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UNITED STATES

For the fiscal year ended December 31, 2003

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

For the transition period from                                to                               .

Commission File Number: 001-31251

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

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: Not Applicable

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

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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

      As of June 30, 2003, the aggregate market value of the 160,842,923 shares of Common Stock of the Registrant issued and outstanding on such date, excluding the approximately 1,145,533 shares held by all directors and executive officers of the Registrant as a group (which does not include unexercised stock options), was $4.1 billion. This figure is based on the last sale price of $25.52 per share of the Registrant’s Common Stock on June 30, 2003, as reported in The Wall Street Journal on July 1, 2003. Although directors of the Registrant and executive officers of the Registrant and its subsidiaries were assumed to be “affiliates” of the Registrant for purposes of this calculation, the classification is not to be interpreted as an admission of such status.

      Number of shares of Common Stock outstanding as of February 26, 2004: 162,830,806

DOCUMENTS INCORPORATED BY REFERENCE

      List hereunder the following documents if incorporated by reference and the part of the Form 10-K into which the document is incorporated:

      Portions of the definitive Proxy Statement for the Annual Meeting of Stockholders to be held on April 27, 2004 are incorporated by reference into Part III, Items 10-14 of this Form 10-K.

BANKNORTH GROUP, INC.

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FORWARD-LOOKING STATEMENTS

      In the normal course of business, we, in an effort to help keep our shareholders and the public informed about our operations, may from time to time issue or make certain statements, either in writing or orally, that are or contain forward-looking statements, as that term is defined in the U.S. federal securities laws. Generally, these statements relate to business plans or strategies, projected or anticipated benefits from acquisitions made by or to be made by us, projections involving anticipated revenues, earnings, profitability or other aspects of operating results or other future developments in our affairs or the industry in which we conduct business. Forward-looking statements may be identified by reference to a future period or periods or by the use of forward-looking terminology such as “anticipate,” “believe,” “expect,” “intend,” “plan,” “estimate” or similar expressions.

      Although we believe that the anticipated results or other expectations reflected in our forward-looking statements are based on reasonable assumptions, we can give no assurance that those results or expectations will be attained. Forward-looking statements involve risks, uncertainties and assumptions (some of which are beyond our control), and as a result actual results may differ materially from those expressed in forward-looking statements. Factors that could cause actual results to differ from forward-looking statements include, but are not limited to, the following, as well as those discussed elsewhere herein:

	•	our investments in our businesses and in related technology could require additional incremental spending, and might not produce expected deposit and loan growth and anticipated contributions to our earnings;
	•	general economic or industry conditions could be less favorable than expected, resulting in a deterioration in credit quality, a change in the allowance for loan and lease losses or a reduced demand for credit or fee-based products and services;
	•	changes in the domestic interest rate environment could reduce net interest income and could increase credit losses;
	•	the conditions of the securities markets could change, which could adversely affect, among other things, the value or credit quality of our assets, the availability and terms of funding necessary to meet our liquidity needs and our ability to originate loans and leases;
	•	changes in the extensive laws, regulations and policies governing financial holding companies and their subsidiaries could alter our business environment or affect our operations;
	•	the potential need to adapt to industry changes in information technology systems, on which we are highly dependent, could present operational issues or require significant capital spending;
	•	competitive pressures could intensify and affect our profitability, including as a result of continued industry consolidation, the increased availability of financial services from non-banks, technological developments such as the internet or bank regulatory reform;
	•	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; and
	•	acts or threats of terrorism and actions taken by the United States or other governments as a result of such acts or threats, including possible military action, could further adversely affect business and economic conditions in the United States generally and in our principal markets, which could have an adverse effect on our financial performance and that of our borrowers and on the financial markets and the price of our common stock.

      You should not put undue reliance on any forward-looking statements. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update them in light of new information or future events except to the extent required by federal securities laws.

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PART I.

General

      We, Banknorth Group, Inc., are a Maine corporation and a registered bank holding company and financial holding company under the Bank Holding Company Act of 1956, as amended. We conduct business from our headquarters in Portland, Maine and, as of December 31, 2003, 359 banking offices located in Maine, New Hampshire, Massachusetts, Vermont, New York and Connecticut. At December 31, 2003, we had consolidated assets of $26.5 billion and consolidated shareholders’ equity of $2.5 billion. Based on total assets at that date, we are one of the 35 largest commercial banking organizations in the United States.

      Our principal asset is all of the capital stock of Banknorth, NA, a national bank which was initially formed as a Maine-chartered savings bank in the mid-19th century. Effective January 1, 2002, we consolidated all eight of our other banking subsidiaries and our trust company subsidiary into Banknorth, NA, which was known as “Peoples Heritage Bank” prior to these consolidations. Banknorth, NA operates under the trade name “Peoples Heritage Bank” in Maine, “Bank of New Hampshire” in New Hampshire and “Evergreen Bank” in New York to take advantage of the strong brand identity associated with the names of these predecessor banks. Banknorth, NA operates under its name elsewhere in our market areas. Through Banknorth, NA we offer a full range of banking services and products to individuals, businesses and governments throughout our market areas, including commercial, consumer and trust and investment services.

      Unless the context otherwise requires, the words “Banknorth,” “we,” “our” and “us” herein refer to Banknorth Group, Inc. and its subsidiaries.

Business

      Our principal business consists of attracting deposits from the general public through our banking offices and using these deposits to originate loans secured by first mortgage liens on existing single-family (one-to-four units) residential real estate and existing multi-family (over four units) residential and commercial real estate, construction loans, commercial business loans and leases and consumer loans. We also provide various mortgage banking services and investment management services, as well as, through subsidiaries of Banknorth, NA, engage in equipment leasing, investment planning, securities brokerage and insurance brokerage activities. We also invest in investment securities and other permitted investments.

      We derive our income principally from interest charged on loans and leases and, to a lesser extent, from interest and dividends earned on investments. We also increasingly derive income from non-interest sources such as fees received in connection with various lending services, deposit services, trust and investment management services, investment planning services and merchant and electronic banking services, as well as insurance brokerage commissions and, from time to time, gains on the sale of assets. Our principal expenses are interest expense on deposits and borrowings, operating expenses, provisions for loan and lease losses and income tax expense. Funds for activities are provided principally by deposits, advances from the Federal Home Loan Bank, securities sold under repurchase agreements, amortization and prepayments of outstanding loans, maturities and sales of investment securities and other sources.

      Through Banknorth, NA we provide extensive trust and investment management services to our customers. We offer employee benefit trust services in which we act as trustee, custodian, administrator and/or investment advisor, among other things, for employee benefit plans and for corporate, self-employed, municipal and not-for-profit employers located throughout our market areas. In addition, we serve as trustee of both living trusts and trusts under wills and in this capacity hold, account for and manage financial assets, real estate and special assets. Custody, estate settlement and fiduciary tax services, among others, also are offered by us. Assets held in a fiduciary capacity by us are not included in our consolidated balance sheet for financial reporting purposes.

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      We are subject to extensive regulation and supervision under federal and state banking laws. For additional information in this regard, see “Supervision and Regulation” below.

Acquisitions

      Our profitability and market share have been enhanced in recent years through internal growth and acquisitions of both financial and nonfinancial institutions. We continually evaluate acquisition opportunities and frequently conduct due diligence in connection with possible acquisitions. As a result, acquisition discussions and, in some cases, negotiations frequently take place and future acquisitions involving cash, debt or equity securities can be expected. Acquisitions typically involve the payment of a premium over book and market values, and therefore, some pro forma dilution of our book value and net income per common share may occur in connection with any future transactions. Moreover, acquisitions commonly result in significant one-time charges against earnings, although cost-savings, especially incident to in-market acquisitions, frequently are anticipated, as are revenue enhancements.

Subsidiaries and Other Equity Investments

      Our only direct subsidiaries at December 31, 2003 were Banknorth, NA, Northgroup Realty, Inc., an acquired subsidiary which holds certain commercial real estate located in Burlington, Vermont, Northgroup Captive Insurance, Inc. and the following financing vehicles: Peoples Heritage Capital Trust I, Banknorth Capital Trust I, Banknorth Capital Trust II and Ipswich Statutory Trust I. For additional information on these trusts, see Note 14 to the Consolidated Financial Statements included in Item 8 hereof. Northgroup Captive Insurance, Inc. is a subsidiary formed in 2002 to self-insure against certain of our risks.

      Set forth below is a brief description of certain of our indirect non-banking subsidiaries and certain other equity investments.

      Insurance Brokerage Activities. We conduct insurance brokerage activities through Banknorth Insurance Group, Inc., which holds all of the outstanding stock of Morse, Payson & Noyes Insurance, the largest insurance brokerage firm in Maine. Morse Payson & Noyes Insurance also conducts business in (i) Vermont, (ii) New Hampshire under the trade name A.D. Davis Insurance, (iii) Massachusetts through Banknorth Insurance Agency, Inc./MA, a wholly-owned subsidiary of Morse, Payson & Noyes Insurance, (iv) Connecticut under the trade name Banknorth Insurance Agency and (v) upstate New York under the trade name Community Insurance Agencies.

      Investment Planning and Securities Brokerage Activities. We conduct investment planning and securities brokerage activities, as well as offer investments in mutual funds and annuities, throughout our market areas through Primevest Financial Services, Inc., an unaffiliated company which uses the marketing name Bancnorth Investment Planning Group. Through Banknorth, NA, Bancnorth Investment Planning Group, Inc., a wholly-owned subsidiary of Banknorth, NA, and Primevest Financial Services, Inc., we offer these services to individuals and small businesses from an office located in Portland, Maine and from certain of our other locations in Maine, Massachusetts, New Hampshire, Vermont, New York and Connecticut. Sales professionals at Banknorth, NA and Bancnorth Investment Planning Group are registered representatives of Primevest Financial Services, Inc., a registered broker/dealer, and all securities brokerage activities are conducted through Primevest Financial Services, Inc. The sales professionals receive referrals from our branch offices throughout our market areas.

      In addition to the foregoing, Bancnorth Investment Planning Group, Inc., conducts insurance sales activities directly in Maine, New Hampshire, Connecticut, Vermont and New York and indirectly, through its wholly-owned insurance agency, Bancnorth Investment and Insurance Agency, Inc., in Massachusetts. Bancnorth Investment Planning Group, either directly or through other agencies, offers life insurance and long-term care insurance products in conjunction with the sales of investments and annuities.

      Equipment Leasing Activities. We conduct equipment leasing activities through Banknorth Leasing Corp. This company engages in direct equipment leasing activities, primarily involving office equipment, in

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      Investment Activities. Northgroup Asset Management Company (formerly known as Northgroup (FM) Investment Company) is a Maine corporation which was formed for purposes of effectively managing assets and investments for the benefit of Banknorth, NA. Northgroup Asset Management Company employs staff in its offices in Portland, Maine who are engaged in the management of its assets. Banknorth, NA has contributed to this Company the stock of certain other subsidiaries and substantially all of the investment securities held by Banknorth, NA.

      Other Investments. We hold certain other investments, primarily through Banknorth, NA and Four Eighty-One Corp., a wholly-owned subsidiary of Banknorth, NA. At December 31, 2003, these investments consisted of (i) $59.4 million of interests in limited partnerships formed for the purpose of investing primarily in real estate for lower-income families in our market areas, plus commitments to invest up to an additional $25.0 million in such partnerships, and (ii) an aggregate of $20.5 million of interests in limited partnerships which invest primarily in small business investment companies in our market areas, plus commitments to invest up to an additional $17.7 million in such partnerships. For additional information about these investments see Note 18 to the Consolidated Financial Statements included in Item 8 hereof.

Competition

      We are subject to vigorous competition in all aspects and areas of our business from banks and other financial institutions, including savings and loan associations, savings banks, finance companies, credit unions and other providers of financial services, such as money market mutual funds, brokerage firms, consumer finance companies and insurance companies. We also compete with non-financial institutions, including retail stores that maintain their own credit programs and governmental agencies that make available low-cost or guaranteed loans to certain borrowers. Certain of these competitors are larger financial institutions with substantially greater resources, lending limits, larger branch systems and a wider array of commercial banking services than us. Competition from both bank and non-bank organizations will continue.

      The banking industry is experiencing rapid changes in technology. In addition to improving customer services, effective use of technology increases efficiency and enables financial institutions to reduce costs. Technological advances are likely to enhance competition by enabling more companies to provide financial resources. As a result, our future success will depend in part on our ability to address our customers’ needs by using technology. We cannot assure you that we will be able to effectively develop new technology-driven products and services or be successful in marketing these products to our customers. Many of our competitors have far greater resources than we have to invest in technology.

Employees

      We had approximately 6,700 full-time equivalent employees as of December 31, 2003. None of these employees is represented by a collective bargaining agent, and we believe that we enjoy good relations with our personnel.

Supervision and Regulation

      The following discussion sets forth certain of the material elements of the regulatory framework applicable to bank holding companies and their subsidiaries and provides certain specific information relevant to Banknorth. The regulatory framework is intended primarily for the protection of depositors and the insurance funds administered by the FDIC and not for the protection of security holders. To the extent that the following information describes statutory and regulatory provisions, it is qualified in its entirety by reference to the particular statutory and regulatory provisions. A change in applicable statutes, regulations or regulatory policy may have a material effect on our business.

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      General. Banknorth currently is registered as a bank holding company and a financial holding company under the Bank Holding Company Act of 1956, as amended. As such, we are subject to regulation, supervision and examination by the Federal Reserve Board. We also are registered as a Maine financial institution holding company under Maine law and as such are subject to regulation and examination by the Superintendent of Financial Institutions of the State of Maine. Banknorth, NA is a national bank subject to regulation, supervision and examination by the Office of the Comptroller of the Currency (“OCC”), its chartering authority, and by the Federal Deposit Insurance Corporation (“FDIC”), which insures Banknorth, NA’s deposits to the maximum extent permitted by law.

      Financial Modernization. The Bank Holding Company Act permits bank holding companies to become financial holding companies and thereby affiliate with securities firms and insurance companies and engage in other activities that are financial in nature and which are not authorized for bank holding companies. A bank holding company may become a financial holding company if each of its subsidiary banks is “well capitalized” under the prompt corrective action provisions of the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) and the applicable regulations thereunder, is “well managed” and has at least a satisfactory rating under the Community Reinvestment Act by filing a declaration with the Federal Reserve Board that the bank holding company seeks to become a financial holding company. Banknorth became a financial holding company effective January 25, 2002.

      No regulatory approval is required for a financial holding company to acquire a company, other than a bank or savings association, engaged in activities that are financial in nature or incidental to activities that are financial in nature, as determined by the Federal Reserve Board. The Gramm-Leach-Bliley Act defines “financial in nature” to include securities underwriting, dealing and market making; sponsoring mutual funds and investment companies; insurance underwriting and agency; merchant banking activities; and activities that the Federal Reserve Board has determined to be closely related to banking. A national bank also may engage, subject to limitations on investment, in activities that are financial in nature, other than insurance underwriting, insurance company portfolio investment, real estate development and real estate investment, through a financial subsidiary of the bank, if the bank is well capitalized, well managed and has at least a “satisfactory” Community Reinvestment Act rating. Subsidiary banks of a financial holding company or national banks with financial subsidiaries must continue to be well capitalized and well managed in order to continue to engage in activities that are financial in nature without regulatory actions or restrictions, which could include divestiture of the financial in nature subsidiary or subsidiaries. In addition, a financial holding company or a bank may not acquire a company that is engaged in activities that are financial in nature unless each of the subsidiary banks of the financial holding company or the bank has a Community Reinvestment Act rating of “satisfactory” or better.

      Bank Acquisitions. Pursuant to the Bank Holding Company Act, we are required to obtain the prior approval of the Federal Reserve Board before acquiring more than 5% of any class of voting stock of any bank that is not already majority owned by us. Pursuant to the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the “Interstate Banking and Branching Act”), a bank holding company became able to acquire banks in states other than its home state beginning September 29, 1995, without regard to the permissibility of such acquisitions under state law, but subject to any state requirement that the bank has been organized and operating for a minimum period of time, not to exceed five years, and the requirement that the bank holding company, prior to or following the proposed acquisition, controls no more than 10% of the total amount of deposits of insured depository institutions in the United States and less than 30% of such deposits in that state (or such lesser or greater amount set by state law).

      The Interstate Banking and Branching Act also authorizes banks to merge across state lines, subject to certain restrictions, thereby creating interstate branches. Pursuant to the Interstate Banking and Branching Act, a bank also may open new branches in a state in which it does not already have banking operations if the state enacts a law permitting such de novo branching.

      Capital and Operational Requirements. The Federal Reserve Board, the OCC and the FDIC have issued substantially similar risk-based and leverage capital guidelines applicable to U.S. banking organizations such as Banknorth and Banknorth, NA. In addition, those regulatory agencies may from time

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      The sum of Tier 1, Tier 2 and Tier 3 capital, less investments in unconsolidated subsidiaries, represents qualifying “total capital,” at least 50% of which must consist of Tier 1 capital. Risk-based capital ratios are calculated by dividing Tier 1 capital and total capital by risk-weighted assets. Assets and off-balance sheet exposures are assigned to one of four categories of risk weights, based primarily on relative credit risk. The minimum Tier 1 risk-based capital ratio is 4% and the minimum total risk-based capital ratio is 8%. At December 31, 2003, our Tier 1 risk-based capital and total risk-based capital ratios under these guidelines were 8.96% and 11.29%, respectively.

      The “leverage ratio” requirement is determined by dividing Tier 1 capital by adjusted average total assets. Although the stated minimum ratio is 3%, most banking organizations are required to maintain ratios of at least 100 to 200 basis points above 3%. At December 31, 2003, our leverage ratio was 6.65%.

      Federal bank regulatory agencies require banking organizations that engage in significant trading activity to calculate a capital charge for market risk. Significant trading activity means trading activity of at least 10% of total assets or $1 billion, whichever is smaller, calculated on a consolidated basis for bank holding companies. Federal bank regulators may apply the market risk measure to other banks and bank holding companies as the agency deems necessary or appropriate for safe and sound banking practices. Each agency may exclude organizations that it supervises that otherwise meet the criteria under certain circumstances. The market risk charge will be included in the calculation of an organization’s risk-based capital ratios.

      FDICIA identifies five capital categories for insured depository institutions (“well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized”) and requires the respective U.S. federal regulatory agencies to implement systems for “prompt corrective action” for insured depository institutions that do not meet minimum capital requirements within such categories. FDICIA imposes progressively more restrictive constraints on operations, management and capital distributions, depending on the category in which an institution is classified. Failure to meet the capital guidelines could also subject a banking institution to capital raising requirements. An “undercapitalized” bank must develop a capital restoration plan and its parent holding company must guarantee that bank’s compliance with the plan. The liability of the parent holding company under any such guarantee is limited to the lesser of 5% of the bank’s assets at the time it became undercapitalized or the amount needed to comply with the plan. Furthermore, in the event of the bankruptcy of the parent holding company, such guarantee would take priority over the parent’s general unsecured creditors. In addition, FDICIA requires the various regulatory agencies to prescribe certain non-capital standards for safety and soundness related generally to operations and management, asset quality and executive compensation and permits regulatory action against a financial institution that does not meet such standards.

      The various federal bank regulatory agencies have adopted substantially similar regulations that define the five capital categories identified by FDICIA, using the total risk-based capital, Tier 1 risk-based capital and leverage capital ratios as the relevant capital measures. Such regulations establish various degrees of corrective action to be taken when an institution is considered undercapitalized. Under the regulations, a “well capitalized” institution must have a Tier 1 capital ratio of at least 6%, a total capital ratio of at least 10% and a leverage ratio of at least 5% and not be subject to a capital directive order. An “adequately capitalized” institution must have a Tier 1 capital ratio of at least 4%, a total capital ratio of at least 8% and a leverage ratio of at least 4%, or 3% in some cases. Under these guidelines, Banknorth, NA is considered “well capitalized.”

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      The Federal bank regulatory agencies also have adopted regulations which mandate that regulators take into consideration concentrations of credit risk and risks from non-traditional activities, as well as an institution’s ability to manage those risks, when determining the adequacy of an institution’s capital. That evaluation will be made as part of the institution’s regular safety and soundness examination. Banking agencies also have adopted final regulations requiring regulators to consider interest rate risk (when the interest rate sensitivity of an institution’s assets does not match the sensitivity of its liabilities or its off-balance sheet position) in the determination of a bank’s capital adequacy. Concurrently, banking agencies have proposed a methodology for evaluating interest rate risk. The banking agencies do not intend to establish an explicit risk-based capital charge for interest rate risk but will continue to assess capital adequacy for interest rate risk under a risk assessment approach based on a combination of quantitative and qualitative factors and have provided guidance on prudent interest rate risk management practices.

      Distributions. We derive funds for cash distributions to our stockholders primarily from dividends received from our banking subsidiary. Banknorth, NA is subject to various regulatory policies and requirements relating to the payment of dividends, including requirements to maintain capital above regulatory minimums. The appropriate U.S. federal regulatory authority is authorized to determine under certain circumstances relating to the financial condition of the bank or bank/financial holding company that the payment of dividends would be an unsafe or unsound practice and to prohibit payment thereof.

      In addition to the foregoing, the ability of us and Banknorth, NA to pay dividends may be affected by the various minimum capital requirements and the capital and non-capital standards established under FDICIA, as described above. Our right and the rights of our stockholders and creditors to participate in any distribution of the assets or earnings of our subsidiaries is further subject to the prior claims of creditors of such subsidiaries.

      “Source of Strength” Policy. According to Federal Reserve Board policy, bank/financial holding companies are expected to act as a source of financial strength to each subsidiary bank and to commit resources to support each such subsidiary. This support may be required at times when a bank/financial holding company may not be able to provide such support. Similarly, under the cross-guarantee provisions of the Federal Deposit Insurance Act, in the event of a loss suffered or anticipated by the FDIC — either as a result of default of a banking or thrift subsidiary of a bank/ financial holding company such as Banknorth or related to FDIC assistance provided to a subsidiary in danger of default — the other banking subsidiaries of such bank/ financial holding company may be assessed for the FDIC’s loss, subject to certain exceptions.

      Community Investment and Consumer Protection Laws. In connection with its lending activities, Banknorth, NA is subject to a variety of federal laws designed to protect borrowers and promote lending to various sectors of the economy and population. Included among these are the federal Home Mortgage Disclosure Act, Real Estate Settlement Procedures Act, Truth-in-Lending Act, Equal Credit Opportunity Act, Fair Credit Reporting Act and Community Reinvestment Act.

      The Community Reinvestment Act requires insured institutions to define the communities that they serve, identify the credit needs of those communities and adopt and implement a “Community Reinvestment Act Statement” pursuant to which they offer credit products and take other actions that respond to the credit needs of the community. The responsible federal banking regulator must conduct regular Community Reinvestment Act examinations of insured financial institutions and assign to them a Community Reinvestment Act rating of “outstanding,” “satisfactory,” “needs improvement” or “unsatisfactory.” In 2003, the Community Reinvestment Act rating of Banknorth, NA was “outstanding.”

      Miscellaneous. Banknorth, NA is subject to certain restrictions on loans to Banknorth or its non-bank subsidiaries, on investments in the stock or securities thereof, on the taking of such stock or securities as collateral for loans to any borrower, and on the issuance of a guarantee or letter of credit on behalf of Banknorth or its non-bank subsidiaries. Banknorth, NA also is subject to certain restrictions on most types of transactions with Banknorth or its non-bank subsidiaries, requiring that the terms of such transactions be substantially equivalent to terms of similar transactions with non-affiliated firms.

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      Regulatory Enforcement Authority. The enforcement powers available to federal banking regulators is substantial and includes, among other things, the ability to assess civil money penalties, to issue cease-and-desist or removal orders and to initiate injunctive actions against banking organizations and institution-affiliated parties, as defined. In general, these enforcement actions may be initiated for violations of laws and regulations and unsafe or unsound practices. Other actions or inactions may provide the basis for enforcement action, including misleading or untimely reports filed with regulatory authorities.

      Sarbanes-Oxley Act of 2002. On July 30, 2002, President George W. Bush signed into law the Sarbanes-Oxley Act of 2002, which generally establishes a comprehensive framework to modernize and reform the oversight of public company auditing, improve the quality and transparency of financial reporting by those companies and strengthen the independence of auditors. Certain of the new legislation’s more significant reforms are noted below.

	•	The new legislation creates a public company accounting oversight board which is empowered to set auditing, quality control and ethics standards, to inspect registered public accounting firms, to conduct investigations and to take disciplinary actions, subject to SEC oversight and review. The new board is funded by mandatory fees paid by all public companies. The new legislation also improves the Financial Accounting Standards Board, giving it full financial independence from the accounting industry.
	•	The new legislation strengthens auditor independence from corporate management by, among other things, limiting the scope of consulting services that auditors can offer their public company audit clients.
	•	The new legislation heightens the responsibility of public company directors and senior managers for the quality of the financial reporting and disclosure made by their companies. Among other things, the new legislation provides for a strong public company audit committee that will be directly responsible for the appointment, compensation and oversight of the work of the public company auditors.
	•	The new legislation contains a number of provisions to deter wrongdoing. CEOs and CFOs now have to certify that company financial statements fairly present the company’s financial condition. If a misleading financial statement later results in a restatement, the CEO and CFO must forfeit and return to the company any bonus, stock or stock option compensation received in the twelve months following the misleading financial report. The new legislation also prohibits any company officer or director from attempting to mislead or coerce an auditor. Among other reforms, the new legislation empowers the SEC to bar certain persons from serving as officers or directors of a public company; prohibits insider trades during pension fund “blackout periods;” directs the SEC to adopt rules requiring attorneys to report securities law violations; and requires that civil penalties imposed by the SEC go into a disgorgement fund to benefit harmed investors.
	•	The new legislation imposes a range of new corporate disclosure requirements. Among other things, the new legislation requires public companies to report all off-balance-sheet transactions and conflicts, as well as to present any pro forma disclosures in a way that is not misleading and in accordance with requirements established by the SEC. The new legislation also accelerated the required reporting of insider transactions, which now generally must be reported by the end of the second business day following a covered transaction; requires that annual reports filed with the SEC include a statement by management asserting that it is responsible for creating and maintaining adequate internal controls and assessing the effectiveness of those controls; and requires companies to disclose whether or not they have adopted an ethics code for senior financial officers, and, if not, why not, and whether the audit committee includes at least one “financial expert,” a term which has been defined by the SEC in accordance with specified requirements. The new legislation also requires the SEC, based on certain enumerated factors, to regularly and systematically review corporate filings.

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	•	The new legislation contains provisions which generally seek to limit and expose to public view possible conflicts of interest affecting securities analysts.
	•	Finally, the new legislation imposes a range of new criminal penalties for fraud and other wrongful acts, as well as extends the period during which certain types of lawsuits can be brought against a company or its insiders.

Taxation

      We are subject to those rules of federal income taxation generally applicable to corporations under the Internal Revenue Code. Banknorth and its subsidiaries, as members of an affiliated group of corporations within the meaning of Section 1504 of the Internal Revenue Code, file a consolidated federal income tax return, which has the effect of eliminating or deferring the tax consequences of inter-company distributions, including dividends, in the computation of consolidated taxable income.

      We also are subject to various forms of state taxation under the laws of Maine, New Hampshire, Massachusetts, Vermont, New York and Connecticut as a result of the business which we conduct in these states. We are also subject to taxation in several other states related to business conducted by our leasing company.

Statistical Disclosure by Bank Holding Companies

      The following information, included under Items 6, 7 and 8 of this report, is incorporated by reference herein.

      Table 2 — Three-Year Average Balance Sheets, which presents average balance sheet amounts, related taxable equivalent interest earned or paid and related average yields earned and rates paid and is included in Item 7;

      Table 3 — Changes in Net Interest Income, which presents changes in taxable equivalent interest income and expense for each major category of interest-earning assets and interest-bearing liabilities and is included in Item 7;

      Table 10 — Securities Available for Sale and Held to Maturity, which presents information regarding carrying values of investment securities by category of security and is included in Item 7;

      Table 11 — Maturities of Securities, which presents information regarding the maturities and weighted average yield of investment securities by category of security and is included in Item 7;

      Table 13 — Composition of Loan Portfolio, which presents the composition of loans and leases by category of loan and lease and is included in Item 7;

      Table 14 — Scheduled Contractual Amortization of Certain Loans and Leases at December 31, 2003, which presents maturities and sensitivities of loans and leases to changes in interest rates and is included in Item 7;

      Table 20 — Five Year Schedule of Nonperforming Assets, which presents information concerning non-performing assets and accruing loans 90 days or more overdue and is included in Item 7;

      “Credit Risk Management” and Note 1 to the Consolidated Financial Statements, which discuss our policies for placing loans on non-accrual status, as well as in the case of the former potential problem loans, which are included in Items 7 and 8, respectively;

      Table 21 — Five-Year Table of Activity in the Allowance for Loan and Lease Losses, included in Item 7;

      Table 22 — Allocation of the Allowance for Loan and Lease Losses — Five Year Schedule, included in Item 7;

      Table 21 — Net Charge-offs as a Percent of Average Loans and Leases Outstanding, included in Item 7;

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      Table 2 — Three-Year Average Balance Sheets, which includes average balances of deposits by category of deposit and is included in Item 7;

      Table 18 — Maturity of Certificates of Deposit of $100,000 or more at December 31, 2003, included in Item 7;

      “Selected Financial Data,” which presents return on assets, return on equity, dividend payout and equity to assets ratios and is included in Item 6; and

      Note 12 to the Consolidated Financial Statements, which includes information regarding short-term borrowings and is included in Item 8.

      For additional information regarding our business and operations, see “Selected Financial Data” in Item 6 hereof, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 hereof and the Consolidated Financial Statements in Item 8 hereof.

Availability of Information

      We make available on our web site, which is located at http://www.banknorth.com, our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K on the date which we electronically file these reports with the Securities and Exchange Commission. Investors are encouraged to access these reports and the other information about our business and operations on our web site.

Item 2.     Properties

      At December 31, 2003, we conducted business from our executive offices at Two Portland Square, Portland, Maine and have 359 banking offices located in Maine, New Hampshire, Massachusetts, Vermont, New York and Connecticut.

      The following table sets forth certain information with respect to our offices as of December 31, 2003.

      For additional information regarding our premises and equipment and lease obligations, see Notes 7 and 18 respectively, to the Consolidated Financial Statements included in Item 8 hereof.

Item 3.     Legal Proceedings

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

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Item 4.     Submission of Matters to a Vote of Security Holders

      There were no matters submitted to a vote of our security holders in the fourth quarter of 2003.

PART II.

      Market Information and Related Matters. Our common stock is traded on the New York Stock Exchange, Inc (“NYSE”). The following table sets forth the high and low prices of our common stock and the dividends declared per share of common stock for the periods indicated. Market price information for our common stock for periods prior to November 4, 2002 represents trading on the Nasdaq Stock Market, Inc.’s National Market, and market price information for this stock on and after that date represents trading on the NYSE.

      As of December 31, 2003, there were 162,187,719 shares of common stock outstanding which were held by approximately 19,750 holders of record. Such number of record holders does not reflect the number of persons or entities holding stock in nominee name through banks, brokerage firms and other nominees.

      We have historically paid quarterly dividends on our common stock and currently intend to continue to do so in the foreseeable future. Our ability to pay dividends depends on a number of factors, however, including restrictions on the ability of Banknorth, NA to pay dividends under federal laws and regulations, and as a result there can be no assurance that dividends will be paid in the future.

      Share Repurchases. During the year ended December 31, 2003, we repurchased 4.5 million shares at an average price per share of $23.53.

      The following table sets forth information with respect to any purchase made by or on behalf of Banknorth or any “affiliated purchaser,” as defined in §240.10b-18(a)(3) under the Exchange Act, of shares of Banknorth common stock during the indicated periods.

(1)	An 8,000,000 share repurchase program was approved by the Board of Directors in February 2002.

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(1)	Net interest margin represents net interest income divided by average interest-earning assets and net interest rate spread represents the difference between the weighted average rate earned on interest-earning assets and the weighted average rate paid on interest-bearing liabilities, in each case calculated on a fully-taxable equivalent basis.
(2)	Cash dividends paid divided by net income.
(3)	Includes loans and leases held for sale.
(4)	Excludes loans and leases held for sale.
(5)	Includes securities held to maturity.
(6)	Nonperforming assets consist of nonperforming loans, other real estate owned, repossessed assets and investment securities placed on non-accrual status.

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      The discussion and analysis that follows focuses on the results of operations of Banknorth Group, Inc. during 2003, 2002 and 2001 and its financial condition at December 31, 2003 and 2002. The Consolidated Financial Statements and related notes should be read in conjunction with this review. Certain amounts in years prior to 2003 have been reclassified to conform to the 2003 presentation.

General

      Banknorth Group, Inc. is a Maine corporation and a registered bank holding company and financial holding company under the Bank Holding Company Act of 1956, as amended. At December 31, 2003, we had consolidated assets of $26.5 billion and consolidated shareholders’ equity of $2.5 billion. Based on total assets at that date, we are one of the 35 largest commercial banking organizations in the United States.

      Our principal asset is all of the capital stock of Banknorth, NA (the “Bank”), a national bank which was initially formed as a Maine-chartered savings bank in the mid-19th century. The Bank operates banking divisions in Connecticut (Banknorth Connecticut), Maine (Peoples Heritage Bank), Massachusetts (Banknorth Massachusetts) New Hampshire (Bank of New Hampshire), New York (Evergreen Bank) and Vermont (Banknorth Vermont). At December 31, 2003, Banknorth NA had 359 banking offices in these states and we served approximately 1.3 million households and commercial customers. Through the Bank and its subsidiaries, we offer a full range of banking services and products to individuals, businesses and governments throughout our market areas, including commercial banking, consumer banking, investment management, investment planning and insurance brokerage services.

      We are subject to extensive regulation and supervision under federal and state banking laws. See “Regulation and Supervision” under Item 1.

      Our primary business segment is Community Banking which represents over 90% of our consolidated income and consists of attracting deposits from the general public and using such deposits and other sources of funds to originate commercial business loans and leases, commercial real estate loans, residential mortgage loans and a variety of consumer loans. In addition to keeping loans for our own portfolio, we sell residential mortgage loans into the secondary market. We also invest in mortgage-backed securities and securities issued by the United States Government and agencies thereof, as well as other securities. In addition to Community Banking, we have Insurance Brokerage, Investment Planning and Investment Management each of which represents less than 10% of our consolidated net income and consolidated assets. Our Insurance Brokerage business earns commissions on insurance brokerage activities, our Investment Planning business earns commissions from the sale of third party mutual funds, annuities, stocks and bonds and our Investment Management business reflects fees from trust and investment management operations.

      Our goal is to sustain profitable, controlled growth by focusing on increasing our loan and deposit market share in New England and upstate New York; developing new financial products, services and delivery channels; closely managing yields on earning assets and rates on interest-bearing liabilities; increasing noninterest income through, among other things, expanded investment management, investment planning and insurance brokerage services, and controlling the growth of noninterest expenses. It is also part of our business strategy to supplement internal growth with targeted acquisitions of other financial institutions and insurance agencies in our current or contiguous market areas. See “Acquisitions” below and under Item 1.

      We strive to maintain a diversified loan and deposit mix and strong asset quality. We are focused on improving efficiencies as we integrate all of our acquisitions. We will continue to evaluate our operations and organizational structures to ensure they are closely aligned with our goal of increasing earnings per share growth.

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     Acquisitions

      We completed four acquisitions in 2003 (including two insurance agency acquisitions) and at December 31, 2003, our proposed acquisitions of Foxborough Savings Bank and CCBT Financial Companies, Inc. were pending. The following table sets forth certain information regarding our acquisitions in 2003, 2002 and 2001. All acquisitions were accounted for as purchases and as such, were included in our results of operations from the date of acquisition.

Table 1 — Acquisitions 2001 – 2003

      For additional information regarding our acquisitions in 2003, see Note 3 to the Consolidated Financial Statements.

Executive Overview

      Our net income increased by $52.1 million in 2003 as compared to 2002, an increase of 17%. Our diluted earnings per share was $2.15 in 2003 as compared to $1.99 in 2002, an increase of $0.16 per diluted share, or 8%. The following were significant factors related to 2003 results as compared to 2002:

	•	Acquisitions continue to be an important part of our long-term strategy for growth. We completed the acquisition of Warren Bancorp, Inc. on December 31, 2002 and American Financial Holdings, Inc. on February 14, 2003 and completed the related systems conversions shortly thereafter. The results of these acquired companies have been included in our operations from the date of acquisition. We completed the acquisition of First & Ocean Bancorp on December 31, 2003.
	•	The net interest margin declined by 41 basis points in 2003 versus 2002 due primarily to low interest rates which resulted in rapid prepayments of mortgage-related earning assets.
	•	In anticipation of the continuing margin compression in 2003, we implemented a balance sheet deleveraging program that 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 and used the proceeds to prepay $853 million of borrowings. The gain on sale of these securities totaled $29.2 million, while the prepayment charges on the borrowings totaled $28.5 million. The deleveraging program benefited our net interest margin by 0.06%.
	•	The effects of the decline in net interest margin were offset by asset growth, increased non-interest income and good expense control.
	•	As a result of the low interest rate environment, we expanded our covered call premium program. Call options were written on securities we owned which generated $10.9 million of fee income in

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		2003. Call options were also written on securities we had committed to buy which generated $16.9 million of fee income in 2003.
	•	During 2003, we recorded strong loan growth in commercial real estate loans, commercial business loans and leases and consumer loans and leases. During this year, commercial real estate loans increased 15%, commercial business loans and leases increased 11% and consumer loans increased 23%. Excluding the effects of acquisitions, during 2003 commercial real estate loans increased 12%, commercial business loans and leases increased 6% and consumer loans and leases increased 9%.
	•	Asset quality remained very good. Even though total assets increased by 13% during 2003, nonperforming assets declined by 8% during this period.
	•	Total deposits increased by 14% during 2003. Excluding acquisitions, core deposits (deposits excluding certificates of deposit and brokered deposits) increased by 9%.

      Our financial condition and liquidity remain strong. The following are important factors in understanding our financial condition and liquidity:

	•	using the definitions of banking regulators, we continue to be “well-capitalized”;
	•	we issued $150 million of senior notes in 2003;
	•	the Moody’s rating of our senior notes was Baa-1 at December 31, 2003;
	•	we repurchased 4.5 million shares at an average price of $23.53 during 2003;
	•	we increased our annual dividend by 21% in 2003 compared to 2002; and
	•	all liquidity measures at December 31, 2003 met or exceeded the same measures at December 31, 2002.

Results of Operations

      Our net income increased $52.1 million, or 17%, during 2003. The increase was attributable in part to acquisitions in 2003 and 2002 and were diminished by the effects of merger and consolidation costs of $8.1 million and $14.7 million in 2003 and 2002, respectively. Return on average assets and return on average equity were 1.37% and 14.51%, respectively, in 2003 compared to 1.39% and 16.25%, respectively, in 2002. The decline in the return on average equity related primarily to the intangible equity resulting from the acquisition of American in February 2003.

      Net interest income and noninterest income increased 6% and 34%, respectively, during 2003. The increase in net interest income was primarily attributable to increased earning asset levels (from organic growth and acquisitions in 2003 and 2002), which more than offset the effects of a 41 basis point decline in the net interest margin. The margin declined primarily due to the effect of prepayments and repricing on loans, securities, deposits and borrowings in a declining rate environment and, to a lesser extent, the effects of acquisitions.

      The provision for loan and lease losses of $42.3 million in 2003 decreased 5% compared to 2002 due mainly to lower net charge-offs and continued strong asset quality. The coverage ratio (allowance for loan and lease losses to nonperforming loans) was 389% at December 31, 2003 compared to 319% at December 31, 2002.

      Noninterest income increased due to higher deposit services income, net securities gains and other noninterest income (primarily covered call premium income and mortgage banking services income).

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      Noninterest expense increased 11% in 2003 due primarily to higher compensation and employee benefits expense and increased occupancy expense, primarily as a result of our acquisitions, as well as prepayment penalties on borrowings.

      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 source of net revenue. Net interest income is affected by changes in interest rates and by changes in the amount and composition of interest-earning assets and interest-bearing liabilities.

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Table 2 — Three-Year Average Balance Sheets

      The following table sets forth, for the periods indicated, information regarding (i) the total dollar amount of interest income on 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. For purposes of the table 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) unpaid interest on nonaccrual loans has not been included for purposes of determining interest income. Information is based on average daily balances during the indicated periods.