a lower interest rate environment. Mortgage loans held for sale amounted to $74.7 million and $128.6 million at September 30, 2003 and December 31, 2002, respectively. We are currently selling substantially all of the conforming 30-year fixed-rate loans we originate.

Average commercial real estate loans of $5.3 billion increased $915 million, or 21%, from the third quarter of last year. Excluding acquisitions, average commercial real estate loans increased $605 million or 13%. While most of our markets reflected increases, the largest increases were in Massachusetts and Connecticut. The average yield on commercial real estate loans during the third quarter of 2003 was 5.88%, as compared to 6.86% in the third quarter of 2002, a decrease of 98 basis points. The lower yield reflects the effect of the downward repricing of variable-rate loans, the refinancing of fixed-rate loans at lower rates and the origination of new loans at the lower prevailing rates.

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Commercial business loans and leases averaged $3.2 billion during the third quarter of 2003, an increase of $462 million, or 17%, over the third quarter of 2002. Excluding acquisitions, average commercial business loans and leases increased $329 million or 11%. Massachusetts reflected the greatest amount of growth. The yield on commercial business loans and leases decreased to 5.04% in the third quarter of 2003 from 5.81% in the third quarter of 2002. The decrease in the yield was primarily due to lower rates on new loans and the repricing of variable-rate loans.

Consumer loans and leases averaged $4.6 billion during the third quarter of 2003, an increase of $915 million, or 25%, from the third quarter of 2002. Acquisitions accounted for approximately $506 million of the increase, while internal loan growth accounted for approximately $409 million of the increase. Internal growth was primarily in home equity loans and indirect auto loans. The average yield on consumer loans and leases decreased to 5.43% in the third quarter of 2003 from 6.78% in the third quarter of 2002. For a description of the types of loans and leases in our loan and lease portfolio and a breakdown of our consumer loans, see “Credit Risk.”

Deposits

Total deposits averaged $17.7 billion during the third quarter of 2003, an increase of $2.9 billion from the third quarter of 2002. Excluding acquisitions, average core deposits (deposits excluding certificates of deposit and brokered deposits) increased $1.4 billion from the third quarter of last year, or 12%. Excluding acquisitions, the average balances of certificates of deposit and brokered deposits decreased $788.5 million from the third quarter of 2002, or 13%. The ratio of loans to deposits was 90% at September 30, 2003 and December 31, 2002.

Average noninterest-bearing deposits totaled $3.4 billion during the third quarter of 2003, an increase of $704 million, or 26%, from the third quarter of 2002. This increase was largely due to strong growth in existing market areas as well as $151 million of average noninterest-bearing deposits acquired in acquisitions.

Average interest-bearing deposits of $14.3 billion during the third quarter of 2003 increased $2.2 billion from the third quarter of 2002. Excluding acquisitions, average money market and NOW deposits increased by $583 million and average regular savings deposits increased $224 million, while average certificates of deposit and brokered deposits declined by $788.5 million in the aggregate. The decline in certificates of deposits resulted from our decision to allow deposits priced above alternate funding costs to run off. The average rates paid on NOW and money market accounts decreased 73 basis points from 1.53% in the third quarter of 2002 to 0.80% in the third quarter of 2003 due largely to lower prevailing interest rates. The average rates paid on all deposit types decreased by 78 basis points from 2.03% in the third quarter of 2002 to 1.25% in the third quarter of 2003, reflecting the decline in prevailing interest rates.

Included within the deposit categories above are government banking deposits, which averaged $1.3 billion in the third quarter of 2003 and $1.2 billion in the third quarter of 2002. Government banking deposits include deposits received from state and local governments, school districts, public colleges/universities, utility districts, public housing authorities and court systems in our market area. Many of these deposits exceed the FDIC insurance coverage amounts and require us to pledge specific collateral or maintain private insurance.

Other Funding Sources

We use both short-term and long-term borrowings to fund the growth of earning assets in excess of deposit growth. Short-term borrowings, which include federal funds purchased, retail securities sold under agreements to repurchase and other short-term borrowings, amounted to $1.05 billion and $1.28 billion at September 30, 2003 and December 31, 2002, respectively, a decrease of $228 million, or 18%.

At September 30, 2003, we also had a $110 million unsecured line of credit. The line is renewable every 364 days and, if used, carries interest at LIBOR plus 0.625%. There were no drawdowns on this line in 2003.

Long-term debt includes FHLB advances, senior notes, subordinated notes, capital trust securities, wholesale securities sold under agreements to repurchase, capital lease obligations and other debt with terms greater than one

31

year. Long-term debt amounted to $3.6 billion and $3.9 billion at September 30, 2003 and December 31, 2002, respectively. The decrease in long-term debt was primarily due to the prepayment of $853 million of borrowings in connection with our deleveraging program in the second quarter of 2003, which was partially offset by the issuance of $150 million of senior notes in the second quarter of 2003 and $400 million of borrowings assumed in acquisitions.

At September 30, 2003 and December 31, 2002, FHLB borrowings amounted to $1.6 billion. FHLB collateral consists primarily of first mortgage loans secured by single-family properties, certain unencumbered securities and other qualified assets. Our additional borrowing capacity with the FHLB at September 30, 2003 was approximately $2.6 billion. These borrowings had an average cost of 4.23% during the three months ended September 30, 2003 as compared to 4.48% during the three months ended September 30, 2002. On July 23, 2003, we entered into interest rate swap agreements for $216.5 million to hedge the fair value of $216.5 million of FHLB advances. The effect of the hedges, which are accounted for as fair value hedges, was to synthetically convert this fixed rate debt to a variable rate set at an average of 1-month LIBOR (1.12% at September 30, 2003) plus 3.82%. These FHLB advances had a weighted average cost of 5.47% and an average term of 2 years.

In April 2003, we issued $150 million of 5-year senior notes carrying a fixed rate of 3.75%. We simultaneously entered into a $150 million interest rate swap agreement pursuant to which we receive a fixed rate of 3.75% and pay a variable rate based on 3-month LIBOR (1.16% at September 30, 2003) plus 0.41%. This swap is accounted for as a fair value hedge of the notes. The proceeds from the notes offering were used for general corporate purposes.

At September 30, 2003 and December 31, 2002, subordinated debt consisted of $200 million of 7.625% subordinated notes due 2011 issued by our banking subsidiary in 2001. The notes qualify as Tier 2 capital for regulatory purposes. In the first quarter of 2003, we entered into an interest rate swap for $200 million to hedge the fair value of the $200 million of subordinated debt. The effect of the hedge, which is accounted for as a fair value hedge, was to synthetically convert this fixed rate debt to a variable rate set at 3-month LIBOR plus 3.47%.

At September 30, 2003 and December 31, 2002, through subsidiary trusts, we had outstanding $295.1 million of capital securities which currently qualify as Tier 1 capital for regulatory purposes. See the “Capital” section below.

At September 30, 2003 and December 31, 2002, wholesale securities sold under repurchase agreements amounted to $1.7 billion and $1.2 billion, respectively, and were collateralized by mortgage-backed securities and U.S. Government obligations.

We have a shelf registration on file with the Securities and Exchange Commission which allows us to sell up to $1.0 billion of debt securities, preferred stock, depository shares, common stock and warrants and which allows subsidiary trusts to sell capital securities. We had $650 million of remaining authority under this shelf registration statement as of September 30, 2003.

At September 30, 2003 and December 31, 2002, other liabilities totaled $521.7 million and $258.3 million, respectively. The increase in other liabilities was primarily attributable to $361 million of amounts due to brokers for securities transactions that settled in October 2003.

CONTRACTUAL OBLIGATIONS

We have entered into numerous contractual obligations and commitments. The following tables summarize our contractual cash obligations, other commitments and derivative financial instruments at September 30, 2003.

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TABLE 9 - Contractual Obligations

Contractual Obligations (1)

				Payments Due By Period
				Less than		1 - 3		4 - 5		After 5
		Total		1 Year		Years		Years		Years
Long-term debt		$	2,212,865	$	73,441	$	826,933	$	180,560	$	1,131,931
Capital lease obligations			6,044		50		182		757		5,055
Repurchase agreements - wholesale			1,692,560		392,560		1,200,000		—		100,000
	Total long-term debt		3,911,469		466,051		2,027,115		181,317		1,236,986
Operating lease obligations			133,813		23,429		38,523		28,177		43,684
Total contractual obligations		$	4,045,282	$	489,480	$	2,065,638	$	209,494	$	1,280,670

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

Other Commitments

			Amount of Commitment Expiration - Per Period
	Total
	Amounts		Less than		1 - 3		4 - 5		After 5
	Committed		1 Year		Years		Years		Years
Unused portions on lines of credit	$	4,119,340	$	291,224	$	218,591	$	44,214	$	3,565,311
Standby letters of credit		395,552		101,556		83,555		84,969		125,472
Commitments to originate loans		1,718,545		1,250,967		236,939		34,388		196,251
Other commitments		45,645		9,127		9,530		2,165		24,823
Total commitments	$	6,279,082	$	1,652,874	$	548,615	$	165,736	$	3,911,857

Derivative Financial Instruments

					Amount of Commitment Expiration - Per Period
			Total
			Amounts		Less than		1 - 3		4 - 5		After 5
			Committed		1 Year		Years		Years		Years
Interest rate swaps (notional amount):
	Commercial loan swap program:
		Interest rate swaps with commercial borrowers (1)	$	297,907	$	13,577	$	8,290	$	53,562	$	222,478
		Interest rate swaps with dealers (2)		297,907		13,577		8,290		53,562		222,478
	Interest rate swaps on borrowings (3)			566,500		—		216,500		150,000		200,000
Forward commitments to sell loans				127,520		127,520		—		—		—
Foreign currency forward contracts (4)				25,582		14,403		11,179		—		—

(1)	Swaps with commercial loan customers (Banknorth receives fixed, pays variable)
(2)	Offsetting swaps with dealers (Banknorth pays fixed, receives variable) which offset the interest rate swaps with commercial borrowers
(3)	Swaps on borrowings (Banknorth pays variable, receives fixed)
(4)	Forward contracts for customer accommodations

RISK MANAGEMENT

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

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

CREDIT RISK MANAGEMENT

General

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

Our residential loan portfolio accounted for 17% of the total loan portfolio at September 30, 2003 and at December 31, 2002. Our residential loans are generally secured by single-family homes (one-to-four units) and have a maximum loan to value ratio of 80%, unless the excess is protected by mortgage insurance. At September 30, 2003, 0.34% of our residential loans were nonperforming, as compared to 0.24% at December 31, 2002 and 0.25% at September 30, 2002. Net charge-offs to average residential loans outstanding for the three months ended September 30, 2003 was .01%.

Our commercial real estate loan portfolio accounted for 33% of the total loan portfolio at September 30, 2003 and 34% at December 31, 2002. This portfolio consists primarily of loans secured by income-producing commercial real estate (including office and industrial buildings), service industry real estate (including hotels and health care facilities), multi-family (over four units) residential properties and retail trade real estate. These loans generally are secured by properties located in the New England states and upstate New York. At September 30, 2003, 0.51% of our commercial real estate loans were nonperforming, as compared to 0.37% at December 31, 2002 and 0.38% at September 30, 2002. Net charge-offs (recoveries) to average commercial real estate loans outstanding for the three months ended September 30, 2003 was (0.02%).

Our commercial business loan and lease portfolio accounted for 21% of the total loan portfolio at September 30, 2003 and December 31, 2002. Commercial business loans and leases are generally made to small to medium size businesses located within our market areas. These loans are not concentrated in any particular industry, but reflect the broad-based economy of New England and upstate New York. Commercial loans consist primarily of loans secured by various equipment, machinery and other corporate assets, as well as loans to provide working capital to businesses in the form of lines of credit. Through a subsidiary, we also offer direct equipment leases, which amounted to $95.6 million at September 30, 2003. We do not emphasize the purchase of participations in syndicated commercial loans. At September 30, 2003, we had $297 million of outstanding participations in syndicated commercial loans and had an additional $312 million of unfunded commitments related to these participations. At September 30, 2003, 0.70% of our commercial business loans were nonperforming, as compared to 1.10% at December 31, 2002 and 1.15% at September 30, 2002. Net charge-offs to average commercial business loans and leases outstanding for the three months ended September 30, 2003 was 0.06%.

The following table presents the geographic distribution of our commercial loans and leases at September 30, 2003 and December 31, 2002.

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Table 10 - Commercial Loans and Leases by State

		Commercial				Commercial Business				Total Commercial
		Real Estate Loans				Loans and Leases				Loans and Leases
		September 30,		December 31,		September 30,		December 31,		September 30,		December 31,
		2003		2002		2003		2002		2003		2002
Massachusetts		$	2,430,249	$	2,174,534	$	1,111,621	$	982,078	$	3,541,870	$	3,156,612
Maine			873,759		868,091		678,979		640,258		1,552,738		1,508,349
New Hampshire			725,103		703,743		504,173		461,079		1,229,276		1,164,822
Vermont			629,101		594,849		423,383		419,291		1,052,484		1,014,140
Connecticut			468,910		286,658		345,853		265,503		814,763		552,161
New York			183,057		164,174		201,786		200,265		384,843		364,439
	Total	$	5,310,179	$	4,792,049	$	3,265,795	$	2,968,474	$	8,575,974	$	7,760,523

Consumer loans and leases accounted for 29% of our total loan portfolio at September 30, 2003 and 28% at December 31, 2002. At September 30, 2003, 0.16% of our consumer loans were nonperforming, as compared to 0.23% at December 31, 2002 and 0.22% at September 30, 2002. Net charge-offs to average consumer loans outstanding for the three months ended September 30, 2003 was 0.68%. The following table lists our consumer loans by type as of September 30, 2003 and December 31, 2002:

Table 11 - Composition of Consumer Loans

	September 30,					December 31,
	2003					2002
			% of					% of
	Amount		Total			Amount		Total
Home equity lines	$	2,228,295		47.95	%	$	1,572,816		40.19	%
Automobile and other vehicle loans and leases		1,590,691		34.23	%		1,478,228		37.77	%
Mobile home loans		148,376		3.19	%		171,715		4.39	%
Vision, dental, and orthodontia fee plan loans		143,240		3.08	%		172,861		4.42	%
Education loans		118,357		2.55	%		135,386		3.46	%
Other		418,024		9.00	%		382,282		9.77	%
Total	$	4,646,983		100.00	%	$	3,913,288		100.00	%

Nonperforming Assets

Nonperforming assets consist of nonperforming loans (which do not include accruing loans 90 days or more overdue), other real estate owned, repossessed assets and certain securities available for sale. Total nonperforming assets as a percentage of total assets were 0.27% at September 30, 2003, 0.29% at December 31, 2002 and 0.31% at September 30, 2002. Total nonperforming assets as a percentage of total loans and total other nonperforming assets was 0.44% at September 30, 2003, 0.49% at December 31, 2002 and 0.50% at September 30, 2002. See Table 12 for a summary of nonperforming assets for the last seven quarters. On a dollar basis, our nonperforming assets increased from $68.8 million at September 30, 2002 to $70.4 million at September 30, 2003. Acquisitions contributed to our increased nonperforming assets in recent periods. See Table 13 for the nonperforming assets of acquired banks at date of acquisition.

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

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The following table presents nonperforming assets for the last seven quarters.

TABLE 12 - Nonperforming Assets

		2003									2002
		September 30			June 30			March 31			December 31			September 30			June 30			March 31
Nonaccrual loans and leases:
Residential real estate loans		$	9,135		$	9,827		$	9,828		$	5,781		$	6,733		$	7,075		$	7,689
Commercial real estate loans			27,069			19,139			22,990			17,649			16,762			20,254			20,812
Commercial business loans and leases			22,857			24,577			38,562			32,693			33,014			33,573			34,481
Consumer loans and leases			7,664			7,192			7,457			9,194			8,364			6,008			8,183
	Total nonaccrual loans and leases		66,725			60,735			78,837			65,317			64,873			66,910			71,165
Other nonperforming assets:
Other real estate owned, net of related reserves			921			814			541			100			92			1,212			1,262
Repossessions, net of related reserves			2,711			2,911			3,276			3,536			3,807			1,964			2,251
Securities available for sale			—			—			—			—			—			2,104			2,104
	Total other nonperforming assets		3,632			3,725			3,817			3,636			3,899			5,280			5,617
Total nonperforming assets		$	70,357		$	64,460		$	82,654		$	68,953		$	68,772		$	72,190		$	76,782
Accruing loans and leases which are 90 days or more overdue		$	3,163		$	2,995		$	3,349		$	3,373		$	2,407		$	2,680		$	5,430
Total nonperforming loans as a percentage of total loans and leases(1)			0.42	%		0.39	%		0.51	%		0.46	%		0.47	%		0.51	%		0.56	%
Total nonperforming assets as a percentage of total assets			0.27	%		0.25	%		0.31	%		0.29	%		0.31	%		0.34	%		0.37	%
Total nonperforming assets as a percentage of total loans and leases (1) and total other nonperforming assets			0.44	%		0.41	%		0.53	%		0.49	%		0.50	%		0.55	%		0.60	%

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

Residential real estate loans are generally placed on nonaccrual when they become 120 days past due or are in the process of foreclosure. All closed-end consumer loans 90 days or more past due and any equity line in the process of foreclosure are placed on nonaccrual status. Unsecured consumer loans are charged-off upon reaching 120 or 180 days past due depending on the type of loan. We generally place all commercial real estate loans and commercial business loans and leases which are 90 days or more past due on nonaccrual status, unless secured by sufficient cash or other assets immediately convertible to cash. At September 30, 2003, we had $3.2 million of accruing loans which were 90 days or more delinquent, as compared to $3.4 million at December 31, 2002 and $2.4 million at September 30, 2002.

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

Over the past seven quarters, nonperforming assets ranged from $64.4 million to $82.7 million. The increase from December 31, 2002 to March 31, 2003 largely related to $6.2 million of nonperforming assets, primarily residential real estate loans, resulting from the acquisition of American, as reflected in Table 13 below. The decrease from March 31, 2003 to June 30, 2003 was primarily due to the return of several commercial loans to performing status. The increase from June 30, 2003 to September 30, 2003 was primarily due to an increase in nonperforming commercial real estate loans, which was primarily attributable to one credit relationship which is well secured. This increase is not believed to be a trend.

The following table presents certain information regarding the nonperforming assets acquired by us in connection with the indicated acquisitions.

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TABLE 13 - Nonperforming Assets of Acquired Banks at Acquisition Date

		American		Warren		Bancorp		Ipswich
Acquisition date		02/14/2003		12/31/2002		08/31/2002		07/26/2002
Nonaccrual loans and leases:
Residential real estate loans		$	6,044	$	—	$	125	$	—
Commercial real estate loans			—		738		—		—
Commercial business loans and leases			—		84		580		167
Consumer loans and leases			—		—		108		—
	Total nonperforming loans and leases		6,044		822		813		167
Other nonperforming assets:
Other real estate owned			202		—		—		—
	Total other nonperforming assets		202		—		—		—
Total nonperforming assets		$	6,246	$	822	$	813	$	167

Net Charge-offs

Net charge-offs were $8.2 million for the three months ended September 30, 2003, as compared to $10.4 million for the three months ended September 30, 2002. Net charge-offs represented 0.20% and 0.31% of average loans and leases outstanding for the quarters ended September 30, 2003 and 2002, respectively. For the nine months ended September 30, 2003 and 2002, net charge-offs were $26.9 million and $29.5 million, respectively. Net charge-offs represented 0.23% and 0.30% of average loans and leases outstanding for the nine months ended September 30, 2003 and 2002, respectively.

Potential Problem Loans

In addition to the nonperforming loans discussed above, we also have loans that are 30 to 89 days delinquent and still accruing. These loans amounted to $135 million at September 30, 2003 compared to $139 million at December 31, 2002. These loans and related delinquency trends are considered in the evaluation of the allowance for loan and lease losses and the determination of the provision for loan and lease losses.

ASSET-LIABILITY MANAGEMENT

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

Market Risk

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

Interest-rate risk, including mortgage prepayment risk, is by far the most significant non-credit risk to which we are exposed. Interest-rate risk is the sensitivity of income to changes in interest rates. Changes in interest rates, as well as fluctuations in the level and duration of assets and liabilities, affect net interest income, our primary source of revenue. This risk arises directly from our core banking activities - lending and deposit gathering. In addition to directly impacting net interest income, changes in the level of interest rates can also affect (i) the amount of loans

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

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

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

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

We manage the interest-rate risk inherent in our core banking operations using non-derivative and derivative instruments. Some non-derivative instruments sometimes contain embedded options, mainly fixed-rate investment securities and borrowed funds that can be prepaid or called away. When appropriate, we use derivative instruments such as interest-rate swaps, interest rate floors, interest rate caps and interest rate corridor agreements, among other instruments. Derivatives used for hedging are designated at inception. At September 30, 2003, our designated hedging activities were limited to forward commitments of $127.5 million related to hedging our mortgage banking operations and interest rate swaps of $566.5 million notional amount tied to fixed rate debt.

Swaps and caps are offered to commercial borrowers through our commercial borrower derivative hedging program. While these derivatives are designated as speculative per SFAS No. 133, we believe that our exposure to commercial customer derivatives is limited because these contracts are matched with a mirrored fixed-rate swap transaction at inception. The program allows us to retain variable-rate commercial loans while allowing the commercial borrowers to synthetically fix the loan rate by entering into a variable-to-fixed interest rate swap. We entered into $241 million of interest rate swaps with commercial borrowers during the nine months ended September 30, 2003. and an equal amount of mirrored transactions with swap dealers. At September 30, 2003, we had $297.9 million of such interest rate swaps outstanding. It is anticipated that, over time, customer interest rate derivatives will reduce the interest rate risk inherent in our longer-term, fixed-rate commercial business and commercial real estate loans.

We manage the interest-rate risk inherent in our mortgage banking operations by entering into forward sales contracts and, to a lesser extent, by using purchased mortgage-backed security options. An increase in market interest rates between the time we commit to terms on a loan and the time we ultimately sell the loan in the secondary market will have the effect of reducing the gain (or increasing the loss) we record on the sale. We attempt to mitigate this risk by entering into forward sales commitments in amounts sufficient to cover 70 to 90% of all

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loans which are currently closed or are anticipated to close. Purchased mortgage-backed security options are also used to hedge rate-locked loans.

The average balances for the three months and nine months ended September 30, 2003 and 2002 of residential mortgage loans held for sale and related hedge positions are summarized in the table below:

     TABLE 14 - Mortgage Loans Held for Sale and Related Hedges

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2003		2002		2003		2002
Residential mortgage loans held for sale	$	101,528	$	72,676	$	90,808	$	58,647
Rate-locked loan commitments		85,551		110,650		104,632		73,725
Forward sales contracts		178,361		160,092		181,739		123,307
Purchased mortgage-backed security options		—		5,000		2,222		6,667

Our policy on interest-rate risk simulation specifies that if interest rates were to shift gradually up or down 2%, estimated net interest income for the subsequent 12 months should decline by less than 5%. The gradual 2% falling rate scenario was slightly outside guidelines at December 31, 2002. The ALCO voted to approve the December 31, 2002 guidelines exception because a gradual 2% decreasing rate scenario was deemed unlikely based on the current level of interest rates. However, all interest rate risk measures were within compliance guidelines as of September 30, 2003. The ALCO currently is more focused on the gradual decreasing 1% rate scenario than on the gradual decreasing 2% scenario and on strategies that prove beneficial to income should rates decline or the yield curve flatten.

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

     TABLE 15 - Interest Rate Sensitivity

	200 Basis Point			100 Basis Point			100 Basis Point			200 Basis Point
	Rate Decrease			Rate Decrease			Rate Increase			Rate Increase
September 30, 2003		(4.21	)%		(1.47	)%		1.02	%		1.52	%
December 31, 2002		(6.22	)%		(2.64	)%		2.15	%		3.40	%

The results implied in the above table indicate estimated changes in simulated net interest income for the subsequent 12 months assuming a gradual shift up or down in market rates of 100 and 200 basis points across the entire yield curve. Assuming a downward shift in rates, most deposit accounts have implied interest rate floors and it is assumed that the related interest expense on these accounts will not decrease in proportion to the downward shift in rates. Assuming an upward shift in rates of 200 basis points, the simulated increase in interest income would be more than the simulated increase in interest expense because total adjustable earning assets will reprice more quickly than will total adjustable cost liabilities. It should be emphasized, however, that the results are dependent on material assumptions such as those discussed above.

The most significant factors affecting market risk exposure of net interest income during the nine months ended September 30, 2003 were (i) changes in the shape of the U.S. Government securities and interest rate swap yield curve, (ii) changes in the composition of the investment portfolio, including a deleveraging strategy completed in the second quarter whereby approximately $901 million in investments yielding approximately 5.05% were sold, (iii) changes in the composition of mortgage assets and prepayment speeds of mortgage assets, (iv) reduction of deposit interest expense and (v) changes in the wholesale borrowings portfolio structure, including $853 million costing

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approximately 4.49% that were prepaid related to the deleveraging program. Interest rates were about 30 basis points lower across the Treasury curve at September 30, 2003 compared to interest rates at December 31, 2002. However, mortgage rate changes during the nine-month period ended September 30, 2003 resulted in significant mortgage loan activity. With higher rates in the third quarter, projected mortgage loan prepayments are forecasted to slow and prepay at a slower constant prepayment rate (CPR) than in the third quarter. Because of historically low rates and increased loan cash inflows, effective duration estimates for loans and mortgage-backed securities are shorter than normal, thus increasing asset sensitivity. Asset and liability management actions were implemented during 2003 to reduce asset sensitivity. Among other things, we purchased securities which are less susceptible to prepayments, replaced approximately $700 million of existing borrowings, some of which were callable, hedged $200 million of fixed rate subordinated debt, $150 million of fixed rate senior notes and $216.5 million of FHLB fixed rate borrowings, and implemented the deleveraging strategy discussed above. The above table reflects the net impact of these changes. We remain asset sensitive and project net interest income to increase if short and long interest rates move symmetrically higher.

Mortgage servicing rights as of September 30, 2003 had a fair value of approximately $5.0 million versus a book value of $3.8 million. The book value of mortgage servicing rights represented 0.71% of the underlying balance of loans serviced for others at September 30, 2003. New mortgage servicing rights from originations are sold quarterly. As a result, future earnings exposure to changes in the value of mortgage servicing rights is not expected to be material.

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

LIQUIDITY

Parent Company

On a parent-only basis at September 30, 2003, our debt service requirements consisted primarily of $295 million junior subordinated debentures and $150 million of 3.75% senior notes due May 1, 2008. The junior subordinated debentures were issued to four subsidiaries in connection with their issuance of capital securities. These obligations mature starting in 2027, have interest rates ranging from 8% to 10.52% and annual debt service payments of $25.1 million. The senior notes have annual debt service payments of $5.6 million.

The principal sources of funds for us to meet parent-only obligations are dividends from our banking subsidiary, which are subject to regulatory limitations, income from investment securities and borrowings, including draws on a $110 million unsecured line of credit which is renewable every 364 days and, if used, carries interest at LIBOR plus 0.625%. At September 30, 2003, our subsidiary bank had $467.7 million available for dividends that could be paid without prior regulatory approval. In addition, the parent company had $202.7 million in cash or cash equivalents at September 30, 2003.

Banking Subsidiary

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

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

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We continually monitor and forecast our liquidity position. There are several interdependent methods which we use for this purpose, including daily review of federal funds positions, monthly review of balance sheet changes, monthly review of liquidity ratios, periodic liquidity forecasts and periodic review of contingent funding plans. As of September 30, 2003, Banknorth, NA had in the aggregate $4.5 billion of “immediately accessible liquidity,” defined as cash that could be raised within 1-3 days through collateralized borrowings or sales of securities. This represented 25% of retail deposits, as compared to a current policy minimum of 10% of deposits.

Also as of September 30, 2003, Banknorth, NA had in the aggregate “potentially volatile funds” of $2.2 billion. These are funds that might flow out of the bank over a 90-day period in an adverse environment. Management estimates this figure by applying adverse probabilities to its various credit-sensitive and economically-sensitive funding sources.

As of September 30, 2003, the ratio of “immediately accessible liquidity” to “potentially volatile funds” was 206%, versus a policy minimum of 100%.

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

CAPITAL

At September 30, 2003, shareholders’ equity amounted to $2.5 billion, or 9.62% of total assets. Tangible equity amounted to $1.3 billion or 5.46% of tangible assets.

We paid a cash dividend of $0.19 per share on our common stock during the third quarter of 2003 compared to $0.15 per share in the third quarter of 2002. In October 2003, our Board authorized a $0.19 per share dividend on our common stock payable in November 2003. In February 2002, our Board authorized 8 million shares to be repurchased in the open market. During the nine months ended September 30, 2003, we repurchased 4.4 million shares at an average price of $23.47. As of September 30, 2003, a total of 2.9 million shares were available for repurchase under existing repurchase authorizations.

Capital guidelines issued by the Federal Reserve Board and the Office of the Comptroller of Currency of the United States (“OCC”) respectively require us and our banking subsidiary to maintain certain ratios, set forth in Table 16. At September 30, 2003, Banknorth Group, Inc. and Banknorth, NA were deemed to be “well capitalized” under the regulations of the Federal Reserve Board and the OCC, respectively, and in compliance with applicable capital requirements.

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Table 16 - Capital Ratios

		Actual					Capital Requirements					Excess
		Amount		Ratio			Amount		Ratio			Amount		Ratio
As of September 30, 2003
Banknorth Group, Inc.
	Total capital (to risk weighted assets)	$	2,039,658		11.27	%	$	1,447,481		8.00	%	$	592,177		3.27	%
	Tier 1 capital (to risk weighted assets)		1,613,447		8.92	%		723,741		4.00	%		889,706		4.92	%
	Tier 1 leverage capital ratio (to average assets)		1,613,447		6.54	%		986,638		4.00	%		626,809		2.54	%
Banknorth, NA
	Total capital (to risk weighted assets)	$	1,969,369		10.91	%	$	1,444,552		8.00	%	$	524,817		2.91	%
	Tier 1 capital (to risk weighted assets)		1,545,527		8.56	%		722,276		4.00	%		823,251		4.56	%
	Tier 1 leverage capital ratio (to average assets)		1,545,527		6.28	%		984,526		4.00	%		561,001		2.28	%
As of December 31, 2002
Banknorth Group, Inc.
	Total capital (to risk weighted assets)	$	1,960,869		12.15	%	$	1,291,616		8.00	%	$	669,253		4.15	%
	Tier 1 capital (to risk weighted assets)		1,558,974		9.66	%		645,808		4.00	%		913,166		5.66	%
	Tier 1 leverage capital ratio (to average assets)		1,558,974		7.13	%		874,180		4.00	%		684,794		3.13	%
Banknorth, NA
	Total capital (to risk weighted assets)	$	1,822,307		11.31	%	$	1,288,562		8.00	%	$	533,745		3.31	%
	Tier 1 capital (to risk weighted assets)		1,421,995		8.83	%		644,281		4.00	%		777,714		4.83	%
	Tier 1 leverage capital ratio (to average assets)		1,421,995		6.52	%		871,830		4.00	%		550,165		2.52	%

Net risk weighted assets were $18.1 billion and $16.1 billion at September 30, 2003 and December 31, 2002, respectively, for Banknorth Group, Inc. and Banknorth, NA.

At September 30, 2003 and December 31, 2002, we had outstanding $295.1 million of capital securities issued by subsidiary trusts. The following table sets forth our capital trust securities which are classified as long-term debt.

TABLE 17 - Capital Trust Securities

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

The regulatory capital treatment of capital securities issued by subsidiary trusts of bank holding companies is currently under review by the banking regulators with respect to FIN 46. The capital securities are currently included in the Tier 1 capital of Banknorth and, at September 30, 2003, amounted to 18.3% of its Tier 1 capital. Depending on the future determination of banking regulators, capital securities issued by certain subsidiary trusts may no longer qualify for Tier 1 capital treatment, but instead may qualify for Tier 2 capital treatment. Outstanding capital securities may or may not be grandfathered by the Federal Reserve Board for treatment as Tier 1 capital for regulatory purposes. On July 2, 2003, the Federal Reserve Board issued a Supervision and Regulation Letter requiring that bank holding companies continue to follow the current instructions for reporting capital securities in their regulatory reports. The effect of the letter is that we will continue to report our capital securities in Tier 1 capital until further notice from the Federal Reserve Board. As noted above, at September 30, 2003, Banknorth was classified as “well capitalized” for regulatory purposes, the highest classification. We believe that Banknorth’s classification would have remained “well-capitalized” were the capital securities issued by subsidiary trusts included in its Tier 2 capital and not in Tier 1 capital. If our trust capital securities were no longer allowed to be included in Tier 1 capital as a result of accounting and regulatory developments, we would be permitted to redeem the capital securities, which bear interest from 8.00% to 10.52%, without penalty. If capital securities issued by subsidiary

42

trusts were not granted Tier 2 status, we believe that Banknorth would remain in compliance with existing minimum capital requirements.

At September 30, 2003 and December 31, 2002, we also had $200 million of 7.625% subordinated notes due in 2011 issued by our banking subsidiary, which qualify as Tier 2 capital for regulatory purposes.

Banking regulators have also established guidelines as to the level of investments in bank owned life insurance (BOLI). These guidelines are expressed in terms of a percentage of Tier 1 capital plus loan loss reserves. Our guideline (which is consistent with regulatory guidelines) is that BOLI should not exceed 25% of our Tier 1 capital plus loan loss reserves, which we monitor monthly. The ratio of BOLI to Tier 1 capital plus loan loss reserves was 26.2% at September 30, 2003 and 21.5% at December 31, 2002. This increase was the result of the $85.6 million of BOLI acquired in the merger with American on February 14, 2003. We currently do not anticipate any additional purchases or sales of BOLI.

CRITICAL ACCOUNTING POLICIES

Our accounting and reporting policies comply with accounting principles generally accepted in the United States of America and conform to general practices within the banking industry. The preparation of financials statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. The financial position and results of operations can be affected by these estimates and assumptions, which are integral to understanding reported results. Management has discussed the development and the selection of critical accounting policies with the Audit Committee of our board of directors. As discussed in our 2002 Annual Report on Form 10-K, we have identified the following critical accounting policies: allowance for loan and lease losses, accounting for acquisitions and review of goodwill and other intangible assets, and accounting for pension plans. We consider these policies as our critical accounting policies due to the potential impact on our results of operations and the carrying value of certain of our assets based on any changes in judgments and assumptions required to be made by us in the application of these policies. Our policies have not changed since December 31, 2002.

IMPACT OF NEW ACCOUNTING STANDARDS

For information on the impact of new accounting standards, see Note 11 to the unaudited Consolidated Financial Statements.

FORWARD LOOKING STATEMENTS

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

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

The information contained in the section captioned “Management’s Discussion and Analysis – Asset-Liability Management” is incorporated herein by reference.

Item 4. Controls and Procedures

Our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and regulations and are operating in an effective manner.

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Securities Exchange Act of 1934) occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II - Other Information

Item 1. Legal Proceedings

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

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

Item 3. Defaults Upon Senior Securities - not applicable.

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

Item 5. Other Information

Our Bylaws were revised to conform to the changes in the Maine Business Corporation Act and are included as Exhibit 3 (ii).

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

(a)	The following exhibits are filed as part of this report.
	Exhibit 3 (ii) Bylaws.
	Exhibit 31.1 Certification of Chief Executive Officer under Rules 13a-14 and 15d-14.
	Exhibit 31.2 Certification of Chief Financial Officer under Rules 13a-14 and 15d-14.
	Exhibit 32.1 Certification of Chief Executive Officer Under 18 U.S.C. § 1350.
	Exhibit 32.2 Certification of Chief Financial Officer Under 18 U.S.C. § 1350.
(b)	We filed a Current Report on Form 8-K or 8-K/A on July 21, 2003, September 2, 2003, September 5, 2003 and September 16, 2003.

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SIGNATURES

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

	BANKNORTH GROUP, INC.
Date: November 4, 2003	By:	/s/ William J. Ryan
		William J. Ryan Chairman, President and Chief Executive Officer
Date: November 4, 2003	By:	/s/ Stephen J. Boyle
		Stephen J. Boyle Executive Vice President and Chief Financial Officer (principal financial and accounting officer)

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EXHIBIT INDEX

Exhibit 3 (ii) Bylaws.

Exhibit 31.1 Certification of Chief Executive Officer under Rules 13a-14 and 15d-14.

Exhibit 31.2 Certification of Chief Financial Officer under Rules 13a-14 and 15d-14.

Exhibit 32.1 Certification of Chief Executive Officer, dated November 4, 2003.

Exhibit 32.2 Certification of Chief Financial Officer, dated November 4, 2003.

46 EX-3.(II) 3 b48036bgexv3wxiiy.txt EX-3.(II) BYLAWS EXHIBIT 3(ii) BYLAWS OF BANKNORTH GROUP, INC. ARTICLE I OFFICES SECTION 1. Registered and Other Offices. The registered office of Banknorth Group, Inc. (hereinafter called the "Corporation") in the State of Maine shall be at Two Portland Square, City of Portland, County of Cumberland. The Corporation also may have an office or offices and keep the books and records of the Corporation, in accordance with the laws of the State of Maine, at such other place or places either within or without the State of Maine as the Board of Directors of the Corporation (hereinafter called the "Board") may from time to time determine or the business may require. The principal office of the Corporation shall be located at Two Portland Square, Portland, Maine. ARTICLE II MEETINGS OF SHAREHOLDERS SECTION 1. Place of Meetings. All meetings of the shareholders shall be held at the principal office of the Corporation at Two Portland Square, Portland, Maine, or at such other place within or without the State of Maine as may from time to time be fixed by the Board. SECTION 2. Annual Meetings. The annual meeting of shareholders of the Corporation for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held either (i) at 10:00 A.M. on the fourth Tuesday of April of each year, if not a legal holiday, and if a legal holiday then on the next succeeding day not a legal holiday, or (ii) at such other time as the Board shall designate. SECTION 3. Special Meetings. Special meetings of the shareholders, for any purpose or purposes, may be called at any time by the Chairman of the Board, the President or a majority of the Board and shall be called by the Chairman of the Board, the President or the Clerk upon the written request of the holders of not less than 50% of the issued and outstanding voting capital stock of the Corporation entitled to vote on the matter for which the meeting is called, voting together as a single class, provided that special meetings of shareholders also may be called in the manner specified in the Maine Business Corporation Act. (This Section, and the comparable provision in Article 8B of the Amended and Restated Articles of Incorporation of the Corporation (as the same may be amended or amended and restated from time to time, the "Articles of Incorporation"), which were formerly authorized by Section 603(4)(D) of Title 13-A of the Maine Revised Statutes, were in effect on July 1, 2003 and as a result they were grandfathered to the Corporation by Section 1701(3) of Title 13-C of the Maine Revised Statutes.) SECTION 4. Notices of Meetings. Written notice of the date, time and place of a meeting of shareholders and, in the case of a special meeting or when otherwise required by law, the purpose or purposes thereof, shall be given not less than 10 days nor more than 60 days before the date of the meeting by any method of delivery used in conventional commercial practice, including delivery by hand, mail, commercial delivery and electronic transmission, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be effective when deposited in the United Sates mail, correctly addressed to the shareholder at the shareholder's address as it appears on the current record of shareholders of the Corporation, with postage thereon prepaid. 47 When a meeting is adjourned to a different date, time or place, notice need not be given of the new date, time or place if (i) the new date, time or place is announced at the meeting before adjournment and (ii) a new record date is not fixed for the adjourned meeting. If a new record date is fixed for the adjourned meeting (which must be done if the new date is more than 120 days after the date of the original meeting), notice of the adjourned meeting must be given as provided in this Section 4 to persons who are shareholders as of the new record date. SECTION 5. Waiver of Notice. Any shareholder may waive notice of any meeting before or after the meeting. The waiver must be in writing, signed by the shareholder and delivered to the Corporation for inclusion in the minutes or filing with the corporate records. A shareholder's attendance, in person or by proxy, at a meeting (i) waives objection to lack of notice or defective notice of the meeting, unless the shareholder or his proxy at the beginning of the meeting objects to holding the meeting or transacting business at the meeting, and (ii) waives objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the shareholder or his proxy objects to considering the matter before it is voted upon. SECTION 6. Shareholders' List. Before each meeting of shareholders, the Secretary or the Clerk shall prepare an alphabetical list of the shareholders entitled to notice of such meeting. The list shall be arranged by voting group (and within each voting group by class or series of shares) and show the address of and number of shares held by each shareholder. The list shall be kept on file at the principal office of the Corporation or at a place identified in the meeting notice in the city where the meeting will be held, for the period beginning two business days after notice of the meeting is given and continuing through the meeting and shall be available for inspection by any shareholder, his agent or attorney, at any time during regular business hours. The list also shall be available at the meeting and shall be subject to inspection by any shareholder, his agent or attorney, at any time during the meeting or any adjournment thereof. SECTION 7. Voting Group. All shares of one or more classes or series that under the Articles of Incorporation or the Maine Business Corporation Act are entitled to vote and be counted together collectively on a matter at a meeting of shareholders constitute a voting group. All shares entitled by the Articles of Incorporation or the Maine Business Corporation Act to vote generally on a matter are for that purpose a single voting group. Classes or series of shares shall not be entitled to vote separately by voting group unless expressly authorized by the Articles of Incorporation or specifically required by law. SECTION 8. Quorum. Shares entitled to vote as a separate voting group may take action on a matter at the meeting only if a quorum of those shares exists. A majority of the votes entitled to be cast on the matter by the voting group constitutes a quorum of that voting group for action on that matter. Once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for that adjourned meeting. SECTION 9. Adjournments. Whether or not a quorum is present at any meeting of shareholders, such meeting may be adjourned from time to time by the vote of a majority of the votes cast on the motion to adjourn. Subject to the provisions of Section 4 of this Article II, at any adjourned meeting any business may be transacted that might have been transacted at the original meeting if a quorum exists with respect to the matter proposed. Notice of any adjourned meeting of shareholders need not be given except as otherwise provided in Section 4 of this Article II. SECTION 10. Proxies. Shares may be voted either in person or by one or more proxies authorized by a written appointment of proxy signed by the shareholder or by his duly authorized attorney-in-fact. Any appointment in the form of an electronic record that may be reproduced in paper form by an automated process and bears the shareholder's electronic signature, including a photocopy, telegram, cablegram, facsimile transmission or e-mail, shall be deemed a valid appointment form. An appointment of proxy is valid for 11 months from the date of its execution, unless a different period is expressly provided in the appointment form. SECTION 11. Voting of Shares. Subject to the provisions of the Articles of Incorporation, each outstanding share shall be entitled to one vote on each matter voted on at a meeting of shareholders. 48 Except in the election of directors, action on a matter by a voting group is approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless a greater vote is required by law, the Articles of Incorporation or these Bylaws. Directors are to be elected by a plurality of votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present. If, at any meeting of shareholders, due to a vacancy or vacancies or otherwise, directors of more than one class of the Board are to be elected, each class of directors to be elected at the meeting shall be elected in a separate election by a plurality vote. Absent special circumstances, shares of the Corporation are not entitled to vote if they are owned, directly or indirectly, by another corporation in which the Corporation owns, directly or indirectly, a majority of the shares entitled to vote for directors of the second corporation, provided that this provision does not limit the power of the Corporation to vote its own shares held by it in a fiduciary capacity. SECTION 12. Proposals. At an annual meeting of the shareholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board, (b) otherwise properly brought before the meeting by or at the direction of the Board or (c) otherwise properly brought before the meeting by a shareholder. For business to be properly brought before an annual meeting by a shareholder, the shareholder must have given timely notice thereof in writing to the Clerk of the Corporation. To be timely, a shareholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not later than 90 days prior to the anniversary date of the immediately preceding annual meeting. A shareholder's notice to the Clerk shall set forth as to each matter the shareholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting, (b) the name and address, as they appear on the Corporation's books, of the shareholder proposing such business, (c) the class and number of shares of the Corporation which are owned of record or beneficially owned by the shareholder, and (d) any material interest of the shareholder in such business. Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this Article II, Section 12. The chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Article II, Section 12, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. This provision is not a limitation on any other applicable laws and regulations. At a special meeting of the shareholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before a special meeting, business must be specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board or such other person or persons as are authorized to call special meetings of shareholders of the Corporation pursuant to Article II, Section 3 of these Bylaws. SECTION 13. Inspectors. For each meeting of shareholders, the Board shall appoint one or more inspectors of election. If for any meeting the inspector(s) appointed by the Board shall be unable to act or the Board shall fail to appoint such inspector(s), inspector(s) may be appointed at the meeting by the chairman thereof. No director or candidate for the office of director shall act as an inspector for the election of directors; and inspectors need not be shareholders but may be an officer or an employee of the Corporation. The inspector(s) appointed to act at any meeting of the shareholders, before entering upon the discharge of their duties, shall be sworn faithfully to execute the duties of inspector(s) at such meeting with strict impartiality and according to the best of their ability, and the oath so taken shall be subscribed by them. The inspector(s) shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum and the authenticity, validity and effect of proxies and ballots; they shall receive votes, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, determine and announce the results, and otherwise see that the vote or election is conducted with fairness to all shareholders. Upon request of the person presiding at the meeting or of any shareholder entitled or claiming to be entitled to vote thereat, the inspector(s) shall report in writing on any challenge, question or matter determined by them and execute a certificate of any fact found by them. Any report or certificate made by the inspector(s) shall be prima facie evidence of the facts stated therein and of the vote as certified by them. 49 SECTION 14. Conduct of Meeting and Order of Business. Unless determined otherwise by the Board of Directors, the Chairman of the Board or the Chief Executive Officer shall act as chairman at all meetings of shareholders and the Secretary of the Corporation shall act as secretary at all meetings of shareholders. The chairman of the meeting shall have the right and authority to determine and maintain the rules, regulations and procedures for the proper conduct of the meeting, including but not limited to restricting entry to the meeting after it has commenced, maintaining order and the safety of those in attendance, opening and closing the polls for voting, dismissing business not properly submitted and limiting time allowed for discussion of the business of the meeting. SECTION 15. Informal Action. Any action required to be taken at a meeting of the shareholders, or any other action which may be taken at a meeting of the shareholders, may be taken without a meeting in the manner set forth in Article 8C of the Articles of Incorporation. ARTICLE III BOARD OF DIRECTORS SECTION 1. General Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board, which may exercise all such authority and powers of the Corporation and do all such lawful acts and things as are not by law, the Articles of Incorporation or these Bylaws directed or required to be exercised or done by the shareholders. SECTION 2. Number and Term of Office. The number of directors shall be determined by the Board in accordance with Article 7 of the Articles of Incorporation. Each director shall continue in office until the annual meeting of shareholders at which such director's term is to expire and until such director's successor shall have been elected and qualified, or until such director's death, resignation, disqualification or removal in the manner hereinafter provided. SECTION 3. Classification and Election. The Board of Directors shall be classified in accordance with the provisions of Article 7A of the Articles of Incorporation. Each class of directors shall be elected at the annual meeting of shareholders at which the term of their predecessors is to expire. SECTION 4. Qualifications. No person may be elected as a director who, at the time of his election, is over 72 years of age; provided that if any director shall reach 72 years of age during his term of office as director, such director shall serve as director only until the next annual meeting of shareholders of the Corporation next following his attainment of age 72. SECTION 5. Removal. The Board of Directors or any individual director may be removed from office only in accordance with the provisions of Article 7B of the Articles of Incorporation. SECTION 6. Vacancies. Any vacancies in the Board of Directors shall be filled in accordance with the provisions of Article 7C of the Articles of Incorporation. SECTION 7. Compensation. The Board of Directors may provide for the compensation of directors for their services as such and for the payment or reimbursement of any or all expenses incurred by them in connection with such services. SECTION 8. Nominations of Directors. Subject to the rights of holders of any class or series of stock having a preference over the common stock as to dividends or upon liquidation, nominations for the election of directors may be made by the Board or a committee appointed by the Board or by any shareholder entitled to vote generally in an election of directors. However, any shareholder entitled to vote generally in an election of directors may nominate one or more persons for election as directors at a meeting only if written notice of such shareholder's intent to make such nomination or nominations has been timely given to the Clerk of the Corporation. To be timely, a shareholder's notice must be delivered to or mailed and received at the principal executive offices of the 50 Corporation not later than (i) 90 days prior to the anniversary date of the immediately preceding annual meeting, and (ii) with respect to an election to be held at a special meeting of shareholders for the election of directors, the close of business on the tenth day following the date on which notice of such meeting is first given to shareholders. Each such notice shall set forth: (a) the name and address of the shareholder who intends to make the nomination and of the person or persons to be nominated; (b) a representation that the shareholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder; (d) such other information regarding each nominee proposed by such shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission; and (e) the consent of each nominee to serve as a director of the Corporation if so elected. The chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedures. SECTION 9. Resignation. Any director may resign at any time by giving written notice to the Board, the Chairman or to the Secretary or the Clerk of the Corporation. Such resignation shall take effect upon receipt of such notice or any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 10. Lead Directors. The Board, by a majority vote of the non-employee directors who are present at a duly called meeting of the Board, shall elect one or more "lead directors," each of whom shall be designated as a Vice Chairman of the Board. The lead director(s) shall be responsible for coordinating the activities of the other non-employee directors, including establishing the agenda for and conduct of meetings of the non-employee directors, which shall occur not less than two times in any calendar year. The lead director(s) also shall have such responsibilities as may be required by applicable law and the listing standards of the New York Stock Exchange, Inc. and as may from time to time be assigned to the lead director(s) by the Board. SECTION 11. Liability of Directors. The personal liability of a director for monetary damages to the Corporation or its shareholders for an action taken or a failure to take an action as a director shall be eliminated to the fullest extent permitted by Section 202(2)(D) of Title 13-C of the Maine Revised Statutes, which is deemed to be included in the Articles of Incorporation, effective as of July 1, 2003, by Section 202(4) of Title 13-C of the Maine Revised Statutes. ARTICLE IV MEETINGS AND ACTION OF THE BOARD AND ITS COMMITTEES SECTION 1. Annual Meeting. The Board shall meet for the purpose of organization, the election of officers and the transaction of other business as soon as practicable after each annual election of directors, on the same day and at the same place at which such election is held or at such other time or place as shall be specified in a notice given as hereinafter provided for special meetings of the Board or in a consent and waiver of notice thereof signed by all directors. SECTION 2. Regular Meetings. Regular meetings of the Board shall be held at such times and places as the Board may from time to time determine by resolution. If any day fixed for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting which would otherwise be held on that day shall be held at said place at the same hour on the next succeeding business day not a legal holiday. SECTION 3. Special Meetings; Notice. Special meetings of the Board shall be held whenever called by a majority of the Board, the Chairman of the Board, a Vice Chairman of the Board, the Chief Executive Officer or the President. 51 SECTION 4. Place of Meeting. The Board may hold its meetings at such place or places within or without the State of Maine as the Board from time to time may determine or as shall be specified or fixed in the respective notices or waivers of notice thereof. SECTION 5. Notice of Meetings. Regular meetings of the Board may be held without notice. The person or persons calling a special meeting of the Board shall, at least twenty-four hours before the meeting, give or cause to be given notice thereof by any usual means of communication, including electronic means. Such notice need not specify the purpose for which the meeting is called. Any duly convened regular or special meeting may be adjourned by the directors to a later time without further notice. SECTION 6. Waiver of Notice. Any director may waive notice of any meeting before or after the meeting. The waiver must be in writing, signed by the director entitled to the notice and delivered to the Corporation for inclusion in the minutes or filing with the corporate records. A director's attendance at or participation in a meeting waives any required notice of such meeting, unless the director at the beginning of the meeting, or promptly upon arrival, objects to holding the meeting or to transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting. If an otherwise valid meeting of the Board is held without call or notice when a notice is required, any action taken at the meeting is deemed ratified by a director who did not attend unless, after learning of the action taken and of the impropriety of the meeting, the director makes prompt objection to the action taken. SECTION 7. Quorum. Unless the Articles of Incorporation or these Bylaws provide otherwise, a majority of the number of directors fixed by or pursuant to the Articles of Incorporation shall constitute a quorum for the transaction of business at any meeting of the Board. SECTION 8. Manner of Acting. Except as otherwise provided in the Articles of Incorporation or these Bylaws, the affirmative vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board. SECTION 9. Presumption of Assent. A director who is present at a meeting of the Board or a committee of the Board when corporate action is taken is deemed to have assented to the action taken unless (i) the director objects at the beginning of the meeting, or promptly upon such director's arrival, to holding the meeting or to transacting business at the meeting, (ii) the director's dissent or abstention from the action taken is entered in the minutes of the meeting or (iii) the director files written notice of dissent or abstention with the presiding officer of the meeting before its adjournment or with the Corporation immediately after the adjournment of the meeting. Such right of dissent or abstention is not available to a director who votes in favor of the action taken. SECTION 10. Telephonic Meetings. Any or all directors may participate in a regular or special meeting of the Board by, or conduct the meeting through the use of, any means of communication by which all directors participating may simultaneously hear each other during the meeting. A director participating in a meeting by this means is deemed to be present in person at the meeting. SECTION 11. Organization. At each meeting of the Board, the Chairman of the Board or in his absence the President, or in his absence a director chosen by a majority of the directors present, shall act as chairman of such meeting and preside thereat, except as otherwise provided in Section 10 of Article III of these Bylaws. The Secretary, or in the absence of the Secretary any person appointed by the chairman, shall act as secretary of the meeting and keep the minutes thereof. At all meetings of the Board, business shall be transacted in the order and in the manner determined by the chairman of the meeting, subject to the approval of the Board. SECTION 12. Action without Meeting. Action required or permitted to be taken at a meeting of the Board may be taken without a meeting if the action is taken by all members of the Board. The action must be evidenced by one or more written consents signed by each director before or after such action, describing the action taken and included in the minutes or filed with the corporate records. 52 SECTION 13. Committees of the Board. The Board shall create an Executive Committee, an Audit Committee, a Nominating and Corporate Governance Committee and a Human Resources Committee, and may create such other committees of the Board as it deems appropriate. The Board shall appoint members of the Board to serve on Board committees. The members of the Audit, Human Resources and Nominating and Corporate Governance Committees of the Board shall at all times meet the independence and other requirements of applicable law and the listing requirements of the New York Stock Exchange, Inc. The creation of a committee of the Board and appointment of members to it must be approved by the greater of (i) a majority of the number of directors in office when the action is taken or (ii) the number of directors required to take action pursuant to Section 8 of Article III of these Bylaws. Each committee of the Board must have two (three in the case of the Audit Committee) or more members and, to the extent authorized by law and specified by the Board in the resolutions creating the committee and any applicable charter of the committee, shall have and may exercise all of the authority of the Board in the management of the Corporation. Each committee member shall serve at the pleasure of the Board. The provisions in these Bylaws governing meetings, action without meetings, notice, waiver of notice, quorum and voting requirements of the Board apply to committees of the Board established under this section. Members of a committee shall be entitled to receive such compensation for service thereon as may be determined by the Board and for the payment or reimbursement of any or all expenses incurred by them in connection with such service. ARTICLE V OFFICERS SECTION 1. Principal Officers. The principal officers of the Corporation shall be the Chairman of the Board, President, Treasurer, Secretary and Chief Auditor. Other officers of the Corporation may be appointed in accordance with the provisions of Section 3 of this Article V. Any two or more offices may be held by the same person, but no individual may act in more than one capacity where action of two or more officers is required. SECTION 2. Election, Term of Office and Qualifications. The officers of the Corporation shall be elected annually by the Board. Each officer, including any officer appointed in accordance with the provisions of Section 3 of this Article V, shall hold office until the annual meeting of the Board held next after such officer's election or until such officer's successor shall have been duly chosen and qualified or until such officer's death, resignation or removal from office. SECTION 3. Appointive Officers. The Board may from time to time appoint or delegate the appointment of such other officers and assistant officers and agents as it may deem necessary and prescribe the respective authority and duties of any such officer or assistant officer. Without limiting the foregoing, the Chief Executive Officer shall have authority to appoint and remove appointive officers, employees and agents and to prescribe their powers and duties and may authorize any other officer or officers to do so. SECTION 4. Bonds. The Board may by resolution require any officer, employee or agent of the Corporation to give bond to the Corporation, with sufficient sureties, conditioned on the faithful performance of the duties of the applicable office or position, and to comply with such other conditions as may from time to time be required by the Board. Such bonds may be scheduled or blanket form and the premiums shall be paid by the Corporation. SECTION 5. The Chairman of the Board. The Chairman of the Board shall preside at all meetings of the shareholders and the Board, except as otherwise provided in Section 10 of Article III of these Bylaws. The Chairman shall perform such other duties as the Board may from time to time prescribe. SECTION 6. The President. In the absence or inability to act of the Chairman of the Board, the President shall, when present, act as ex officio chairman and shall preside at all meetings of the shareholders and the Board, except as otherwise provided in Section 10 of Article III of these Bylaws. The President may be designated by the Board as the Chief Executive Officer of the Corporation, and in such capacity shall have general charge of the business affairs and property of the Corporation. He shall have such other powers and perform such duties as is 53 authorized by law and as may from time to time be assigned to him by the Board or as may be prescribed by these Bylaws. SECTION 7. The Treasurer. The Treasurer shall have charge and custody of, and be responsible for, all funds and securities of the Corporation, and shall deposit all such funds in the name of the Corporation in such banks or other depositories as shall be selected or authorized to be selected by the Board; shall render or cause to be rendered a statement of the condition of the finances of the Corporation at all regular meetings of the Board, and a full financial report at the annual meeting of shareholders, if called upon so to do; shall receive and give receipt for moneys due and payable to the Corporation from any source whatsoever; and, in general, shall perform or cause to be performed all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the Board or as may be prescribed in these Bylaws. SECTION 8. The Secretary. The Secretary shall attend the meetings of the shareholders and the Board and record minutes of the proceedings of such meetings in books kept for that purpose. The Secretary also shall have the responsibility for authenticating records of the Corporation and, to the extent permitted by applicable law, may perform any responsibility of the Clerk of the Corporation. SECTION 9. Officers Acting as Assistant Secretary. Any Senior Executive Vice President or Executive Vice President shall have, by virtue of such officer's office and by authority of these Bylaws, the authority from time to time to act as an Assistant Secretary of the Corporation and to such extent said officers are appointed to the office of Assistant Secretary. SECTION 10. The Chief Auditor. The Chief Auditor shall be the chief internal auditing officer of the Corporation. The Chief Auditor shall continuously examine the affairs of the Corporation and its subsidiaries and, in general, shall perform or cause to be performed all the duties incident to the office of chief internal auditing officer and such other duties as from time to time may be assigned to him by the Board or the Audit Committee of the Board. The Chief Auditor shall report to the Audit Committee of the Board. SECTION 11. The Clerk. In addition to the foregoing officers, the Board shall appoint a Clerk of the Corporation, who shall be a resident of the State of Maine. The Clerk shall perform the functions required by law, shall not be deemed an officer of the Corporation as a result of serving in such capacity and shall not be liable in that capacity for any liabilities of the Corporation, including without limitation debts, claims, taxes, fines or penalties. The Clerk shall keep, at the registered office of the Corporation or at another office of the Corporation to which he has ready access, in a book kept for such purpose, the records of all shareholders' meetings, including records of all votes and minutes of such meetings, as well as a list of shareholders entitled to vote at each meeting and the most recent list of shareholders. He may certify all votes, resolutions and actions of the shareholders and of the Board and its committees. He may give or cause to be given notice of all shareholders' and directors' meetings. He shall have custody of the corporate seal and he shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature. 54 SECTION 12. Resignation. Any officer may resign at any time by giving written notice to the Board, the Chairman of the Board or the President, or if such officer was appointed by an officer in accordance with Section 3 of this Article V, by giving written notice to the officer who appointed such officer. Such resignation shall take effect at the time specified therein, or if no time is specified therein, at the time such resignation is received by the Board, the Chairman of the Board, the President or the officer who appointed such officer, unless it shall be necessary to accept such resignation before it becomes effective, in which event the resignation shall take effect upon its acceptance by the Board, the Chairman of the Board, the President or the officer who appointed such officer. Unless otherwise specified therein, the acceptance of any such resignation shall not be necessary to make it effective. SECTION 13. Removal. The principal officers designated in Section 1 of this Article V may be removed, either with or without cause, by vote of a majority of the number of directors then in office. The officers appointed in accordance with the provisions of Section 3 of this Article V may be removed, either with or without cause, by a majority vote of the directors present at any meeting or by any officer upon whom such power of removal may be conferred by the Board. SECTION 14. Vacancies. A vacancy in any office because of death, resignation, removal or any other cause shall be filled for the unexpired portion of the term in the manner prescribed by these Bylaws for regular election or appointment to such office. SECTION 15. Salaries of Officers. No officer of the Corporation shall be prevented from receiving a salary as such officer or from voting thereon by reason of the fact that such officer is also a director of the Corporation. The salaries of the officers of the Corporation, including such officers as may be directors of the Corporation, shall be fixed from time to time by the Board, except that the Board may delegate to any officer who has been given power to appoint subordinate officers, as provided in Section 3 of this Article V, the authority to fix the salaries or other compensation of any such officers appointed by him. SECTION 16. Contract Rights of Officers. The appointment of an officer does not itself create contract rights, and an officer's removal or resignation does not itself affect the officer's contract rights, if any, with the Corporation. ARTICLE VI INDEMNIFICATION SECTION 1. Indemnification. Without limitation, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, trustee, partner, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other entity, against expenses, including attorney's fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding to the full extent permitted by the Maine Business Corporation Act, provided that the Corporation shall not be liable for any amount which may be due to any person in connection with a settlement of any action, suit or proceeding effected without its prior written consent or any action, suit or proceeding initiated by an indemnified person without its prior written consent, other than an action, suit or proceeding seeking indemnification from the Corporation hereunder. SECTION 2. Expenses. Expenses incurred in defending a civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt by the Corporation of a written undertaking by or on behalf of the director, officer, employee, agent, trustee, partner or fiduciary to repay such amount under the circumstances specified in the Maine Business Corporation Act and which otherwise meets the requirements of such Act. Such undertaking shall be an unlimited general obligation of the person seeking the advance, but need not be secured and may be accepted by the Corporation without reference to financial ability to make the repayment. 55 SECTION 3. Other Rights and Remedies. The indemnification and entitlement to advances of expenses provided by this Article VI shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in that person's official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee, agent, trustee, partner or fiduciary and shall inure to the benefit of the heirs, executors and administrators of such a person. A right to indemnification hereunder may be enforced by a separate action against the Corporation, if an order for indemnification has not been entered by a court in any action, suit or proceeding in respect to which indemnification is sought. (This Section, which was formerly authorized by Section 719(5) of Title 13-A of the Maine Revised Statutes, was in effect on July 1, 2003 and as a result it was grandfathered to the Corporation by Section 1701(3) of Title 13-C of the Maine Revised Statutes). SECTION 4. Insurance. The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, trustee, partner, fiduciary, employee or agent of another corporation, partnership, joint venture, trust, pension or other employee benefit plan or other entity, against any liability asserted against that person and incurred by that person in any such capacity, or arising out of that person's status as such, whether or not the Corporation would have the power to indemnify that person against such liability under this Article VI. SECTION 5. Coverage. The right to indemnification herein provided for shall apply to persons who are directors, officers, employees or agents of corporations or other entities that are merged or otherwise combined with the Corporation only after the effective date of such merger or other combination and only as to their status with and activities on behalf of the Corporation after such date. SECTION 6. Witness Fees. Nothing in this Article VI shall limit the Corporation's power to pay or reimburse expenses incurred by a person in connection with his appearance as a witness in a proceeding at a time when he is not a party. SECTION 7. Severability. In the event that any of the provisions of this Article VI (including any provision within a single section, subsection, division or sentence) is held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, the remaining provisions of this Article VI shall remain enforceable to the fullest extent permitted by law. SECTION 8. Modification. The duties of the Corporation to indemnify and to advance expenses to any person provided in this Article VI shall be in the nature of a contract between the Corporation and each such person, and no amendment or repeal of any provision of this Article VI shall alter, to the detriment of such person, the right of such person to the advancement of expenses or indemnification related to a claim based on an act or omission, or alleged act or omission, which took place prior to such amendment or repeal. ARTICLE VII CONTRACTS, LOANS, CHECKS AND DEPOSITS SECTION 1. Execution of Contracts. The Board may authorize any officer, employee or agent, in the name and on behalf of the Corporation, to enter into any contract or execute and deliver any instrument, and any such authority may be general or confined to specific instances, or otherwise limited. SECTION 2. Loans. The President, or any officer, employee or agent authorized by the President or by the Board, may effect loans and advances at any time for the Corporation from any bank, trust company or other institutions or from any firm, corporation or individual and for such loans and advances may make, execute and deliver promissory notes, bonds or other certificates or evidences of indebtedness of the Corporation, and when authorized so to do may pledge and hypothecate or transfer any securities or other property of the Corporation as 56 security for any such loans or advances. Such authority conferred by the Board or the President may be general or confined to specific instances, or otherwise limited. SECTION 3. Checks, Drafts, Etc. All checks, drafts and other orders for the payment of money out of funds of the Corporation and all notes or other evidences of the Corporation shall be signed on behalf of the Corporation in such a manner as shall from time to time be determined by resolution of the Board. SECTION 4. Deposits. The funds of the Corporation not otherwise employed shall be deposited from time to time to the order of the Corporation in such banks, trust companies or other depositories as the Board may select or as may be selected by an officer, employee or agent of the Corporation to whom such power may from time to time be delegated by the Board. SECTION 5. General and Special Bank Accounts. The Board or the President or any other officer designated by the Board or appointed by the President and authorized by the Board or the President may from time to time authorize the opening and keeping of general and special bank accounts with such banks, trust companies or other depositories as may be selected by the President or any other officer or officers or agent or agents to whom power in that respect shall have been delegated by the Board. The Board may make such special rules and regulations with respect to such bank accounts, not inconsistent with the provisions of these Bylaws, as it may deem expedient. ARTICLE VIII SHARES AND THEIR TRANSFER SECTION 1. Certificates for Shares. Shares of capital stock of the Corporation may but need not be represented by certificates. If shares are represented by certificates, the certificates shall be in such form as required by law and as determined by the Board. Certificates shall be signed, either manually or in facsimile, by the Chairman of the Board, the President or an Executive Vice President and by the Secretary or Treasurer or an Assistant Secretary or an Assistant Treasurer. In case any officer or officers who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate or certificates shall cease to be such officer or officers, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who shall have signed such certificate or certificates or whose facsimile signature or signatures shall have been used thereon had not ceased to be such officer or officers. All certificates for shares shall be consecutively numbered or otherwise identified and entered into the stock transfer books of the Corporation. When shares are represented by certificates, the Corporation shall issue and deliver to each shareholder to whom such shares have been issued or transferred certificates representing the shares owned by him. When shares are not represented by certificates, then within a reasonable time after the issuance or transfer of such shares, the Corporation shall send the shareholder to whom such shares have been issued or transferred a written statement of the information required by law to be on certificates. SECTION 2. Stock Transfer Books. The Corporation shall keep, or cause one or more stock transfer agents to keep, a book or set of books, to be known as the stock transfer books of the Corporation, containing the name of each shareholder of record, together with such shareholder's address and the number and class or series of stock held by such shareholder. Transfers of shares of the Corporation shall be made only on the stock transfer books of the Corporation by the holder of record thereof or by such holder's legal representative, who shall furnish proper evidence of authority to transfer, or by such holder's attorney authorized to effect such transfer by power of attorney duly executed, and upon surrender for cancellation of the certificate for such shares (if the shares are represented by certificates). All certificates surrendered and transferred shall be cancelled before new certificates for the transferred shares shall be issued. The Board may make rules and regulations as it deems expedient concerning the issue, transfer and registration of shares of capital stock of the Corporation. SECTION 3. Lost, Stolen or Destroyed Certificates. The Corporation may authorize the issuance of a new certificate to be issued in place of any certificate theretofore issued by the Corporation claimed to have been lost, 57 stolen or destroyed, upon receipt of an affidavit of such fact from the person claiming the certificate to have been lost, stolen or destroyed. When authorizing such issue of a new certificate, the Corporation shall require that the owner of such lost, stolen or destroyed certificate, or such owner's legal representative, give the Corporation a bond in such sum and with such surety or other security as the Corporation may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate claimed to have been lost, stolen or destroyed, except where the Board or a duly authorized officer finds that the circumstances justify omission of a bond. SECTION 4. Date for Determining Shareholders of Record. In order that the Corporation may determine the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which shall not be more than 70 nor less than 10 days before the date of such meeting, nor more than 70 days prior to any other action. A determination of shareholders entitled to notice of or to vote at a shareholders' meeting is effective for any adjournment of the meeting unless the Board fixes a new record date for the adjourned meeting, which it must do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting. SECTION 5. Holder of Record. Except as otherwise required by law, the Corporation may treat the person in whose name the shares stand of record on its books as the absolute owner of the shares and the person exclusively entitled to receive notification and distributions, to vote and to otherwise exercise the rights, powers and privileges of ownership of such shares. SECTION 6. Transfer Agents and Registrars. The Board may, in its discretion, appoint one or more banks or trust companies to act as transfer agents and registrars of any class or series of the capital stock of the Corporation; and upon such appointments being made, no stock certificate relating to any such class or series shall be valid until countersigned by one of such transfer agents and registered by one of such registrars. ARTICLE IX MISCELLANEOUS SECTION 1. Distributions. The Board may from time to time authorize, and the Corporation may grant, distributions and share dividends to its shareholders pursuant to law and subject to the provisions of the Articles of Incorporation. SECTION 2. Seal. The seal of the Corporation shall be in the form of a circle and shall bear the name of the Corporation and the year of its incorporation. SECTION 3. Fiscal Year. The fiscal year of the Corporation shall begin on the first day of January and end on the last day of December in each year. SECTION 4. Waiver of Notice. Whenever any notice is required to be given by these Bylaws, the Articles of Incorporation or by law, the person entitled thereto may in person, or in the case of a shareholder by his attorney thereunto duly authorized, waive such notice in writing, whether before or after the meeting, or other matter in respect of which such notice is to be given, and in such event such notice need not be given to such person and such waiver shall be equivalent to such notice, and any action to be taken after such notice or after the lapse of a prescribed period of time may be taken without such notice and without the lapse of any period of time. SECTION 5. Execution of Instruments. All agreements, indentures, mortgages, deeds, conveyances, transfers, certificates, declarations, receipts, discharges, releases, satisfactions, settlements, petitions, schedules, accounts, affidavits, bonds, undertakings, proxies, and other instruments or documents may be signed, executed, acknowledged, verified, delivered or accepted on behalf of the Corporation by the Chairman of the Board, a Vice Chairman of the Board, the President, the Chief Executive Officer, any Executive Vice President, any Vice President or the Secretary or any Assistant Secretary; provided, however, that where required, any such instrument 58 shall be attested by one of such officers other than the officer executing such instrument. Any such instruments also may be executed, acknowledged, verified, delivered or accepted on behalf of the Corporation in such other manner and by such other officers as the Board may from time to time direct. The provisions of this Section 5 are supplementary to any other provisions of these Bylaws. SECTION 6. Shares of Other Corporations. The Chairman, the President, a Vice Chairman, any Executive Vice President, any Vice President and the Secretary is each authorized to vote, represent and exercise on behalf of the Corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of the Corporation. The authority herein granted to such officers to vote or represent on behalf of the Corporation any and all shares held by the Corporation in any other corporation or corporations may be exercised by any such officer in person or by any person authorized so to do by proxy or power of attorney duly executed by any such officer. Notwithstanding the foregoing, however, the Board, in its discretion, may designate by resolution the person to vote or represent shares of other corporations held by the Corporation. SECTION 7. Inspection of Records by Shareholders. A shareholder's right to inspect records of the Corporation is subject to Section 1602 of Title 13-C of the Maine Revised Statutes. The Corporation hereby reserves the right to restrict disclosure of records of the Corporation, as defined in Sections 1601 and 1602, or parts thereof to the extent that they include material, non-public information and/or are subject to confidentiality agreements or privacy or information security laws or regulations which prohibit their disclosure. SECTION 8. References to Gender. A reference in these Bylaws to one gender, masculine or feminine, includes the other, and the singular includes the plural and vice versa unless the context otherwise requires. ARTICLE X EMERGENCY TRANSFER OF RESPONSIBILITY SECTION 1. Emergency Defined. In the event of a national emergency threatening national security or a major disaster declared by the President of the United States, or the person performing his functions, which directly or severely affects the operations of the Corporation, the officers and employees of the Corporation will continue to conduct the affairs of the Corporation under such guidance from the directors as may be available except as to matters which by law or regulation require specific approval of the Board and subject to conformance with any applicable laws, regulations and governmental directives during the emergency. SECTION 2. Officers Pro Tempore. The Board shall have the power, in the absence or disability of any officer, or upon the refusal of any officer to act as a result of said national emergency directly and severely affecting the operations of the Corporation, to delegate and prescribe such officer's powers and duties to any other officer, or to any director. In the event a national emergency or disaster prevents a quorum of the Corporation's directors from being readily assembled or otherwise prevents the conduct and management of the affairs and business of the Corporation by its directors and officers as contemplated by these Bylaws, any two or more available members of the then incumbent Executive Committee shall constitute a quorum of such Committee for the full conduct and management of the Corporation in accordance with the provisions of Articles III and IV of these Bylaws. If two members of the Executive Committee cannot be expeditiously located, then three available directors shall constitute the Executive Committee for the full conduct and management of the affairs and business of the Corporation until the then remaining Board can be convened. These provisions shall be subject to implementation by resolutions of the Board passed from time to time, and any provisions of the Bylaws (other than this Section) and any resolutions which are contrary to the provisions of this Section or the provisions of any such implementary resolutions shall be suspended until it shall be determined by any such interim Executive Committee acting under this Section that it shall be to the advantage of the Corporation to resume the conduct and management of its affairs and business under all of the other provisions of these Bylaws. 59 SECTION 3. Officer Succession. If, in the event of a national emergency or disaster which directly and severely affects the operations of the Corporation, the President and/or the Chief Executive Officer cannot be located expeditiously or is unable to assume or to continue normal duties, then the authority and duties of the office shall be automatically assumed, without Board action, in order of title, and subject only to willingness and ability to serve, by the Senior Executive Vice President, Executive Vice President, Senior Vice President, Corporate Secretary or their successors in office at the time of the emergency or disaster. Where two or more officers hold equivalent titles and are willing and able to serve, seniority in title controls initial appointment. If, in the same manner, the Secretary or Treasurer cannot be located or is unable to assume or continue normal duties, the responsibilities attached thereto shall, in like manner as described immediately above, be assumed by any Executive Vice President, Senior Vice President or Vice President. Any officer assuming authority and position hereunder shall continue to serve until the earlier of his resignation or the elected officer or a more senior officer shall become available to perform the duties of the position of President, Chief Executive Officer, Secretary or Treasurer, as applicable. SECTION 4. Certification of Authority. In the event of a national emergency or disaster which directly and severely affects the operations of the Corporation, anyone dealing with this Corporation shall accept a certification by the Secretary, the Clerk or any two officers of the Corporation that a specified individual is acting as Chairman of the Board, Chief Executive Officer, President, Secretary or Treasurer in accordance with these Bylaws; and that anyone accepting such certification shall continue to consider it in force until notified in writing of a change, such notice of change to carry the signature of the Secretary, the Clerk or two officers of the Corporation. SECTION 5. Alternative Locations. In the event of a national emergency or disaster which destroys, demolishes or renders the Corporation's offices or facilities unserviceable, or which causes, or in the judgment of the Board or the Executive Committee probably will cause, the occupancy or use thereof to be a clear and imminent hazard to personal safety, the Corporation shall temporarily lease or acquire sufficient facilities to carry on its business as may be designated by the Board. Any temporarily relocated place of business of this Corporation shall be returned to its legally authorized location as soon as practicable and such temporary place of business shall then be discontinued. SECTION 6. Amendments to Article X. At any meeting called in accordance with Section 2 of this Article X, the Board or Executive Committee, as the case may be, may modify, amend or add to the provisions of this Article X so as to make any provision that may be practical or necessary for the circumstances of the emergency. ARTICLE XI AMENDMENTS These Bylaws (including, without limitation, this Article XI) may be altered, amended or repealed or new Bylaws may be adopted only by the Board. (This Section, and the comparable provision in Article 8D of the Articles of Incorporation, which were formerly authorized by Section 601(4) of Title 13-A of the Maine Revised Statutes, were in effect on July 1, 2003 and as a result they were grandfathered to the Corporation by Section 1701(3) of Title 13-C of the Maine Revised Statutes.) Amended on May 27, 2003. 60 EX-31.1 4 b48036bgexv31w1.txt EX-31.1 SECT. 302 CERTIFICATION OF C.E.O. EXHIBIT 31.1 PURSUANT TO RULES 13a-14 AND 15d-14 OF THE SECURITIES EXCHANGE ACT OF 1934 AND SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER I, William J. Ryan, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Banknorth Group, Inc. (the "Registrant"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; 4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and 5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of Registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. Date: November 4, 2003 /s/ William J. Ryan -------------------------------------- William J. Ryan Chief Executive Officer 61 EX-31.2 5 b48036bgexv31w2.txt EX-31.2 SECT. 302 CERTIFICATION OF C.F.O. EXHIBIT 31.2 PURSUANT TO RULES 13a-14 AND 15d-14 OF THE SECURITIES EXCHANGE ACT OF 1934 AND SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 CERTIFICATION OF THE CHIEF FINANCIAL OFFICER I, Stephen J. Boyle, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Banknorth Group, Inc. (the "Registrant"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; 4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and 5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of Registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. Date: November 4, 2003 /s/ Stephen J. Boyle -------------------------------------- Stephen J. Boyle Chief Financial Officer 62 EX-32.1 6 b48036bgexv32w1.txt EX-32.1 SECT. 906 CERTIFICATION OF C.E.O. EXHIBIT 32.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. 1350) The undersigned executive officer of Banknorth Group, Inc. (the "Registrant") hereby certifies that the Registrant's Form 10-Q for the three months ended September 30, 2003 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained therein fairly presents, in all material respects, the financial condition and results of operations of the Registrant. /s/ William J. Ryan -------------------------------- Name: William J. Ryan Title: Chief Executive Officer Date: November 4, 2003 Note: A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to Banknorth Group, Inc. and will be retained by Banknorth Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. 63 EX-32.2 7 b48036bgexv32w2.txt EX-32.2 SECT. 906 CERTIFICATION OF C.F.O. EXHIBIT 32.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. 1350) The undersigned executive officer of Banknorth Group, Inc. (the "Registrant") hereby certifies that the Registrant's Form 10-Q for the three months ended September 30, 2003 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained therein fairly presents, in all material respects, the financial condition and results of operations of the Registrant. /s/ Stephen J. Boyle -------------------------------- Name: Stephen J. Boyle Title: Chief Financial Officer Date: November 4, 2003 Note: A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to Banknorth Group, Inc. and will be retained by Banknorth Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. 64 -----END PRIVACY-ENHANCED MESSAGE-----

EX-3.(II)

                                                                   EXHIBIT 3(ii)

                                     BYLAWS

                                       OF

                              BANKNORTH GROUP, INC.

                                    ARTICLE I

                                     OFFICES

         SECTION 1. Registered and Other Offices. The registered office of
Banknorth Group, Inc. (hereinafter called the "Corporation") in the State of
Maine shall be at Two Portland Square, City of Portland, County of Cumberland.
The Corporation also may have an office or offices and keep the books and
records of the Corporation, in accordance with the laws of the State of Maine,
at such other place or places either within or without the State of Maine as the
Board of Directors of the Corporation (hereinafter called the "Board") may from
time to time determine or the business may require. The principal office of the
Corporation shall be located at Two Portland Square, Portland, Maine.

                                   ARTICLE II

                            MEETINGS OF SHAREHOLDERS

         SECTION 1. Place of Meetings. All meetings of the shareholders shall be
held at the principal office of the Corporation at Two Portland Square,
Portland, Maine, or at such other place within or without the State of Maine as
may from time to time be fixed by the Board.

         SECTION 2. Annual Meetings. The annual meeting of shareholders of the
Corporation for the election of directors and for the transaction of such other
business as may properly come before the meeting shall be held either (i) at
10:00 A.M. on the fourth Tuesday of April of each year, if not a legal holiday,
and if a legal holiday then on the next succeeding day not a legal holiday, or
(ii) at such other time as the Board shall designate.

         SECTION 3. Special Meetings. Special meetings of the shareholders, for
any purpose or purposes, may be called at any time by the Chairman of the Board,
the President or a majority of the Board and shall be called by the Chairman of
the Board, the President or the Clerk upon the written request of the holders of
not less than 50% of the issued and outstanding voting capital stock of the
Corporation entitled to vote on the matter for which the meeting is called,
voting together as a single class, provided that special meetings of
shareholders also may be called in the manner specified in the Maine Business
Corporation Act. (This Section, and the comparable provision in Article 8B of
the Amended and Restated Articles of Incorporation of the Corporation (as the
same may be amended or amended and restated from time to time, the "Articles of
Incorporation"), which were formerly authorized by Section 603(4)(D) of Title
13-A of the Maine Revised Statutes, were in effect on July 1, 2003 and as a
result they were grandfathered to the Corporation by Section 1701(3) of Title
13-C of the Maine Revised Statutes.)

         SECTION 4. Notices of Meetings. Written notice of the date, time and
place of a meeting of shareholders and, in the case of a special meeting or when
otherwise required by law, the purpose or purposes thereof, shall be given not
less than 10 days nor more than 60 days before the date of the meeting by any
method of delivery used in conventional commercial practice, including delivery
by hand, mail, commercial delivery and electronic transmission, to each
shareholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be effective when deposited in the United Sates mail,
correctly addressed to the shareholder at the shareholder's address as it
appears on the current record of shareholders of the Corporation, with postage
thereon prepaid.

                                       47



         When a meeting is adjourned to a different date, time or place, notice
need not be given of the new date, time or place if (i) the new date, time or
place is announced at the meeting before adjournment and (ii) a new record date
is not fixed for the adjourned meeting. If a new record date is fixed for the
adjourned meeting (which must be done if the new date is more than 120 days
after the date of the original meeting), notice of the adjourned meeting must be
given as provided in this Section 4 to persons who are shareholders as of the
new record date.

         SECTION 5. Waiver of Notice. Any shareholder may waive notice of any
meeting before or after the meeting. The waiver must be in writing, signed by
the shareholder and delivered to the Corporation for inclusion in the minutes or
filing with the corporate records. A shareholder's attendance, in person or by
proxy, at a meeting (i) waives objection to lack of notice or defective notice
of the meeting, unless the shareholder or his proxy at the beginning of the
meeting objects to holding the meeting or transacting business at the meeting,
and (ii) waives objection to consideration of a particular matter at the meeting
that is not within the purpose or purposes described in the meeting notice,
unless the shareholder or his proxy objects to considering the matter before it
is voted upon.

         SECTION 6. Shareholders' List. Before each meeting of shareholders, the
Secretary or the Clerk shall prepare an alphabetical list of the shareholders
entitled to notice of such meeting. The list shall be arranged by voting group
(and within each voting group by class or series of shares) and show the address
of and number of shares held by each shareholder. The list shall be kept on file
at the principal office of the Corporation or at a place identified in the
meeting notice in the city where the meeting will be held, for the period
beginning two business days after notice of the meeting is given and continuing
through the meeting and shall be available for inspection by any shareholder,
his agent or attorney, at any time during regular business hours. The list also
shall be available at the meeting and shall be subject to inspection by any
shareholder, his agent or attorney, at any time during the meeting or any
adjournment thereof.

         SECTION 7. Voting Group. All shares of one or more classes or series
that under the Articles of Incorporation or the Maine Business Corporation Act
are entitled to vote and be counted together collectively on a matter at a
meeting of shareholders constitute a voting group. All shares entitled by the
Articles of Incorporation or the Maine Business Corporation Act to vote
generally on a matter are for that purpose a single voting group. Classes or
series of shares shall not be entitled to vote separately by voting group unless
expressly authorized by the Articles of Incorporation or specifically required
by law.

         SECTION 8. Quorum. Shares entitled to vote as a separate voting group
may take action on a matter at the meeting only if a quorum of those shares
exists. A majority of the votes entitled to be cast on the matter by the voting
group constitutes a quorum of that voting group for action on that matter. Once
a share is represented for any purpose at a meeting, it is deemed present for
quorum purposes for the remainder of the meeting and for any adjournment of that
meeting unless a new record date is or must be set for that adjourned meeting.

         SECTION 9. Adjournments. Whether or not a quorum is present at any
meeting of shareholders, such meeting may be adjourned from time to time by the
vote of a majority of the votes cast on the motion to adjourn. Subject to the
provisions of Section 4 of this Article II, at any adjourned meeting any
business may be transacted that might have been transacted at the original
meeting if a quorum exists with respect to the matter proposed. Notice of any
adjourned meeting of shareholders need not be given except as otherwise provided
in Section 4 of this Article II.

         SECTION 10. Proxies. Shares may be voted either in person or by one or
more proxies authorized by a written appointment of proxy signed by the
shareholder or by his duly authorized attorney-in-fact. Any appointment in the
form of an electronic record that may be reproduced in paper form by an
automated process and bears the shareholder's electronic signature, including a
photocopy, telegram, cablegram, facsimile transmission or e-mail, shall be
deemed a valid appointment form. An appointment of proxy is valid for 11 months
from the date of its execution, unless a different period is expressly provided
in the appointment form.

         SECTION 11. Voting of Shares. Subject to the provisions of the Articles
of Incorporation, each outstanding share shall be entitled to one vote on each
matter voted on at a meeting of shareholders.

                                       48



         Except in the election of directors, action on a matter by a voting
group is approved if the votes cast within the voting group favoring the action
exceed the votes cast opposing the action, unless a greater vote is required by
law, the Articles of Incorporation or these Bylaws. Directors are to be elected
by a plurality of votes cast by the shares entitled to vote in the election at a
meeting at which a quorum is present. If, at any meeting of shareholders, due to
a vacancy or vacancies or otherwise, directors of more than one class of the
Board are to be elected, each class of directors to be elected at the meeting
shall be elected in a separate election by a plurality vote.

         Absent special circumstances, shares of the Corporation are not
entitled to vote if they are owned, directly or indirectly, by another
corporation in which the Corporation owns, directly or indirectly, a majority of
the shares entitled to vote for directors of the second corporation, provided
that this provision does not limit the power of the Corporation to vote its own
shares held by it in a fiduciary capacity.

         SECTION 12. Proposals. At an annual meeting of the shareholders, only
such business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting, business must be (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board, (b) otherwise properly brought before the meeting by
or at the direction of the Board or (c) otherwise properly brought before the
meeting by a shareholder. For business to be properly brought before an annual
meeting by a shareholder, the shareholder must have given timely notice thereof
in writing to the Clerk of the Corporation. To be timely, a shareholder's notice
must be delivered to or mailed and received at the principal executive offices
of the Corporation not later than 90 days prior to the anniversary date of the
immediately preceding annual meeting. A shareholder's notice to the Clerk shall
set forth as to each matter the shareholder proposes to bring before the annual
meeting (a) a brief description of the business desired to be brought before the
annual meeting, (b) the name and address, as they appear on the Corporation's
books, of the shareholder proposing such business, (c) the class and number of
shares of the Corporation which are owned of record or beneficially owned by the
shareholder, and (d) any material interest of the shareholder in such business.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at an annual meeting except in accordance with the procedures set
forth in this Article II, Section 12. The chairman of an annual meeting shall,
if the facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting in accordance with the provisions of this
Article II, Section 12, and if he should so determine, he shall so declare to
the meeting and any such business not properly brought before the meeting shall
not be transacted. This provision is not a limitation on any other applicable
laws and regulations.

         At a special meeting of the shareholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before a special meeting, business must be specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board or
such other person or persons as are authorized to call special meetings of
shareholders of the Corporation pursuant to Article II, Section 3 of these
Bylaws.

         SECTION 13. Inspectors. For each meeting of shareholders, the Board
shall appoint one or more inspectors of election. If for any meeting the
inspector(s) appointed by the Board shall be unable to act or the Board shall
fail to appoint such inspector(s), inspector(s) may be appointed at the meeting
by the chairman thereof. No director or candidate for the office of director
shall act as an inspector for the election of directors; and inspectors need not
be shareholders but may be an officer or an employee of the Corporation. The
inspector(s) appointed to act at any meeting of the shareholders, before
entering upon the discharge of their duties, shall be sworn faithfully to
execute the duties of inspector(s) at such meeting with strict impartiality and
according to the best of their ability, and the oath so taken shall be
subscribed by them. The inspector(s) shall determine the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum and the authenticity, validity and effect of proxies
and ballots; they shall receive votes, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, determine and announce the results, and otherwise see that the vote or
election is conducted with fairness to all shareholders. Upon request of the
person presiding at the meeting or of any shareholder entitled or claiming to be
entitled to vote thereat, the inspector(s) shall report in writing on any
challenge, question or matter determined by them and execute a certificate of
any fact found by them. Any report or certificate made by the inspector(s) shall
be prima facie evidence of the facts stated therein and of the vote as certified
by them.

                                       49



         SECTION 14. Conduct of Meeting and Order of Business. Unless determined
otherwise by the Board of Directors, the Chairman of the Board or the Chief
Executive Officer shall act as chairman at all meetings of shareholders and the
Secretary of the Corporation shall act as secretary at all meetings of
shareholders. The chairman of the meeting shall have the right and authority to
determine and maintain the rules, regulations and procedures for the proper
conduct of the meeting, including but not limited to restricting entry to the
meeting after it has commenced, maintaining order and the safety of those in
attendance, opening and closing the polls for voting, dismissing business not
properly submitted and limiting time allowed for discussion of the business of
the meeting.

         SECTION 15. Informal Action. Any action required to be taken at a
meeting of the shareholders, or any other action which may be taken at a meeting
of the shareholders, may be taken without a meeting in the manner set forth in
Article 8C of the Articles of Incorporation.

                                   ARTICLE III

                               BOARD OF DIRECTORS

         SECTION 1. General Powers. The business and affairs of the Corporation
shall be managed by or under the direction of the Board, which may exercise all
such authority and powers of the Corporation and do all such lawful acts and
things as are not by law, the Articles of Incorporation or these Bylaws directed
or required to be exercised or done by the shareholders.

         SECTION 2. Number and Term of Office. The number of directors shall be
determined by the Board in accordance with Article 7 of the Articles of
Incorporation. Each director shall continue in office until the annual meeting
of shareholders at which such director's term is to expire and until such
director's successor shall have been elected and qualified, or until such
director's death, resignation, disqualification or removal in the manner
hereinafter provided.

         SECTION 3. Classification and Election. The Board of Directors shall be
classified in accordance with the provisions of Article 7A of the Articles of
Incorporation. Each class of directors shall be elected at the annual meeting of
shareholders at which the term of their predecessors is to expire.

         SECTION 4. Qualifications. No person may be elected as a director who,
at the time of his election, is over 72 years of age; provided that if any
director shall reach 72 years of age during his term of office as director, such
director shall serve as director only until the next annual meeting of
shareholders of the Corporation next following his attainment of age 72.

         SECTION 5. Removal. The Board of Directors or any individual director
may be removed from office only in accordance with the provisions of Article 7B
of the Articles of Incorporation.

         SECTION 6. Vacancies. Any vacancies in the Board of Directors shall be
filled in accordance with the provisions of Article 7C of the Articles of
Incorporation.

         SECTION 7. Compensation. The Board of Directors may provide for the
compensation of directors for their services as such and for the payment or
reimbursement of any or all expenses incurred by them in connection with such
services.

         SECTION 8. Nominations of Directors. Subject to the rights of holders
of any class or series of stock having a preference over the common stock as to
dividends or upon liquidation, nominations for the election of directors may be
made by the Board or a committee appointed by the Board or by any shareholder
entitled to vote generally in an election of directors. However, any shareholder
entitled to vote generally in an election of directors may nominate one or more
persons for election as directors at a meeting only if written notice of such
shareholder's intent to make such nomination or nominations has been timely
given to the Clerk of the Corporation. To be timely, a shareholder's notice must
be delivered to or mailed and received at the principal executive offices of the

                                       50



Corporation not later than (i) 90 days prior to the anniversary date of the
immediately preceding annual meeting, and (ii) with respect to an election to be
held at a special meeting of shareholders for the election of directors, the
close of business on the tenth day following the date on which notice of such
meeting is first given to shareholders. Each such notice shall set forth: (a)
the name and address of the shareholder who intends to make the nomination and
of the person or persons to be nominated; (b) a representation that the
shareholder is a holder of record of stock of the Corporation entitled to vote
at such meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (c) a description of all
arrangements or understandings between the shareholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the shareholder; (d) such other
information regarding each nominee proposed by such shareholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission; and (e) the consent of each nominee
to serve as a director of the Corporation if so elected. The chairman of the
meeting may refuse to acknowledge the nomination of any person not made in
compliance with the foregoing procedures.

         SECTION 9. Resignation. Any director may resign at any time by giving
written notice to the Board, the Chairman or to the Secretary or the Clerk of
the Corporation. Such resignation shall take effect upon receipt of such notice
or any later time specified therein; and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.

         SECTION 10. Lead Directors. The Board, by a majority vote of the
non-employee directors who are present at a duly called meeting of the Board,
shall elect one or more "lead directors," each of whom shall be designated as a
Vice Chairman of the Board. The lead director(s) shall be responsible for
coordinating the activities of the other non-employee directors, including
establishing the agenda for and conduct of meetings of the non-employee
directors, which shall occur not less than two times in any calendar year. The
lead director(s) also shall have such responsibilities as may be required by
applicable law and the listing standards of the New York Stock Exchange, Inc.
and as may from time to time be assigned to the lead director(s) by the Board.

         SECTION 11. Liability of Directors. The personal liability of a
director for monetary damages to the Corporation or its shareholders for an
action taken or a failure to take an action as a director shall be eliminated to
the fullest extent permitted by Section 202(2)(D) of Title 13-C of the Maine
Revised Statutes, which is deemed to be included in the Articles of
Incorporation, effective as of July 1, 2003, by Section 202(4) of Title 13-C of
the Maine Revised Statutes.

                                   ARTICLE IV

                           MEETINGS AND ACTION OF THE
                            BOARD AND ITS COMMITTEES

         SECTION 1. Annual Meeting. The Board shall meet for the purpose of
organization, the election of officers and the transaction of other business as
soon as practicable after each annual election of directors, on the same day and
at the same place at which such election is held or at such other time or place
as shall be specified in a notice given as hereinafter provided for special
meetings of the Board or in a consent and waiver of notice thereof signed by all
directors.

         SECTION 2. Regular Meetings. Regular meetings of the Board shall be
held at such times and places as the Board may from time to time determine by
resolution. If any day fixed for a regular meeting shall be a legal holiday at
the place where the meeting is to be held, then the meeting which would
otherwise be held on that day shall be held at said place at the same hour on
the next succeeding business day not a legal holiday.

         SECTION 3. Special Meetings; Notice. Special meetings of the Board
shall be held whenever called by a majority of the Board, the Chairman of the
Board, a Vice Chairman of the Board, the Chief Executive Officer or the
President.

                                       51



         SECTION 4. Place of Meeting. The Board may hold its meetings at such
place or places within or without the State of Maine as the Board from time to
time may determine or as shall be specified or fixed in the respective notices
or waivers of notice thereof.

         SECTION 5. Notice of Meetings. Regular meetings of the Board may be
held without notice. The person or persons calling a special meeting of the
Board shall, at least twenty-four hours before the meeting, give or cause to be
given notice thereof by any usual means of communication, including electronic
means. Such notice need not specify the purpose for which the meeting is called.
Any duly convened regular or special meeting may be adjourned by the directors
to a later time without further notice.

         SECTION 6. Waiver of Notice. Any director may waive notice of any
meeting before or after the meeting. The waiver must be in writing, signed by
the director entitled to the notice and delivered to the Corporation for
inclusion in the minutes or filing with the corporate records. A director's
attendance at or participation in a meeting waives any required notice of such
meeting, unless the director at the beginning of the meeting, or promptly upon
arrival, objects to holding the meeting or to transacting business at the
meeting and does not thereafter vote for or assent to action taken at the
meeting. If an otherwise valid meeting of the Board is held without call or
notice when a notice is required, any action taken at the meeting is deemed
ratified by a director who did not attend unless, after learning of the action
taken and of the impropriety of the meeting, the director makes prompt objection
to the action taken.

         SECTION 7. Quorum. Unless the Articles of Incorporation or these Bylaws
provide otherwise, a majority of the number of directors fixed by or pursuant to
the Articles of Incorporation shall constitute a quorum for the transaction of
business at any meeting of the Board.

         SECTION 8. Manner of Acting. Except as otherwise provided in the
Articles of Incorporation or these Bylaws, the affirmative vote of a majority of
the directors present at a meeting at which a quorum is present shall be the act
of the Board.

         SECTION 9. Presumption of Assent. A director who is present at a
meeting of the Board or a committee of the Board when corporate action is taken
is deemed to have assented to the action taken unless (i) the director objects
at the beginning of the meeting, or promptly upon such director's arrival, to
holding the meeting or to transacting business at the meeting, (ii) the
director's dissent or abstention from the action taken is entered in the minutes
of the meeting or (iii) the director files written notice of dissent or
abstention with the presiding officer of the meeting before its adjournment or
with the Corporation immediately after the adjournment of the meeting. Such
right of dissent or abstention is not available to a director who votes in favor
of the action taken.

         SECTION 10. Telephonic Meetings. Any or all directors may participate
in a regular or special meeting of the Board by, or conduct the meeting through
the use of, any means of communication by which all directors participating may
simultaneously hear each other during the meeting. A director participating in a
meeting by this means is deemed to be present in person at the meeting.

         SECTION 11. Organization. At each meeting of the Board, the Chairman of
the Board or in his absence the President, or in his absence a director chosen
by a majority of the directors present, shall act as chairman of such meeting
and preside thereat, except as otherwise provided in Section 10 of Article III
of these Bylaws. The Secretary, or in the absence of the Secretary any person
appointed by the chairman, shall act as secretary of the meeting and keep the
minutes thereof. At all meetings of the Board, business shall be transacted in
the order and in the manner determined by the chairman of the meeting, subject
to the approval of the Board.

         SECTION 12. Action without Meeting. Action required or permitted to be
taken at a meeting of the Board may be taken without a meeting if the action is
taken by all members of the Board. The action must be evidenced by one or more
written consents signed by each director before or after such action, describing
the action taken and included in the minutes or filed with the corporate
records.

                                       52



         SECTION 13. Committees of the Board. The Board shall create an
Executive Committee, an Audit Committee, a Nominating and Corporate Governance
Committee and a Human Resources Committee, and may create such other committees
of the Board as it deems appropriate. The Board shall appoint members of the
Board to serve on Board committees. The members of the Audit, Human Resources
and Nominating and Corporate Governance Committees of the Board shall at all
times meet the independence and other requirements of applicable law and the
listing requirements of the New York Stock Exchange, Inc. The creation of a
committee of the Board and appointment of members to it must be approved by the
greater of (i) a majority of the number of directors in office when the action
is taken or (ii) the number of directors required to take action pursuant to
Section 8 of Article III of these Bylaws. Each committee of the Board must have
two (three in the case of the Audit Committee) or more members and, to the
extent authorized by law and specified by the Board in the resolutions creating
the committee and any applicable charter of the committee, shall have and may
exercise all of the authority of the Board in the management of the Corporation.
Each committee member shall serve at the pleasure of the Board. The provisions
in these Bylaws governing meetings, action without meetings, notice, waiver of
notice, quorum and voting requirements of the Board apply to committees of the
Board established under this section. Members of a committee shall be entitled
to receive such compensation for service thereon as may be determined by the
Board and for the payment or reimbursement of any or all expenses incurred by
them in connection with such service.

                                    ARTICLE V

                                    OFFICERS

         SECTION 1. Principal Officers. The principal officers of the
Corporation shall be the Chairman of the Board, President, Treasurer, Secretary
and Chief Auditor. Other officers of the Corporation may be appointed in
accordance with the provisions of Section 3 of this Article V. Any two or more
offices may be held by the same person, but no individual may act in more than
one capacity where action of two or more officers is required.

         SECTION 2. Election, Term of Office and Qualifications. The officers of
the Corporation shall be elected annually by the Board. Each officer, including
any officer appointed in accordance with the provisions of Section 3 of this
Article V, shall hold office until the annual meeting of the Board held next
after such officer's election or until such officer's successor shall have been
duly chosen and qualified or until such officer's death, resignation or removal
from office.

         SECTION 3. Appointive Officers. The Board may from time to time appoint
or delegate the appointment of such other officers and assistant officers and
agents as it may deem necessary and prescribe the respective authority and
duties of any such officer or assistant officer. Without limiting the foregoing,
the Chief Executive Officer shall have authority to appoint and remove
appointive officers, employees and agents and to prescribe their powers and
duties and may authorize any other officer or officers to do so.

         SECTION 4. Bonds. The Board may by resolution require any officer,
employee or agent of the Corporation to give bond to the Corporation, with
sufficient sureties, conditioned on the faithful performance of the duties of
the applicable office or position, and to comply with such other conditions as
may from time to time be required by the Board. Such bonds may be scheduled or
blanket form and the premiums shall be paid by the Corporation.

         SECTION 5. The Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the shareholders and the Board, except as otherwise
provided in Section 10 of Article III of these Bylaws. The Chairman shall
perform such other duties as the Board may from time to time prescribe.

         SECTION 6. The President. In the absence or inability to act of the
Chairman of the Board, the President shall, when present, act as ex officio
chairman and shall preside at all meetings of the shareholders and the Board,
except as otherwise provided in Section 10 of Article III of these Bylaws. The
President may be designated by the Board as the Chief Executive Officer of the
Corporation, and in such capacity shall have general charge of the business
affairs and property of the Corporation. He shall have such other powers and
perform such duties as is

                                       53



authorized by law and as may from time to time be assigned to him by the Board
or as may be prescribed by these Bylaws.

         SECTION 7. The Treasurer. The Treasurer shall have charge and custody
of, and be responsible for, all funds and securities of the Corporation, and
shall deposit all such funds in the name of the Corporation in such banks or
other depositories as shall be selected or authorized to be selected by the
Board; shall render or cause to be rendered a statement of the condition of the
finances of the Corporation at all regular meetings of the Board, and a full
financial report at the annual meeting of shareholders, if called upon so to do;
shall receive and give receipt for moneys due and payable to the Corporation
from any source whatsoever; and, in general, shall perform or cause to be
performed all the duties incident to the office of Treasurer and such other
duties as from time to time may be assigned to him by the Board or as may be
prescribed in these Bylaws.

         SECTION 8. The Secretary. The Secretary shall attend the meetings of
the shareholders and the Board and record minutes of the proceedings of such
meetings in books kept for that purpose. The Secretary also shall have the
responsibility for authenticating records of the Corporation and, to the extent
permitted by applicable law, may perform any responsibility of the Clerk of the
Corporation.

         SECTION 9. Officers Acting as Assistant Secretary. Any Senior Executive
Vice President or Executive Vice President shall have, by virtue of such
officer's office and by authority of these Bylaws, the authority from time to
time to act as an Assistant Secretary of the Corporation and to such extent said
officers are appointed to the office of Assistant Secretary.

         SECTION 10. The Chief Auditor. The Chief Auditor shall be the chief
internal auditing officer of the Corporation. The Chief Auditor shall
continuously examine the affairs of the Corporation and its subsidiaries and, in
general, shall perform or cause to be performed all the duties incident to the
office of chief internal auditing officer and such other duties as from time to
time may be assigned to him by the Board or the Audit Committee of the Board.
The Chief Auditor shall report to the Audit Committee of the Board.

         SECTION 11. The Clerk. In addition to the foregoing officers, the Board
shall appoint a Clerk of the Corporation, who shall be a resident of the State
of Maine. The Clerk shall perform the functions required by law, shall not be
deemed an officer of the Corporation as a result of serving in such capacity and
shall not be liable in that capacity for any liabilities of the Corporation,
including without limitation debts, claims, taxes, fines or penalties. The Clerk
shall keep, at the registered office of the Corporation or at another office of
the Corporation to which he has ready access, in a book kept for such purpose,
the records of all shareholders' meetings, including records of all votes and
minutes of such meetings, as well as a list of shareholders entitled to vote at
each meeting and the most recent list of shareholders. He may certify all votes,
resolutions and actions of the shareholders and of the Board and its committees.
He may give or cause to be given notice of all shareholders' and directors'
meetings. He shall have custody of the corporate seal and he shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature.

                                       54



         SECTION 12. Resignation. Any officer may resign at any time by giving
written notice to the Board, the Chairman of the Board or the President, or if
such officer was appointed by an officer in accordance with Section 3 of this
Article V, by giving written notice to the officer who appointed such officer.
Such resignation shall take effect at the time specified therein, or if no time
is specified therein, at the time such resignation is received by the Board, the
Chairman of the Board, the President or the officer who appointed such officer,
unless it shall be necessary to accept such resignation before it becomes
effective, in which event the resignation shall take effect upon its acceptance
by the Board, the Chairman of the Board, the President or the officer who
appointed such officer. Unless otherwise specified therein, the acceptance of
any such resignation shall not be necessary to make it effective.

         SECTION 13. Removal. The principal officers designated in Section 1 of
this Article V may be removed, either with or without cause, by vote of a
majority of the number of directors then in office. The officers appointed in
accordance with the provisions of Section 3 of this Article V may be removed,
either with or without cause, by a majority vote of the directors present at any
meeting or by any officer upon whom such power of removal may be conferred by
the Board.

         SECTION 14. Vacancies. A vacancy in any office because of death,
resignation, removal or any other cause shall be filled for the unexpired
portion of the term in the manner prescribed by these Bylaws for regular
election or appointment to such office.

         SECTION 15. Salaries of Officers. No officer of the Corporation shall
be prevented from receiving a salary as such officer or from voting thereon by
reason of the fact that such officer is also a director of the Corporation. The
salaries of the officers of the Corporation, including such officers as may be
directors of the Corporation, shall be fixed from time to time by the Board,
except that the Board may delegate to any officer who has been given power to
appoint subordinate officers, as provided in Section 3 of this Article V, the
authority to fix the salaries or other compensation of any such officers
appointed by him.

         SECTION 16. Contract Rights of Officers. The appointment of an officer
does not itself create contract rights, and an officer's removal or resignation
does not itself affect the officer's contract rights, if any, with the
Corporation.

                                   ARTICLE VI

                                 INDEMNIFICATION

         SECTION 1. Indemnification. Without limitation, the Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he
is or was a director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer, trustee,
partner, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other entity, against expenses, including
attorney's fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding to
the full extent permitted by the Maine Business Corporation Act, provided that
the Corporation shall not be liable for any amount which may be due to any
person in connection with a settlement of any action, suit or proceeding
effected without its prior written consent or any action, suit or proceeding
initiated by an indemnified person without its prior written consent, other than
an action, suit or proceeding seeking indemnification from the Corporation
hereunder.

         SECTION 2. Expenses. Expenses incurred in defending a civil, criminal,
administrative or investigative action, suit or proceeding shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt by the Corporation of a written undertaking by or on
behalf of the director, officer, employee, agent, trustee, partner or fiduciary
to repay such amount under the circumstances specified in the Maine Business
Corporation Act and which otherwise meets the requirements of such Act. Such
undertaking shall be an unlimited general obligation of the person seeking the
advance, but need not be secured and may be accepted by the Corporation without
reference to financial ability to make the repayment.

                                       55



         SECTION 3. Other Rights and Remedies. The indemnification and
entitlement to advances of expenses provided by this Article VI shall not be
deemed exclusive of any other rights to which those indemnified may be entitled
under any bylaw, agreement, vote of shareholders or disinterested directors or
otherwise, both as to action in that person's official capacity and as to action
in another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee, agent, trustee, partner or
fiduciary and shall inure to the benefit of the heirs, executors and
administrators of such a person. A right to indemnification hereunder may be
enforced by a separate action against the Corporation, if an order for
indemnification has not been entered by a court in any action, suit or
proceeding in respect to which indemnification is sought. (This Section, which
was formerly authorized by Section 719(5) of Title 13-A of the Maine Revised
Statutes, was in effect on July 1, 2003 and as a result it was grandfathered to
the Corporation by Section 1701(3) of Title 13-C of the Maine Revised Statutes).

         SECTION 4. Insurance. The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, trustee, partner, fiduciary, employee or
agent of another corporation, partnership, joint venture, trust, pension or
other employee benefit plan or other entity, against any liability asserted
against that person and incurred by that person in any such capacity, or arising
out of that person's status as such, whether or not the Corporation would have
the power to indemnify that person against such liability under this Article VI.

         SECTION 5. Coverage. The right to indemnification herein provided for
shall apply to persons who are directors, officers, employees or agents of
corporations or other entities that are merged or otherwise combined with the
Corporation only after the effective date of such merger or other combination
and only as to their status with and activities on behalf of the Corporation
after such date.

         SECTION 6. Witness Fees. Nothing in this Article VI shall limit the
Corporation's power to pay or reimburse expenses incurred by a person in
connection with his appearance as a witness in a proceeding at a time when he is
not a party.

         SECTION 7. Severability. In the event that any of the provisions of
this Article VI (including any provision within a single section, subsection,
division or sentence) is held by a court of competent jurisdiction to be
invalid, void or otherwise unenforceable, the remaining provisions of this
Article VI shall remain enforceable to the fullest extent permitted by law.

         SECTION 8. Modification. The duties of the Corporation to indemnify and
to advance expenses to any person provided in this Article VI shall be in the
nature of a contract between the Corporation and each such person, and no
amendment or repeal of any provision of this Article VI shall alter, to the
detriment of such person, the right of such person to the advancement of
expenses or indemnification related to a claim based on an act or omission, or
alleged act or omission, which took place prior to such amendment or repeal.

                                   ARTICLE VII

                      CONTRACTS, LOANS, CHECKS AND DEPOSITS

         SECTION 1. Execution of Contracts. The Board may authorize any officer,
employee or agent, in the name and on behalf of the Corporation, to enter into
any contract or execute and deliver any instrument, and any such authority may
be general or confined to specific instances, or otherwise limited.

         SECTION 2. Loans. The President, or any officer, employee or agent
authorized by the President or by the Board, may effect loans and advances at
any time for the Corporation from any bank, trust company or other institutions
or from any firm, corporation or individual and for such loans and advances may
make, execute and deliver promissory notes, bonds or other certificates or
evidences of indebtedness of the Corporation, and when authorized so to do may
pledge and hypothecate or transfer any securities or other property of the
Corporation as

                                       56



security for any such loans or advances. Such authority conferred by the Board
or the President may be general or confined to specific instances, or otherwise
limited.

         SECTION 3. Checks, Drafts, Etc. All checks, drafts and other orders for
the payment of money out of funds of the Corporation and all notes or other
evidences of the Corporation shall be signed on behalf of the Corporation in
such a manner as shall from time to time be determined by resolution of the
Board.

         SECTION 4. Deposits. The funds of the Corporation not otherwise
employed shall be deposited from time to time to the order of the Corporation in
such banks, trust companies or other depositories as the Board may select or as
may be selected by an officer, employee or agent of the Corporation to whom such
power may from time to time be delegated by the Board.

         SECTION 5. General and Special Bank Accounts. The Board or the
President or any other officer designated by the Board or appointed by the
President and authorized by the Board or the President may from time to time
authorize the opening and keeping of general and special bank accounts with such
banks, trust companies or other depositories as may be selected by the President
or any other officer or officers or agent or agents to whom power in that
respect shall have been delegated by the Board. The Board may make such special
rules and regulations with respect to such bank accounts, not inconsistent with
the provisions of these Bylaws, as it may deem expedient.

                                  ARTICLE VIII

                            SHARES AND THEIR TRANSFER

         SECTION 1. Certificates for Shares. Shares of capital stock of the
Corporation may but need not be represented by certificates. If shares are
represented by certificates, the certificates shall be in such form as required
by law and as determined by the Board. Certificates shall be signed, either
manually or in facsimile, by the Chairman of the Board, the President or an
Executive Vice President and by the Secretary or Treasurer or an Assistant
Secretary or an Assistant Treasurer. In case any officer or officers who shall
have signed, or whose facsimile signature or signatures shall have been used on,
any such certificate or certificates shall cease to be such officer or officers,
whether because of death, resignation or otherwise, before such certificate or
certificates shall have been delivered by the Corporation, such certificate or
certificates may nevertheless be adopted by the Corporation and be issued and
delivered as though the person or persons who shall have signed such certificate
or certificates or whose facsimile signature or signatures shall have been used
thereon had not ceased to be such officer or officers. All certificates for
shares shall be consecutively numbered or otherwise identified and entered into
the stock transfer books of the Corporation. When shares are represented by
certificates, the Corporation shall issue and deliver to each shareholder to
whom such shares have been issued or transferred certificates representing the
shares owned by him. When shares are not represented by certificates, then
within a reasonable time after the issuance or transfer of such shares, the
Corporation shall send the shareholder to whom such shares have been issued or
transferred a written statement of the information required by law to be on
certificates.

         SECTION 2. Stock Transfer Books. The Corporation shall keep, or cause
one or more stock transfer agents to keep, a book or set of books, to be known
as the stock transfer books of the Corporation, containing the name of each
shareholder of record, together with such shareholder's address and the number
and class or series of stock held by such shareholder. Transfers of shares of
the Corporation shall be made only on the stock transfer books of the
Corporation by the holder of record thereof or by such holder's legal
representative, who shall furnish proper evidence of authority to transfer, or
by such holder's attorney authorized to effect such transfer by power of
attorney duly executed, and upon surrender for cancellation of the certificate
for such shares (if the shares are represented by certificates). All
certificates surrendered and transferred shall be cancelled before new
certificates for the transferred shares shall be issued. The Board may make
rules and regulations as it deems expedient concerning the issue, transfer and
registration of shares of capital stock of the Corporation.

         SECTION 3. Lost, Stolen or Destroyed Certificates. The Corporation may
authorize the issuance of a new certificate to be issued in place of any
certificate theretofore issued by the Corporation claimed to have been lost,

                                       57



stolen or destroyed, upon receipt of an affidavit of such fact from the person
claiming the certificate to have been lost, stolen or destroyed. When
authorizing such issue of a new certificate, the Corporation shall require that
the owner of such lost, stolen or destroyed certificate, or such owner's legal
representative, give the Corporation a bond in such sum and with such surety or
other security as the Corporation may direct as indemnity against any claim that
may be made against the Corporation with respect to the certificate claimed to
have been lost, stolen or destroyed, except where the Board or a duly authorized
officer finds that the circumstances justify omission of a bond.

         SECTION 4. Date for Determining Shareholders of Record. In order that
the Corporation may determine the shareholders entitled to notice of or to vote
at any meeting of shareholders or any adjournment thereof, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the Board
may fix, in advance, a record date, which shall not be more than 70 nor less
than 10 days before the date of such meeting, nor more than 70 days prior to any
other action. A determination of shareholders entitled to notice of or to vote
at a shareholders' meeting is effective for any adjournment of the meeting
unless the Board fixes a new record date for the adjourned meeting, which it
must do if the meeting is adjourned to a date more than 120 days after the date
fixed for the original meeting.

         SECTION 5. Holder of Record. Except as otherwise required by law, the
Corporation may treat the person in whose name the shares stand of record on its
books as the absolute owner of the shares and the person exclusively entitled to
receive notification and distributions, to vote and to otherwise exercise the
rights, powers and privileges of ownership of such shares.

         SECTION 6. Transfer Agents and Registrars. The Board may, in its
discretion, appoint one or more banks or trust companies to act as transfer
agents and registrars of any class or series of the capital stock of the
Corporation; and upon such appointments being made, no stock certificate
relating to any such class or series shall be valid until countersigned by one
of such transfer agents and registered by one of such registrars.

                                   ARTICLE IX

                                  MISCELLANEOUS

         SECTION 1. Distributions. The Board may from time to time authorize,
and the Corporation may grant, distributions and share dividends to its
shareholders pursuant to law and subject to the provisions of the Articles of
Incorporation.

         SECTION 2. Seal. The seal of the Corporation shall be in the form of a
circle and shall bear the name of the Corporation and the year of its
incorporation.

         SECTION 3. Fiscal Year. The fiscal year of the Corporation shall begin
on the first day of January and end on the last day of December in each year.

         SECTION 4. Waiver of Notice. Whenever any notice is required to be
given by these Bylaws, the Articles of Incorporation or by law, the person
entitled thereto may in person, or in the case of a shareholder by his attorney
thereunto duly authorized, waive such notice in writing, whether before or after
the meeting, or other matter in respect of which such notice is to be given, and
in such event such notice need not be given to such person and such waiver shall
be equivalent to such notice, and any action to be taken after such notice or
after the lapse of a prescribed period of time may be taken without such notice
and without the lapse of any period of time.

         SECTION 5. Execution of Instruments. All agreements, indentures,
mortgages, deeds, conveyances, transfers, certificates, declarations, receipts,
discharges, releases, satisfactions, settlements, petitions, schedules,
accounts, affidavits, bonds, undertakings, proxies, and other instruments or
documents may be signed, executed, acknowledged, verified, delivered or accepted
on behalf of the Corporation by the Chairman of the Board, a Vice Chairman of
the Board, the President, the Chief Executive Officer, any Executive Vice
President, any Vice President or the Secretary or any Assistant Secretary;
provided, however, that where required, any such instrument

                                       58



shall be attested by one of such officers other than the officer executing such
instrument. Any such instruments also may be executed, acknowledged, verified,
delivered or accepted on behalf of the Corporation in such other manner and by
such other officers as the Board may from time to time direct. The provisions of
this Section 5 are supplementary to any other provisions of these Bylaws.

         SECTION 6. Shares of Other Corporations. The Chairman, the President, a
Vice Chairman, any Executive Vice President, any Vice President and the
Secretary is each authorized to vote, represent and exercise on behalf of the
Corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of the Corporation. The authority herein
granted to such officers to vote or represent on behalf of the Corporation any
and all shares held by the Corporation in any other corporation or corporations
may be exercised by any such officer in person or by any person authorized so to
do by proxy or power of attorney duly executed by any such officer.
Notwithstanding the foregoing, however, the Board, in its discretion, may
designate by resolution the person to vote or represent shares of other
corporations held by the Corporation.

         SECTION 7. Inspection of Records by Shareholders. A shareholder's right
to inspect records of the Corporation is subject to Section 1602 of Title 13-C
of the Maine Revised Statutes. The Corporation hereby reserves the right to
restrict disclosure of records of the Corporation, as defined in Sections 1601
and 1602, or parts thereof to the extent that they include material, non-public
information and/or are subject to confidentiality agreements or privacy or
information security laws or regulations which prohibit their disclosure.

         SECTION 8. References to Gender. A reference in these Bylaws to one
gender, masculine or feminine, includes the other, and the singular includes the
plural and vice versa unless the context otherwise requires.

                                    ARTICLE X

                      EMERGENCY TRANSFER OF RESPONSIBILITY

         SECTION 1. Emergency Defined. In the event of a national emergency
threatening national security or a major disaster declared by the President of
the United States, or the person performing his functions, which directly or
severely affects the operations of the Corporation, the officers and employees
of the Corporation will continue to conduct the affairs of the Corporation under
such guidance from the directors as may be available except as to matters which
by law or regulation require specific approval of the Board and subject to
conformance with any applicable laws, regulations and governmental directives
during the emergency.

         SECTION 2. Officers Pro Tempore. The Board shall have the power, in the
absence or disability of any officer, or upon the refusal of any officer to act
as a result of said national emergency directly and severely affecting the
operations of the Corporation, to delegate and prescribe such officer's powers
and duties to any other officer, or to any director.

         In the event a national emergency or disaster prevents a quorum of the
Corporation's directors from being readily assembled or otherwise prevents the
conduct and management of the affairs and business of the Corporation by its
directors and officers as contemplated by these Bylaws, any two or more
available members of the then incumbent Executive Committee shall constitute a
quorum of such Committee for the full conduct and management of the Corporation
in accordance with the provisions of Articles III and IV of these Bylaws. If two
members of the Executive Committee cannot be expeditiously located, then three
available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Corporation until the
then remaining Board can be convened. These provisions shall be subject to
implementation by resolutions of the Board passed from time to time, and any
provisions of the Bylaws (other than this Section) and any resolutions which are
contrary to the provisions of this Section or the provisions of any such
implementary resolutions shall be suspended until it shall be determined by any
such interim Executive Committee acting under this Section that it shall be to
the advantage of the Corporation to resume the conduct and management of its
affairs and business under all of the other provisions of these Bylaws.

                                       59



         SECTION 3. Officer Succession. If, in the event of a national emergency
or disaster which directly and severely affects the operations of the
Corporation, the President and/or the Chief Executive Officer cannot be located
expeditiously or is unable to assume or to continue normal duties, then the
authority and duties of the office shall be automatically assumed, without Board
action, in order of title, and subject only to willingness and ability to serve,
by the Senior Executive Vice President, Executive Vice President, Senior Vice
President, Corporate Secretary or their successors in office at the time of the
emergency or disaster. Where two or more officers hold equivalent titles and are
willing and able to serve, seniority in title controls initial appointment. If,
in the same manner, the Secretary or Treasurer cannot be located or is unable to
assume or continue normal duties, the responsibilities attached thereto shall,
in like manner as described immediately above, be assumed by any Executive Vice
President, Senior Vice President or Vice President. Any officer assuming
authority and position hereunder shall continue to serve until the earlier of
his resignation or the elected officer or a more senior officer shall become
available to perform the duties of the position of President, Chief Executive
Officer, Secretary or Treasurer, as applicable.

         SECTION 4. Certification of Authority. In the event of a national
emergency or disaster which directly and severely affects the operations of the
Corporation, anyone dealing with this Corporation shall accept a certification
by the Secretary, the Clerk or any two officers of the Corporation that a
specified individual is acting as Chairman of the Board, Chief Executive
Officer, President, Secretary or Treasurer in accordance with these Bylaws; and
that anyone accepting such certification shall continue to consider it in force
until notified in writing of a change, such notice of change to carry the
signature of the Secretary, the Clerk or two officers of the Corporation.

         SECTION 5. Alternative Locations. In the event of a national emergency
or disaster which destroys, demolishes or renders the Corporation's offices or
facilities unserviceable, or which causes, or in the judgment of the Board or
the Executive Committee probably will cause, the occupancy or use thereof to be
a clear and imminent hazard to personal safety, the Corporation shall
temporarily lease or acquire sufficient facilities to carry on its business as
may be designated by the Board. Any temporarily relocated place of business of
this Corporation shall be returned to its legally authorized location as soon as
practicable and such temporary place of business shall then be discontinued.

         SECTION 6. Amendments to Article X. At any meeting called in accordance
with Section 2 of this Article X, the Board or Executive Committee, as the case
may be, may modify, amend or add to the provisions of this Article X so as to
make any provision that may be practical or necessary for the circumstances of
the emergency.

                                   ARTICLE XI

                                   AMENDMENTS

         These Bylaws (including, without limitation, this Article XI) may be
altered, amended or repealed or new Bylaws may be adopted only by the Board.
(This Section, and the comparable provision in Article 8D of the Articles of
Incorporation, which were formerly authorized by Section 601(4) of Title 13-A of
the Maine Revised Statutes, were in effect on July 1, 2003 and as a result they
were grandfathered to the Corporation by Section 1701(3) of Title 13-C of the
Maine Revised Statutes.)

Amended on May 27, 2003.

                                       60

EX-31.1

                                                                    EXHIBIT 31.1

PURSUANT TO RULES 13a-14 AND 15d-14 OF THE SECURITIES EXCHANGE ACT OF 1934 AND
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

I, William J. Ryan, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of Banknorth Group,
         Inc. (the "Registrant");

2.       Based on my knowledge, this report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this report, fairly present in all material
         respects the financial condition, results of operations and cash flows
         of the Registrant as of, and for, the periods presented in this report;

4.       The Registrant's other certifying officer and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
         Registrant and have:

         (a)      Designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the Registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

         (b)      Evaluated the effectiveness of the Registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

         (c)      Disclosed in this report any change in the Registrant's
                  internal control over financial reporting that occurred during
                  the Registrant's most recent fiscal quarter (the Registrant's
                  fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially
                  affect, the Registrant's internal control over financial
                  reporting; and

5.       The Registrant's other certifying officer and I have disclosed, based
         on our most recent evaluation of internal control over financial
         reporting, to the Registrant's auditors and the audit committee of
         Registrant's board of directors (or persons performing the equivalent
         functions):

         (a)      All significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  Registrant's ability to record, process, summarize and report
                  financial information; and

         (b)      Any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  Registrant's internal control over financial reporting.

Date: November 4, 2003                    /s/ William J. Ryan
                                          --------------------------------------
                                          William J. Ryan
                                          Chief Executive Officer

                                       61

EX-31.2

                                                                    EXHIBIT 31.2

PURSUANT TO RULES 13a-14 AND 15d-14 OF THE SECURITIES EXCHANGE ACT OF 1934 AND
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

I, Stephen J. Boyle, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of Banknorth Group,
         Inc. (the "Registrant");

2.       Based on my knowledge, this report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this report, fairly present in all material
         respects the financial condition, results of operations and cash flows
         of the Registrant as of, and for, the periods presented in this report;

4.       The Registrant's other certifying officer and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
         Registrant and have:

         (a)      Designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the Registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

         (b)      Evaluated the effectiveness of the Registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

         (c)      Disclosed in this report any change in the Registrant's
                  internal control over financial reporting that occurred during
                  the Registrant's most recent fiscal quarter (the Registrant's
                  fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially
                  affect, the Registrant's internal control over financial
                  reporting; and

5.       The Registrant's other certifying officer and I have disclosed, based
         on our most recent evaluation of internal control over financial
         reporting, to the Registrant's auditors and the audit committee of
         Registrant's board of directors (or persons performing the equivalent
         functions):

         (a)      All significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  Registrant's ability to record, process, summarize and report
                  financial information; and

         (b)      Any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  Registrant's internal control over financial reporting.

Date: November 4, 2003                    /s/ Stephen J. Boyle
                                          --------------------------------------
                                          Stephen J. Boyle
                                          Chief Financial Officer

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EX-32.1

                                                                    EXHIBIT 32.1

                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER

   PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. 1350)

         The undersigned executive officer of Banknorth Group, Inc. (the
"Registrant") hereby certifies that the Registrant's Form 10-Q for the three
months ended September 30, 2003 fully complies with the requirements of Section
13(a) of the Securities Exchange Act of 1934 and that the information contained
therein fairly presents, in all material respects, the financial condition and
results of operations of the Registrant.

                                                /s/ William J. Ryan
                                                --------------------------------
                                          Name: William J. Ryan
                                          Title: Chief Executive Officer

Date: November 4, 2003

Note: A signed original of this written statement required by Section 906 of the
Sarbanes-Oxley Act of 2002 has been provided to Banknorth Group, Inc. and will
be retained by Banknorth Group, Inc. and furnished to the Securities and
Exchange Commission or its staff upon request.

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EX-32.2

                                                                    EXHIBIT 32.2

                    CERTIFICATION OF CHIEF FINANCIAL OFFICER

   PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. 1350)

         The undersigned executive officer of Banknorth Group, Inc. (the
"Registrant") hereby certifies that the Registrant's Form 10-Q for the three
months ended September 30, 2003 fully complies with the requirements of Section
13(a) of the Securities Exchange Act of 1934 and that the information contained
therein fairly presents, in all material respects, the financial condition and
results of operations of the Registrant.

                                                /s/ Stephen J. Boyle
                                                --------------------------------
                                          Name: Stephen J. Boyle
                                          Title: Chief Financial Officer

Date: November 4, 2003

Note: A signed original of this written statement required by Section 906 of the
Sarbanes-Oxley Act of 2002 has been provided to Banknorth Group, Inc. and will
be retained by Banknorth Group, Inc. and furnished to the Securities and
Exchange Commission or its staff upon request.

                                       64