Banknorth Group Earnings Up 8 % on an Operating Basis;

Strong Margin, Commercial Lending, Demand Deposit Growth

Portland, Maine, July 23, 2001 -- Banknorth Group, Inc. (NASDAQ: BKNG) today announced operating and net earnings of $59.9 million, or 43 cents per diluted share, for the second quarter ended June 30, 2001. Operating earnings, which exclude special charges and securities restructurings, were up 8 percent on a per diluted share basis from the second quarter a year ago and net income was up more than 200 percent from the same quarter a year ago due to special charges in that quarter related to the acquisition of Banknorth Group. During the second quarter of last year, Peoples Heritage Financial Group acquired Banknorth and took on the Banknorth name.

On an operating cash earnings basis, (excluding amortization of goodwill and core deposit premiums as well as special charges and securities restructurings) the Company's per diluted share earnings of 46 cents were 7 percent higher in the second quarter of 2001 than for the same quarter a year ago.

For the first six months of 2001 versus the first half of 2000, operating income of $118.9 million, or 85 cents per share, was up 10 percent per diluted share over operating income of $111.2 million, or 77 cent per diluted share. For the same period, net income was $115.0 million, or 82 cents per diluted share, an increase of 67 percent over net income of $68.8 million, or 47 cents per diluted share. Operating cash income of 91 cents per diluted share rose 10 percent for the first half of 2001 as compared to the first half of 2000.

The Company achieved a net interest margin of 4.03% in the quarter ended June 30, 2001, the first quarterly margin in excess of 4 percent since the first quarter of 1999.

"Commercial lending remained strong and is one the main generators of a 15% increase year over year in checking deposits, which in turn helps to finance additional lending," said William J. Ryan, Company Chairman, President and Chief Executive Officer.

"The second quarter and first half-year both experienced a near doubling of insurance commissions, reflecting quality agency acquisitions last year and a strengthening insurance market," Mr. Ryan added.

Largely as a result of the strong margin and increases in commercial lending and demand deposits, the Company's net interest income rose 10 percent for the quarter ended June 30, 2001 as compared to the same quarter a year ago. For the first six months of the year, net interest income increased 6 percent over the first half of 2000.

On the fee income side, strong insurance commission income and deposit service fees were mitigated to some degree by flat income in the trust area, reflecting lowered stock market performance, which is a principal determinant of fee levels for trust services. Mortgage banking income was also down substantially from the same period a year ago, reflecting the Company's exiting of the mortgage servicing business. Even so, exclusive of losses on a securities restructuring in the second quarter of 2000, noninterest income increased 9 percent for the first half of 2001 over the first six months of 2000.

Noninterest expenses, excluding special charges in the second quarter of 2000, rose 5 percent in the second quarter of 2001 as compared to the second quarter of 2000 primarily because of salary and benefits increases related to insurance agency acquisitions, rent increases related to the Company's new headquarters, and energy and seasonal factors.

The Company's return on average equity (ROE) for the quarter ended June 30, 2001 was 17.85% and its return on average assets (ROA) was 1.32%. Cash ROE and ROA for the second quarter were 22.11% and 1.44%, respectively.

The Company's efficiency ratio for the quarter ended June 30, 2001 was 54.01%, improved from 54.97% for the same quarter a year ago and down from 55.13% for the previous quarter ended March 31, 2001

Asset quality remained strong at the Company but declined slightly, reflecting a slower economy. Nonperforming loans as a percentage of total loans were 0.62% at June 30, 2001, as compared to 0.57% for the previous quarter and 0.48% for the same quarter a year ago. Nonperforming assets as a percentage of total assets were 0.40% at the end of the second quarter as opposed to 0.37% at the end of the first quarter and 0.33% at June 30, 2000.

The Company indicated that it has completed the purchase of approximately 5 million shares of an 8 million share repurchase program authorized in January.

Shareholders' equity at June 30, 2001 was $1.36 billion, up 12 percent from $1.22 billion at June 30, 2000. Book value at June 30, 2001 was $9.92, up from $8.45 at June 30, 2000

Banknorth Group, Inc., headquartered in Portland, Maine, is one of the country's 40 largest commercial banking companies with $18.1 billion in assets. The Company operates banking subsidiaries in Maine, Peoples Heritage Bank, NA, in New Hampshire, Bank of New Hampshire, NA, in Massachusetts, First Massachusetts Bank, NA, in Vermont, The Howard Bank, NA, Franklin Lamoille Bank, NA and First Vermont Bank, NA, and New York, Evergreen Bank, NA. In north central Connecticut, the Company's banking presence is GBT, a division of First Massachusetts Bank, NA.

The Company also operates a variety of insurance agencies in New England as subsidiaries of Morse, Payson & Noyes, Insurance, its lead agency, a money management firm, The Stratevest Group, NA, an investment subsidiary, Bancnorth Investment Planning Services, and a leasing company, Banknorth Leasing.
Other subsidiaries and divisions provide services in mortgage banking, asset based lending, private banking, merchant services and other financial services.
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Note: This news release may contain forward looking information for Banknorth Group, Inc. Actual results may vary materially from any forward looking statements. Factors which could result in material variations from forward looking statements include, but are not limited to: changes in interest rates which could affect net interest margins and net interest income; delays in cost savings measures or a failure to realize anticipated cost savings; competitive factors which could affect noninterest income, costs of deposits and interest income: and general economic conditions which could affect the volume of loan originations, the amount of loan losses and levels of noninterest income.
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