Banknorth Group First Quarter Earnings Per Share Up 15%

Portland, Maine, April 23, 2001 -- Banknorth Group, Inc. (NASDAQ:BKNG) today announced operating earnings of $59.0 million, or 42 cents a share, for the first quarter ended March 31, 2001, a 14 percent increase on a per diluted share basis over operating earnings of $53.5 million, or 37 cents for the same quarter a year ago. (Operating earnings are exclusive of special charges, referenced below.) Net income for the quarter was $55.1 million, or 39 cents per diluted share, up 15 percent on a per diluted share basis from net income of $49.9 million for the first quarter of 2000.

Operating cash earnings, which are operating earnings less the expense associated with the amortization of goodwill and deposit premiums, were 45 cents per share at March 31, 2001, up 12.5 percent from 40 cents per diluted share for the same quarter a year ago.

"First quarter results showed a strong increase in our net interest margin as well as good expense control and overall strong asset quality," said William J. Ryan, Chairman, President and Chief Executive Officer. "We also sustained double digit growth in commercial business loans and solid growth in noninterest bearing deposits."

Reflecting rate cuts by the Federal Reserve Bank, the Company's net interest margin increased to 3.84% for the quarter ended March 31, 2001, as compared to 3.70% for the quarter ended March 31, 2000.

Commercial business loans at March 31, 2001 were up 12 percent over March 31, 2000. For the same period, commercial real estate loans were up 7 percent and consumer loans were up 9 percent. Overall loans at March 31, 2001 were up 5 percent over March 31, 2000, affected by an 8 percent decrease in residential mortgage loans.

Noninterest bearing deposits, principally checking accounts, increased by 9 percent at March 31, 2001 from March 31, 2000, reflecting the success of the Company's "Simply Free" checking product and an increase in commercial checking accounts which were partially attributable to the growth in commercial business loans. Overall deposits were up 3 percent as declines in regular savings and certificates of deposit partially offset the increase in noninterest bearing deposits and a similar rate of growth in money market and NOW accounts.

"On a stand alone basis, the increasing margin is positive to income," said Mr. Ryan. "But slowing loan demand and reductions in fee income growth in the trust and investment areas as the stock market declines and in credit card processing fees as consumer spending drops are tending to offset those gains."

Total noninterest income for the quarter ended March 31, 2001 was up 17 percent over the same quarter a year ago to nearly 27 percent of total income from under 25 percent for the same quarter of 2000. The leading categories were insurance commissions, up 89 percent in large measure because of insurance agency acquisitions in the fourth quarter of 2000, and deposit services income which increased 11 percent. Conversely, trust services increased by only one percent and investment advisory services and merchant and card product income were down 7 percent and 2 percent, respectively.

Other key financial measures for the first quarter ended March 31, 2001 were as follows:

- Operating return on average assets was 1.32%, up from 1.17% for the same quarter a year ago. Operating cash ROA was 1.46% as compared to 1.30% for the quarter ended March 31, 2000.

- Operating return on average equity was 17.78%, down slightly from 17.96% for the same quarter a year ago, mostly because the unrealized loss on securities available for sale, post tax, of $142 million at March 31, 2000 improved to an unrealized gain of $13 million, post tax, increasing Company equity and lowering the return. Operating cash ROE was 22.46% as compared to 23.37% for the first quarter a year ago.

- The Company's efficiency ratio was 55.13%, down from 57.30% during the quarter ended March 31, 2000.

- Nonperforming assets as a percentage of total assets of 0.37% at March 31, 2001 were flat with March 31, 2000 and December 31, 2000.

- Nonperforming loans as a percentage of total loans were 0.57% at March 31, 2001, up from 0.54% at March 31, 2000 and even with 0.57% at December 31, 2000.

The Company also announced that it will reduce its 284 branches by 10 and that it has taken $1.5 million in special charges (after tax) related to the reduction. The branches are mostly in close proximity to other branches as the result of acquisitions. The Company is taking another $1.5 million in special charges (after tax) related primarily to severance packages for executives exercising change of control contracts from the Banknorth acquisition. (Banknorth Group was acquired in 2000 by the former Peoples Heritage Financial Group, Inc., which took on the Banknorth name following completion of the transaction.) The two charges accounted for most of the difference between operating and net income.

The Company also indicated it has completed the purchase of approximately 3 million shares of an 8 million share repurchase program authorized in January.

Shareholders' equity at March 31, 2001 was $1.36 billion, up 13 percent from $1.20 billion at March 31, 2000. Book value at March 31, 2001 was $9.82, up from $8.31 at March 31, 2000

Banknorth Group, Inc., headquartered in Portland, Maine, is one of the country's 50 largest commercial banking companies with $18.3 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, Heritage 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.