Record Quarterly Net Income at Banknorth

Portland, Maine, July 21, 2003 - Banknorth Group, Inc. (NYSE: BNK) today announced record quarterly net income of $87.5 million for the second quarter ended June 30, 2003, an increase of 15% over net income of $76.2 million for the second quarter of 2002. On a diluted earnings per share basis, the Company earned 53 cents for the second quarter, up 4% from 51 cents for the same quarter a year ago. Exclusive of merger and consolidation charges, earnings for the second quarter ended June 30, 2003 were $88.5 million, or 54 cents per diluted share, as compared to $76.9 million, or 52 cents per diluted share, for the second quarter of 2002.

For the first six months of 2003, the Company's net income was $168.9 million, up 17% over $144.6 million in the first half of 2002. On a diluted earnings per share basis, the Company earned $1.04 for the first half of 2003, up 8% over $0.96 for the same period a year ago. Exclusive of merger and consolidation charges, earnings for the first half of 2003 were $172.8 million, or $1.07 per diluted share, as compared to $150.7 million, or $1.00 per diluted share for the first six months of 2002.

"I am pleased that strong net interest income and fee income supported by sound expense management have resulted in a record quarter," said William J. Ryan, Banknorth Chairman, President and Chief Executive Officer. "We also enhanced shareholder value by actively repurchasing our shares in the second quarter to maximize the balance sheet deleveraging strategy that strengthened our net interest margin."

Banknorth's net interest margin was 3.71% for the quarter ended June 30, 2003, up from 3.66% in the first quarter of the year, but down from 4.18% from the same quarter a year ago as a result of a lower interest rate environment.

The increase in Banknorth's net interest margin during the second quarter of 2003, as compared to the first quarter of 2003, was primarily attributable to a deleveraging strategy which resulted in the sale of $901 million of investment securities with an approximate weighted average yield of 5.05% and prepayment of $853 million of borrowings with a weighted average rate of 4.49% during the second quarter of 2003. The $29.2 million gain from the sale of these securities was substantially offset by the $28.5 million prepayment penalty incurred on the early payoff of borrowings. In addition, the Company implemented other asset/liability management strategies in the second quarter that resulted in a $4.2 million gain from the sale of securities and a $2 million prepayment penalty incurred on the early payoff of borrowings.

The Company's deleveraging strategy also included the repurchase of 3.7 million shares of Banknorth common stock in the second quarter to further enhance the impact of this strategy on earnings per share.

The Company's loan and lease portfolio was 21% higher at June 30, 2003 than at June 30, 2002 (1% exclusive of acquisitions) and increased by 1% when compared to the balance at March 31, 2003. The overall loan growth from the second quarter of 2002 to the second quarter of 2003 was a strong offset to margin compression over the same timeframes.

The Company's non-residential loans increased 22% from June 30, 2002 to June 30, 2003 (10% exclusive of acquisitions) and 3% compared to March 31, 2003. By category:

• Consumer loans and leases at June 30, 2003 increased by 27% over June 30, 2002 (9% exclusive of acquisitions) and by 1% over the March 31, 2003 balance.
  
  
• Commercial business loans and leases at June 30, 2003 increased by 21% over June 30, 2002 (11% exclusive of acquisitions) and by 5% over the March 31, 2003 balance.
  
  
• Commercial real estate loans at June 30, 2003 increased by 19% over June 30, 2002 (10% exclusive of acquisitions) and by 2% over the balance at March 31, 2003.

Residential mortgages increased by 14% from June 30, 2002 to June 30, 2003 but declined by 26% during this period exclusive of acquisitions, primarily due to heavy refinancings in the mortgage sector. Residential mortgages declined by 6% from their balance at March 31, 2003.

Noninterest income excluding net gains on sales of securities was $82.4 million for the quarter ended June 30, 2003, an increase of 32% (84% including securities gains) over the same quarter a year ago and a 9% increase (48% including securities gains) over the previous quarter. On the banking side of the Company, deposit services and merchant and electronic banking income increased by more than 15% in the second quarter of 2003 as compared to the second quarter of 2002.

Investment planning services and insurance brokerage commissions grew substantially on the financial services side of the Company in the quarter ended June 30, 2003 over the same quarter a year ago. Trust and investment management services, while down in the second quarter of 2003 from the same quarter a year ago, increased over the first quarter of the year, reflecting a strengthening stock market. Fees for trust and investment management services are largely dependent on stock market performance.

Exclusive of prepayment penalties on borrowings, noninterest expenses for the second quarter were up 12% (35% including prepayment penalties on borrowings) over the same quarter a year ago, primarily due to acquisitions completed in 2002 and 2003, but increased by only 2% (23% including prepayment penalties on borrowings) over the first quarter of 2003.

"Although we are operating in a challenging environment for banks, we believe that the consensus street earnings estimate for the Company is in a reasonable range," said Mr. Ryan. The consensus First Call 2003 earnings estimate for Banknorth, which excludes merger and consolidation charges, is $2.18 per diluted share.

Total deposits at Banknorth on June 30, 2003 were 23% higher than at June 30, 2002, with double digit increases in all major categories, including savings accounts, noninterest bearing deposits (principally checking accounts), money market and NOW accounts and certificates of deposit. Exclusive of acquisitions, total deposits increased by 1.6% from June 30, 2002 to June 30, 2003. Excluding certificates of deposit and brokered deposits, as well as acquisitions, total deposits increased 9.4% from June 30, 2002 to June 30, 2003. Deposits at June 30, 2003 increased by 1% from their balance at March 31, 2003.

The Company repurchased 3.7 million shares during the second quarter of 2003 at an average price of $23.72 per share. During the first two quarters of 2003, the Company has repurchased 4.4 million shares at an average price of $23.47 per share. The Company's stock price closed at $25.52 on June 30, 2003.

Solid asset quality remained a feature at Banknorth:

• Nonperforming loans to total loans and leases at June 30, 2003 were 0.39%, down from 0.51% for the same quarter a year ago and from 0.51% for the first quarter of 2003.
  
  
• Nonperforming assets to total assets at June 30, 2003 were 0.25%, down from 0.34% for the same quarter a year ago and from 0.31% for the previous quarter.
  
  
• Net charge-offs to average loans for the three months ended June 30, 2003 amounted to 0.25%, virtually the same as the 0.26% ratio for the three months ended June 30, 2002 and the 0.24% ratio for the three months ended March 31, 2003.

At June 30, 2003, the Company's allowance for loan and lease losses to total loans and leases was 1.44% and its allowance for loan and lease losses to nonperforming loans was 374%.

At June 30, 2003, the Company's Tier 1 leverage capital ratio was 6.36%, its total risk based capital ratio was 11.05%, and its ratio of tangible equity to tangible assets was 5.41%. Banknorth and its banking subsidiary, Banknorth, N.A., each continues to be a "well capitalized" institution under applicable laws and regulations.

Banknorth Group, Inc., headquartered in Portland, Maine, is a $25.8 billion banking and financial services company. The Company's banking subsidiary, Banknorth, N.A. 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).

The Company also operates subsidiaries and divisions in insurance, investment planning, trust and investments services, leasing, merchant services, mortgage banking, government banking and other financial services.

Note: This news release contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The Company's management uses these non-GAAP measures in its analysis of the Company's performance. These measures typically adjust GAAP performance measures to exclude the effects of charges and expenses related to the consummation of mergers and acquisitions and costs related to the integration of merged entities, as well as the amortization of intangible assets in the case of "cash basis" performance measures. These non-GAAP measures also may exclude other significant gains or losses that are unusual in nature, such as security gains and prepayment penalties. Because these items and their impact on the Company's performance are difficult to predict, management believes that presentations of financial measures excluding the impact of these items provide useful supplemental information that is essential to a proper understanding of the operating results of the Company's core businesses. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies.

This news release contains certain forward-looking statements with respect to the financial condition, results of operations and business of Banknorth. 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 accounting and technological factors affecting Banknorth's 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. Investors are encouraged to access Banknorth's periodic reports filed with the Securities and Exchange Commission for financial and business information regarding Banknorth, including information which could affect Banknorth's forward-looking statements.