Banknorth Group Reports Third Quarter Earnings.

BURLINGTON, Vt.--(BUSINESS WIRE)--Oct. 14, 1997--Banknorth Group, Inc. (NASDAQ:BKNG) today reported third quarter financial results for 1997. Net income for the three months ended September 30, 1997, was $7.6 million, or $.97 per share, compared to $6.8 million, or $.87 per share, for the third quarter of 1996. Net income for the nine months ended September 30, 1997, was $21.7 million, or $2.78 per share, compared to $18.4 million, or $2.40 per share, for the first nine months of 1996. Amortization of goodwill, a non-cash expense, accounts for 11 cents a share per quarter, making "cash EPS" $1.08 and $3.10 for the third quarter and nine months ended September 30, 1997, respectively. Making the announcement was William H. Chadwick, president and chief executive officer.

Net interest income, the primary contributor to earnings, was $30.2 million for the three months ended September 30, 1997, an increase of $1.9 million, or 6.9%, over the third quarter of 1996. The provision for loan losses in the third quarter of 1997 was $1.9 million, $440 thousand, or 29.3% higher than in the third quarter of 1996.

Other operating income for the quarter ended September 30, 1997, was $8.0 million, an increase of $1.5 million or 23.9% over the third quarter of 1996. Increases in other operating income in the third quarter of 1997, over the third quarter of 1996, include income from fiduciary activities up $186 thousand, net securities transactions up $142 thousand, and gain on sale of mortgage servicing up $816 thousand.

Total other operating expenses, $25.1 million for the third quarter of 1997, were up $1.9 million or 8.2% from the level experienced in the third quarter of 1996. Increases in other operating expenses in the third quarter of 1997, over the third quarter of 1996, include: salaries up $645 thousand or 7.0%; net occupancy expense up $312 thousand or 18.7%; equipment and software expense up $222 thousand or 14.1%; data processing fees up $145 thousand or 13.1%; and, capital securities expense of $789 thousand, a new item in 1997. Included in the third quarter 1996 other operating expenses was a loss of $250 thousand related to a burglary at one of the subsidiary bank branches.

Included in salaries expense in the third quarter of 1997 was $367 thousand to adjust employees restricted stock awards to market value. Net occupancy expense, as well as equipment and software expense, in the third quarter of 1997 include expenses for the new main office facility in Worcester for First Massachusetts Bank, N.A., ("FMB"). The capital securities expense relates to the capital securities issued by Banknorth in May, 1997.

Increases in income and expense levels between the nine month periods ended September 30, 1997 and 1996, are due, in part, to the formation of FMB, which was included for only seven of the first nine months of 1996. Offsetting this in 1996, were one-time expenses of $1.8 million related to the first quarter 1996 startup of FMB and Stratevest Group, N.A., the Company's investment management subsidiary. Other one-time expenses in the first quarter of 1996 of $366 thousand related to a data processing conversion and the transition to a new incentive-based compensation system. A loss of $250 thousand in the third quarter 1996 related to the aforementioned burglary.

For the nine months ended September 30, 1997, net interest income was $88.6 million, an increase of $8.3 million, or 10.4%, over the first nine months of 1996. The provision for loan losses was $5.6 million, $1.5 million higher than the first nine months of 1996. Increased provisioning has been necessary during 1996 and 1997 to build the allowance for loan losses at FMB, the Company's de novo bank that began operations in February 1996.

Other operating income, for the nine months ended September 30, 1997, was $21.2 million, $2.4 million or 12.8% over the first nine months of 1996. Besides the items previously mentioned, service charges on depositor accounts for the third quarter of 1997, were up $923 thousand or 19.1% from the third quarter of 1996. For the first nine months of 1997, total other operating expenses at $72.1 million, were up $4.2 million or 6.3% from the level experienced in the first nine months of 1996.

"While we are pleased with third quarter results, we believe we can improve upon them in the future," said Chadwick. "We have recently produced a comprehensive study that has the potential to measurably enhance revenue and reduce expenses. The entire organization is focused on achieving the benefit of that report over the next six months," he said.

Total assets at September 30, 1997, were $2.9 billion, up 14.4% or $360.9 million, from the balance at September 30, 1996. Total loans at September 30, 1997, at $1.9 billion, were up $118.7 million or 6.5%, from September 30, 1996. Total deposits at September 30, 1997, were up $70.9 million or 3.4%, from September 30, 1996. Banknorth, as well as each subsidiary bank, is well capitalized by regulatory definition.

Banknorth Group, Inc. serves the financial needs of customers through its seven community banks with 60 offices located in Vermont, Massachusetts and New Hampshire, a mortgage company and an investment management company.

                         Banknorth Group, Inc.
                     Comparative Financial Results
           (In thousands, except share and per share data)


                             For the three months ended September 30
Income Statements                1997        1996      Change    %

Interest income               $  56,321  $   49,175    $7,146   14.5%
Interest expense                 26,103      20,899     5,204   24.9%
 Net interest income             30,218      28,276     1,942    6.9%
Provision for loan
 losses                           1,940       1,500       440   29.3%
 Net interest income
  after provision for
  loan losses                    28,278      26,776     1,502    5.6%

Non-interest income               8,001       6,457     1,544   23.9%

Goodwill amortization             1,305       1,297         8    0.6%
Capital securities
 expense                            789        --         789  100.0%
Other expenses                   22,977      21,879     1,098    5.0%
 Total non-interest
  expenses                       25,071      23,176     1,895    8.2%
Income before income
 taxes                           11,208      10,057     1,151   11.4%
Income taxes                      3,618       3,244       374   11.5%
NET INCOME                   $    7,590  $    6,813    $  777   11.4%

Per Share Information
Wtd. avg number of
 shares outstanding           7,826,648   7,826,648      --       --
Net income                   $     0.97  $     0.87    $ 0.10   11.5%
Goodwill, after income
 tax effect                        0.11        0.11      --       --
"Cash" earnings per share          1.08        0.98      0.10   10.2%

Shares outstanding            7,826,648   7,826,648      --       --
Book value                   $    29.19  $    25.53    $ 3.66   14.3%
Tangible book value               25.08       20.74      4.34   20.9%

Cash dividends declared
 per share                         0.29        0.25      0.04   16.0%
Closing price at period end       54.63       37.38     17.25   46.1%

Ratios
Return on average total
 assets                            1.06%       1.09%    -0.03%  -2.8%
Return on average
 shareholders' equity             13.49%      13.88%    -0.39%  -2.8%

Dividend payout ratio             29.90%      28.74%     1.16%   4.0%
Price / Earnings (last
 four reported quarters)           14.8        11.5       3.3   28.7%
Price / Tangible book value        217.8%      180.2%     37.6%  20.9%

Net interest income, f.t.e.
 basis                        $  30,365    $ 28,391    $1,974    7.0%
Net interest margin                4.46%       4.83%    -0.37%  -7.7%

Efficiency ratio                  62.93%      61.33%     1.60%   2.6%
Expense ratio                      2.43%       2.54%    -0.11%  -4.3%

NPAs as a % of total assets, p.e.  0.65%       0.93%    -0.28% -30.1%
Allow. for loan losses
 as % of NPLs, p.e.              143.09%     108.99%    34.10   31.3%
Allow. for loan losses
 as % total loans                  1.29%       1.33%    -0.04%  -3.0%

Shareholders' equity to
 total assets, p.e.                7.95%       7.95%       --     --
Tangible sh equity to
 tangible assets, p.e.             6.91%       6.56%     0.35%   5.3%


Balance Sheets
                                  Balances as of
                               9-30-97     9-30-96     Change     %

Loans                        $1,938,824  $1,820,094  $118,730     6.5%
Loans held for sale              17,139      12,935     4,204    32.5%
Securities available
 for sale                       715,850     468,154   247,696    52.9%
Investment securities            26,171      38,321   (12,150)  -31.7%
Money market investments          5,678          50     5,628 11256.0%
Total earning assets          2,703,662   2,339,554   364,108    15.6%
Allowance for loan losses       (25,061)    (24,284)      777     3.2%
Goodwill                         32,225      37,448    (5,223)  -13.9%
Other assets                    161,774     158,982     2,792     1.8%
 Total assets                $2,872,600  $2,511,700  $360,900    14.4%

Deposits:
 Non-interest bearing          $303,031    $288,317   $14,714     5.1%
 Interest bearing             1,826,542   1,770,356    56,186     3.2%
  Total                       2,129,573   2,058,673    70,900     3.4%
Short-term borrowed funds       444,968     190,644   254,324   133.4%
Long-term debt                   18,998      43,143   (24,145)  -56.0%
Other liabilities                20,575      19,440     1,135     5.8%
 Total liabilities            2,614,114   2,311,900   302,214    13.1%
Corporation obligated jr sub
 debentures                      30,000          --    30,000   100.0%
Shareholders' equity            228,486     199,800    28,686    14.4%
 Total liabilities, corp
  obligated jr sub debentures
  and shareholders' equity   $2,872,600  $2,511,700  $360,900    14.4%

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                        Banknorth Group, Inc.
                     Comparative Financial Results
           (In thousands, except share and per share data)


                             For the nine months ended September 30
Income Statements                1997        1996      Change    %

Interest income              $  161,615  $  139,762  $ 21,853   15.6%
Interest expense                 72,985      59,474    13,511   22.7%
 Net interest income             88,630      80,288     8,342   10.4%
Provision for loan losses         5,626       4,100     1,526   37.2%
 Net interest income after
  provision for loan losses      83,004      76,188     6,816    8.9%

Non-interest income              21,202      18,799     2,403   12.8%

Goodwill amortization             3,917       3,347       570   17.0%
Capital securities expense        1,315          --     1,315  100.0%
Other expenses                   66,854      64,492     2,362    3.7%
 Total non-interest expenses     72,086      67,839     4,247    6.3%
Income before income taxes       32,120      27,148     4,972   18.3%
Income taxes                     10,391       8,791     1,600   18.2%
NET INCOME                   $   21,729  $   18,357   $ 3,372   18.4%

Per Share Information
Wtd. avg number of
 shares outstanding           7,826,648   7,662,495   164,153    2.1%
Net income                   $     2.78  $     2.40   $  0.38   15.8%
Goodwill, after income
 tax effect                        0.32        0.28      0.04   14.3%
"Cash" earnings per share          3.10        2.68      0.42   15.7%

Shares outstanding            7,826,648   7,826,648        --     --
Book value                   $    29.19  $    25.53   $  3.66   14.3%
Tangible book value               25.08       20.74      4.34   20.9%

Cash dividends declared
 per share                         0.87        0.75      0.12   16.0%
Closing price at period end       54.63       37.38     17.25   46.1%

Ratios
Return on average total
 assets                            1.06%       1.04%     0.02%   1.9%
Return on average
 shareholders' equity             13.57%      13.07%     0.50%   3.8%

Dividend payout ratio             31.30%      31.25%     0.05%   0.2%
Price / Earnings (last four
 reported quarter)                 14.8        11.5       3.3   28.7%
Price / Tangible book value       217.8%      180.2%     37.6%  20.9%

Net interest income, f.t.e.
 basis                       $   89,048  $   80,747   $ 8,301   10.3%
Net interest margin                4.60%       4.88%    -0.28%  -5.7%

Efficiency ratio                  61.93%      62.01%    -0.09%  -0.1%
Expense ratio                      2.46%       2.59%    -0.13%  -5.0%

NPAs as a % of total
 assets, p.e.                      0.65%       0.93%    -0.28% -30.1%
Allow. for loan losses as
 % of NPLs, p.e.                 143.09%     108.99%    34.10%  31.3%
Allow. for loan losses as
 % total loans                     1.29%       1.33%    -0.04%  -3.0%

Shareholders' equity to
 total assets, p.e.                7.95%       7.95%       --     --
Tangible sh equity to
 tangible assets, p.e.             6.91%       6.56%     0.35%   5.3%


                                   Balances as of
Balance Sheets                 12-31-96    12-31-95    Change     %

Loans                        $1,848,232  $1,351,053  $497,179   36.8%
Loans held for sale              12,106      19,125    (7,019) -36.7%
Securities available
 for sale                       531,269     359,085   172,184   48.0%
Investment securities            34,194      49,680   (15,486) -31.2%
Money market investments            101         650      (549) -84.5%
 Total earning assets         2,425,902   1,779,593   646,309   36.3%
Allowance for loan losses       (23,520)    (22,095)    1,425    6.4%
Goodwill                         36,142       8,553    27,589  322.6%
Other assets                    162,799     144,123    18,676   13.0%
 Total assets                $2,601,323  $1,910,174  $691,149   36.2%

Deposits:
 Non-interest bearing          $287,598    $228,334   $59,264   26.0%
 Interest bearing             1,778,466   1,332,435   446,031   33.5%
  Total                       2,066,064   1,560,769   505,295   32.4%
Short-term borrowed funds       280,461     116,213   164,248  141.3%
Long-term debt                   25,923      55,997   (30,074) -53.7%
Other liabilities                22,138      17,259     4,879   28.3%
 Total liabilities            2,394,586   1,750,238   644,348   36.8%
Corporation obligated jr
 sub debentures                      --          --        --     --
Shareholders' equity            206,737     159,936    46,801   29.3%
 Total liabilities, corp
  obligated jr debentures
  and shareholders' equity   $2,601,323  $1,910,174  $691,149   36.2%

CONTACT: Banknorth Group, Inc.

David P. Reville Thomas J. Pruitt

Director, Corporate Communications EVP & CFO

[phone] [phone]