UNITED STATES
                     SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C. 20549


                                  FORM 10-Q


[ X ]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934

       For the quarterly period ended June 30, 1998

       Commission file number (0-18173)


                            BANKNORTH GROUP, INC.
           (Exact name of registrant as specified in its charter)


              DELAWARE                         03-0321189
   (State or other jurisdiction of          (I.R.S. Employer
    incorporation or organization)       Identification Number)


                             300 FINANCIAL PLAZA
                                P.O. BOX 5420
                             BURLINGTON, VERMONT
                  (Address of principal executive offices)

                                    05401
                                 (Zip code)

                               (802) 658-9959
            (Registrant's telephone number, including area code)


      Indicate by check mark whether the Registrant (l) has filed all 
reports required to be filed by Section l3 or l5(d) of the Securities 
Exchange Act of l934 during the preceding l2 months (or for such shorter 
period that the registrant was required to file such reports), and (2) has 
been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

15,239,296 shares of common stock, $l.00 par, outstanding on June 30, 1998.


INDEX TO FORM 10-Q


PART I                                                                      PAGE
--------------------------------------------------------------------------------

         Financial Highlights (Unaudited)                                      1

      Item l  Interim Financial Statements

              Consolidated Statements of Income for the Three and Six
              Months Ended June 30, 1998 and 1997 (Both unaudited)             2

              Consolidated Balance Sheets at June 30, 1998 (Unaudited),
              December 31, 1997 and June 30, 1997 (Unaudited)                  3

              Statements of Changes in Shareholders' Equity for the
              Period January 1, 1997 to June 30, 1998 (Unaudited)              4

              Consolidated Statements of Cash Flows for the Six Months
              Ended June 30, 1998 and 1997 (Both unaudited)                    5

              Notes to Unaudited Interim Consolidated Financial Statements     6

              Independent Auditors' Report                                     8

      Item 2  Management's Discussion and Analysis of Financial Condition
              and Results of Operations                                        9

      Item 3  Quantitative and Qualitative Disclosures about Market Risk      14


PART II
--------------------------------------------------------------------------------

      Item 1  Legal Proceedings                                              N/A

      Item 2  Changes in Securities                                           31

      Item 3  Defaults Upon Senior Securities                                N/A

      Item 4  Submission of Matters to a Vote of Security Holders             31

      Item 5  Other Information                                               31

      Item 6  Exhibits and Reports on Form 8-K                                32

              Signatures                                                      33


2nd Quarter 1998 Financial Highlights (Unaudited)

<TABLE>
<CAPTION>
                                                                             Three Months                   Six Months 
                                                                            Ended June 30,                 Ended June 30,
                                                                     ----------------------------   ---------------------------
(Dollars in thousands, except share and per share data)                  1998            1997           1998           1997
                                                                         ----            ----           ----           ----

<S>                                                                  <C>             <C>            <C>            <C>
INCOME DATA
  Net interest income, taxable equivalent                            $    30,420     $    29,997    $    60,219    $    58,683
  Net interest margin                                                       4.41%           4.63%          4.42%          4.68%

  Net income                                                         $     8,322     $     7,089    $    15,246    $    14,139 

SHARE AND PER SHARE DATA
  Basic wtd. avg. number of shares outstanding                        15,360,499      15,553,496     15,406,181     15,553,496 
  Basic earnings per share (Basic EPS)                               $      0.54     $      0.46    $      0.99    $      0.91 
  Diluted wtd. avg. number of shares outstanding                      15,621,944      15,756,090     15,667,264     15,753,880 
  Diluted earnings per share (Diluted EPS)                           $      0.53     $      0.45    $      0.97    $      0.90 

  Shares outstanding, net of treasury shares, p.e.                    15,239,296      15,653,296     15,239,296     15,653,296 
  Book value, p.e.                                                   $     15.26     $     13.85    $     15.26    $     13.85 
  Tangible book value, p.e.                                                13.41           11.71          13.41          11.71 

  Cash dividends declared                                                   0.16           0.145           0.32           0.29 
  Market price:
    High                                                                   39.13           23.13          39.13          23.13 
    Low                                                                    33.38           20.25          27.63          20.00 
    Average close                                                          35.85           21.53          34.12          21.22
    Last                                                                   37.00           23.13          37.00          23.13 
  Share volume                                                         2,990,875       1,637,400      5,152,599      3,436,132 
  Average monthly share volume                                           996,958         545,800        858,767        572,688 

  Price/Tangible book value, p.e.                                           2.76            1.98           2.76           1.98 
  Price/Diluted EPS (last four reported quarters)                           18.5            13.0           18.5           13.0 

AVERAGE BALANCES
  Assets                                                             $ 2,962,153     $ 2,743,432    $ 2,939,226    $ 2,680,834 
  Earning assets                                                       2,768,913       2,590,647      2,750,091      2,524,401 
  Loans                                                                1,979,596       1,914,211      1,971,756      1,889,495 
  Goodwill                                                                29,073          34,334         29,712         34,964 
  Deposits                                                             2,228,976       2,077,242      2,206,475      2,072,532 
  Short-term borrowed funds                                              413,953         388,903        421,154        341,640 
  Long-term debt                                                          34,041          22,607         27,334         23,740 
  Corporation-obligated mandatorily redeemable capital securities         30,000          20,110         30,000         10,110 
  Shareholders' equity                                                   229,273         210,869        228,985        209,303 

KEY RATIOS
  Return on average assets                                                  1.13%           1.04%          1.05%          1.06%
  Return on average shareholders' equity                                   14.56           13.48          13.43          13.62 
  Efficiency ratio                                                         59.49           61.43          60.91          61.40 
  Total other operating income to gross revenue (t.e.)                     21.62           17.98          20.55          18.36  

  Net loan charge-offs to average loans                                     0.12            0.34           0.13           0.34 
  Provision for loan losses to average loans                                0.37            0.40           0.37           0.39 
  Allowance for loan losses to loans, p.e.                                  1.43            1.24           1.43           1.24 
  Allowance for loan losses coverage of non-performing loans, p.e.        255.81          152.21         255.81         152.21 
  Non-performing assets to total assets, p.e.                               0.41            0.57           0.41           0.57 

  Total capital to risk-adjusted assets, p.e.                              11.76           11.72          11.76          11.72 
  Tier 1 capital to risk-adjusted assets, p.e.                             10.51           10.55          10.51          10.55 
  Tier 1 capital to quarterly average total assets (Leverage)               7.87            7.94           7.87           7.94 
  Tangible shareholders' equity to tangible assets, p.e.                    6.89            6.51           6.89           6.51 
</TABLE>


Note:  All share and per share data has been restated for the effect of the 
       2-for-1 stock split declared February 24, 1998.


CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

<TABLE>
<CAPTION>
                                                          Three Months            Six Months
                                                         Ended June 30,         Ended June 30,
                                                       ------------------    --------------------
(Dollars in thousands, except per share data)           1998       1997        1998        1997
                                                        ----       ----        ----        ----

<S>                                                    <C>        <C>        <C>         <C>
Interest income:
  Interest and fees on loans                           $45,242    $43,711    $ 89,386    $ 85,543
  Interest on money market investments                     150         80         195         194
  Interest on securities available for sale             11,425      9,987      22,819      18,435
  Interest on investment securities                        320        534         732       1,122
                                                       ------------------------------------------
    Total interest income                               57,137     54,312     113,132     105,294

Interest expense:
  Deposits                                              20,915     18,861      41,323      37,245
  Short-term borrowed funds                              5,488      5,211      11,144       8,866
  Long-term debt                                           538        376         874         771
                                                       ------------------------------------------
    Total interest expense                              26,941     24,448      53,341      46,882
                                                       ------------------------------------------

Net interest income                                     30,196     29,864      59,791      58,412
  Less: provision for loan losses                        1,840      1,936       3,685       3,686
                                                       ------------------------------------------

Net interest income after provision for loan losses     28,356     27,928      56,106      54,726
                                                       ------------------------------------------

Other operating income:
  Income from trust and investment management fees       2,394      2,081       4,616       4,103
  Service charges on deposit accounts                    2,223      1,981       4,386       3,837
  Card product income                                      514        822         922       1,542
  Loan servicing income                                    216        640         633       1,329
  Net loan transactions                                    861        183       1,472         418
  Net securities transactions                               69          6        (370)         24
  Bank owned life insurance                                553          -       1,093           -
  Other income                                           1,562        862       2,824       1,948
                                                       ------------------------------------------
    Total other operating income                         8,392      6,575      15,576      13,201

Other operating expenses:
  Compensation                                           9,746      9,443      19,588      18,409
  Employee benefits                                      2,137      1,963       4,438       4,289
  Net occupancy                                          1,922      1,948       3,930       3,923
  Equipment and software                                 1,764      1,733       3,500       3,489
  Data processing                                        1,308      1,223       2,459       2,430
  Other real estate owned and repossession                 116        264         338         361
  Legal and professional                                 1,106        658       2,047       1,452
  Printing and supplies                                    476        600       1,041       1,197
  Advertising and marketing                                687        630       1,375       1,244
  Communications                                           601        611       1,193       1,197
  Amortization of goodwill                               1,306      1,306       2,612       2,612
  Capital securities                                       789        526       1,578         526
  Other expenses                                         2,688      3,129       5,603       5,886
                                                       ------------------------------------------
    Total other operating expenses                      24,646     24,034      49,702      47,015
                                                       ------------------------------------------

Income before income tax expense                        12,102     10,469      21,980      20,912
Income tax expense                                       3,780      3,380       6,734       6,773
                                                       ------------------------------------------

Net income                                             $ 8,322    $ 7,089    $ 15,246   $  14,139
                                                       ==========================================

Basic earnings per share                               $  0.54    $  0.46    $   0.99   $    0.91
                                                       ==========================================

Diluted earnings per share                             $  0.53    $  0.45    $   0.97   $    0.90
                                                       ==========================================
</TABLE>

Note:  All per share data has been restated for the effect of the 2-for-1 
       stock split declared February 24, 1998.

See accompanying notes to unaudited interim consolidated financial statements.


CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                               June 30,      December 31,     June 30,
(Dollars in thousands, except share and per share data)                          1998            1997           1997
                                                                              ------------------------------------------
                                                                              (Unaudited)                    (Unaudited)

<S>                                                                           <C>             <C>            <C>
Assets
  Cash and due from banks                                                     $   98,078      $   85,734     $   88,422
  Money market investments                                                        37,205              50          4,502
                                                                              -----------------------------------------
    Cash and cash equivalents                                                    135,283          85,784         92,924
                                                                              -----------------------------------------

  Securities available for sale, at fair value                                   723,795         710,308        701,063
  Loans held for sale                                                             36,284          24,958         17,286
  Investment securities                                                           13,912          23,972         28,041

  Loans                                                                        1,969,767       1,960,629      1,931,434
  Less: allowance for loan losses                                                 28,116          25,721         23,963
                                                                              -----------------------------------------
    Net loans                                                                  1,941,651       1,934,908      1,907,471
                                                                              -----------------------------------------

  Accrued interest receivable                                                     15,954          16,115         16,551
  Premises, equipment and software, net                                           27,995          29,446         30,054
  Other real estate owned and repossessed assets                                   1,196           1,574            559
  Goodwill                                                                        28,307          30,919         33,530
  Capitalized mortgage servicing rights                                            5,252           4,650          4,743
  Bank-owned life insurance                                                       41,170          40,077              -
  Other assets                                                                    23,788          20,266         19,085
                                                                              -----------------------------------------
      Total assets                                                            $2,994,587      $2,922,977     $2,851,307
                                                                              =========================================

Liabilities, Corporation-Obligated Mandatorily Redeemable
 Capital securities and Shareholders' Equity
  Deposits:
    Non-interest bearing                                                      $  323,973      $  324,320     $  302,922
    NOW accounts & money market savings                                        1,008,833         895,682        798,798
    Regular savings                                                              176,653         185,453        205,935
    Time deposits $100 thousand and greater                                       94,172         103,998         87,615
    Time deposits under $100 thousand                                            658,089         690,367        706,560
                                                                              -----------------------------------------
      Total deposits                                                           2,261,720       2,199,820      2,101,830
                                                                              -----------------------------------------
  Short-term borrowed funds:
    Federal funds purchased                                                            -             700              -
    Securities sold under agreements to repurchase                               143,007         139,347        129,405
    Borrowings from U.S. Treasury                                                 26,046          19,730         23,329
    Borrowings from Federal Home Loan Bank of Boston                             225,500         263,000        305,000
                                                                              -----------------------------------------
      Total short-term borrowed funds                                            394,553         422,777        457,734
                                                                              -----------------------------------------
  Long-term debt:
    Federal Home Loan Bank of Boston term notes                                   40,292           6,139          9,722
    Bank term loan                                                                 9,100          10,400         11,700
                                                                              -----------------------------------------
      Total long-term debt                                                        49,392          16,539         21,422
                                                                              -----------------------------------------

  Accrued interest payable                                                         4,939           4,721          5,112
  Other liabilities                                                               21,383          19,248         18,343
                                                                              -----------------------------------------

  Total liabilities                                                            2,731,987       2,663,105      2,604,441
                                                                              -----------------------------------------
  Corporation-obligated mandatorily redeemable capital securities                 30,000          30,000         30,000

  Shareholders' equity:
  Preferred stock, $.01 par value; authorized 500,000 shares as of June
   30, 1998, and no shares authorized as of December 31, 1997 and
   June 30, 1997                                                                       -               -              -
  Common stock, $1.00 par value; authorized 70,000,000 shares and issued
   15,653,296 shares as of June 30, 1998, and authorized 20,000,000 shares
   and issued 15,653,296 shares as of December 31, 1997, and authorized
   20,000,000 shares and issued 7,826,648 shares as of June 30,1997               15,653          15,653          7,827
  Surplus                                                                         84,248          83,770         87,566
  Retained earnings                                                              143,562         134,486        124,532
  Unamortized employee restricted stock                                           (1,310)         (1,550)        (1,047)
  Accumulated other comprehensive income                                           3,820           2,311         (2,012)
  Less: Common stock in treasury, at cost;
   414,000 shares as of June 30, 1998, 154,000 shares as of
   December 31, 1997 and no shares as of June 30, 1997                           (13,373)         (4,798)             -
                                                                              -----------------------------------------
      Total shareholders' equity                                                 232,600         229,872        216,866
                                                                              -----------------------------------------
      Total liabilities, corporation-obligated mandatorily redeemable 
       capital securities and shareholders' equity                            $2,994,587      $2,922,977     $2,851,307
                                                                              =========================================
</TABLE>

See accompanying notes to unaudited interim consolidated financial statements.


CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                  Unamortized   Accumulated
                                                                   Employee        Other
(Dollars in thousands,                Common            Retained  Restricted   Comprehensive  Treasury  Comprehensive
except per share data)                 Stock   Surplus  Earnings     Stock        Income       Stock       Income       Total
                                      -----------------------------------------------------------------------------------------

<S>                                   <C>      <C>      <C>        <C>           <C>          <C>                      <C>
Balance, January 1, 1997              $ 7,827  $87,410  $115,130   $(1,153)      $(2,477)           --                 $206,737

Comprehensive income:
  Net income                               --       --    30,489        --            --            --     $30,489       30,489
                                                                                                           -------
  Other comprehensive income, net
   of tax:
    Unrealized net holding gains
     arising during the year
     (pre-tax $7,654)                      --       --        --        --            --            --       4,954
    Reclassification adjustment for
     net gains realized in net
     income during the year
     (pre-tax $258)                        --       --        --        --            --            --        (166)
                                                                                                           -------
Other comprehensive income                                                         4,788                     4,788        4,788
                                                                                                           -------
Comprehensive income                                                                                       $35,277
                                                                                                           -------

Cash dividends $.58 per share              --       --    (9,069)       --            --            --                   (9,069)
Issuance of employee restricted
 stock                                     --       --        --      (315)           --            --                     (315)
Amortization of employee restricted
 stock                                     --      851        --       (82)           --            --                      769
Issuance of restricted stock units
 under directors' deferred
 compensation plan, net                    --    3,335        (4)       --            --            --                    3,331
Exercise of employee stock options,
 net                                       --       --    (2,060)       --            --            --                   (2,060)
Purchase of treasury stock, net            --       --        --        --            --        (4,798)                  (4,798)
2-for-1 stock split                     7,826   (7,826)       --        --            --            --                       --
                                      ----------------------------------------------------------------                 --------
Balance, December 31, 1997            $15,653  $83,770  $134,486   $(1,550)      $ 2,311      $ (4,798)                $229,872
                                      ================================================================                 ========

Comprehensive income:
  Net income                               --       --  $  6,924        --            --            --     $ 6,924     $  6,924
                                                                                                           -------
  Other comprehensive income, net
   of tax:
    Unrealized net holding gains
     arising during the quarter
     (pre-tax $517)                        --       --        --        --            --            --         318
    Reclassification adjustment for
     net losses realized in net
     income during the quarter
     (pre-tax $439)                        --       --        --        --            --            --         284
                                                                                                           -------
Other comprehensive income                                                           602                       602          602
                                                                                                           ------- 
Comprehensive income                                                                                       $ 7,526
                                                                                                           -------

Cash dividends $.16 per share              --       --    (2,472)       --            --            --                   (2,472)
Amortization of employee restricted
 stock                                     --      217        --        29            --            --                      246
Issuance of restricted stock units
 under directors' deferred
 compensation plan, net                    --      145        (3)       --            --            --                      142
Exercise of employee stock options,
 net                                       --       --      (413)       --            --            --                     (413)
Purchase of treasury stock, net            --       --        --        --            --        (5,019)                  (5,019)
                                      ----------------------------------------------------------------                 --------
Balance, March 31, 1998               $15,653  $84,132  $138,522   $(1,521)      $ 2,913      $ (9,817)                $229,882
                                      ================================================================                 ========

Comprehensive income:
  Net income                               --       --  $  8,322        --            --            --     $ 8,322     $  8,322
                                                                                                           -------
  Other comprehensive income, net
   of tax:
    Unrealized net holding gains
     arising during the quarter
     (pre-tax $1,493)                      --       --        --        --            --            --         951
    Reclassification adjustment for
     net gains realized in net
     income during the quarter
     (pre-tax $69)                         --       --        --        --            --            --         (44)
                                                                                                           -------     
Other comprehensive income                                                           907                       907          907
                                                                                                           -------       
Comprehensive income                                                                                       $ 9,229
                                                                                                           =======

Cash dividends $ .16 per share             --       --    (2,434)       --            --            --                   (2,434)
Amortization of employee restricted
 stock                                     --       38        --       211            --            --                      249
Issuance of restricted stock units
 under directors' deferred
 compensation plan, net                    --       78       (18)       --            --            --                       60
Exercise of employee stock options,
 net                                       --       --      (830)       --            --            --                     (830)
Purchase of treasury stock, net            --       --        --        --            --        (3,556)                  (3,556)
                                      ----------------------------------------------------------------                 --------
Balance, June 30, 1998                $15,653  $84,248  $143,562   $(1,310)      $ 3,820      $(13,373)                $232,600
                                      ================================================================                 ========
</TABLE>


Note:  All per share data has been restated for the effect of the 2-for-1 
       stock split declared February 24, 1998.

See accompanying notes to unaudited interim consolidated financial statements.


CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                             Six Months Ended June 30,
                                                             -------------------------
(Dollars in thousands)                                          1998           1997
                                                             ---------      ---------

<S>                                                          <C>            <C>
Increase in cash and cash equivalents:
Cash flows from operating activities:
      Net income                                             $  15,246      $  14,139 

Adjustments to reconcile net income to net cash
 provided by operating activities:
  Depreciation and amortization of premises,
   equipment and software                                        2,459          2,334 
  Amortization of goodwill                                       2,612          2,612 
  Net amortization of securities available for sale              1,707          1,686 
  Net accretion of investment securities                          (133)          (179)
  Provision for loan losses                                      3,685          3,686 
  Adjustment of other real estate owned to estimated
   fair value                                                       68            184 
  Provision for deferred tax benefit                              (465)           (98)
  Amortization of employee restricted stock                        495            262 
  Exercise of employee stock options, net                       (1,243)          (197)
  Issuance of restricted stock units under directors'
   deferred compensation plan, net                                 202              - 
  Net decrease in trading account assets                            22              - 
  Net securities transactions                                      370            (24)
  Net gain on sale of securities held for trading                  (22)             - 
  Net gain on sale of other real estate owned and
   repossessed assets                                             (170)          (177)
  Proceeds from sale of loans held for sale                    152,836         45,212 
  Originations and purchases of loans held for resale         (162,690)       (49,974)
  Net gain on sale of loans held for sale                       (1,472)          (418)
  Decrease (increase) in interest receivable                       161         (1,403)
  Increase in interest payable                                     218          1,724 
  Decrease (increase) in other assets and other intangibles     (5,181)         1,527 
  Increase (decrease) in other liabilities                       2,137           (407)
                                                             ------------------------
      Total adjustments                                         (4,404)         6,350 
                                                             ------------------------
      Net cash provided by operating activities                 10,842         20,489 
                                                             ------------------------

Cash flows from investing activities:
  Proceeds from maturity and call of securities
   available for sale                                           87,735         36,651 
  Proceeds from maturity and call of investment securities      10,206          6,355 
  Proceeds from sale of securities available for sale           88,403              - 
  Purchase of securities available for sale                   (189,335)      (207,497)
  Proceeds from sale of OREO and repossessed assets              1,630          1,623 
  Loans purchased                                                    -        (30,023)
  Net increase in originated loans                             (11,578)       (57,690)
  Capital expenditures                                          (1,452)        (2,954)
                                                             ------------------------
      Net cash used in investing activities                    (14,391)      (253,535)
                                                             ------------------------

Cash flows from financing activities:
  Net increase in deposits                                      61,900         35,766 
  Net increase (decrease) in short-term borrowed funds         (28,224)       177,273 
  Purchase of treasury stock, net                               (8,575)             - 
  Issuance of corporation-obligated mandatorily redeemable
   capital securities                                                -         30,000 
  Issuance of long-term debt                                    37,645              - 
  Payments on long-term debt                                    (4,792)        (4,501)
  Dividends paid                                                (4,906)        (4,540)
                                                             ------------------------
      Net cash provided by financing activities                 53,048        233,998 
                                                             ------------------------
Net increase in cash and cash equivalents                       49,499            952 
                                                             ------------------------
Cash and cash equivalents at beginning of period                85,784         91,972 
                                                             ------------------------
Cash and cash equivalents at end of period                   $ 135,283      $  92,924 
                                                             ========================

Additional disclosure relative to statement of cash flows:
  Interest paid                                              $  53,123      $  45,158 
                                                             ========================
  Taxes paid                                                 $   9,049      $   4,905 
                                                             ========================

Supplemental schedule of non-cash investing and
 financing activities:
  Net transfer of loans to OREO and repossessed assets       $   1,150      $   1,268 
  Adjustment to securities available for sale to fair
   value, net of tax                                             1,509            465
</TABLE>

See accompanying notes to unaudited interim consolidated financial statements.


NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1.    The accompanying unaudited interim consolidated financial statements 
      include the accounts of the Company and its subsidiaries, First 
      Massachusetts Bank, N.A., North American Bank Corporation and its 
      wholly owned subsidiary, Farmington National Bank, The Howard Bank, 
      N.A., First Vermont Bank and Trust Company and its wholly owned 
      subsidiary, Banknorth Mortgage Company, Franklin Lamoille Bank, 
      Granite Savings Bank and Trust Company, Woodstock National Bank, The 
      Stratevest Group, N.A., North Group Realty, Inc., and Banknorth 
      Capital Trust I. It is the opinion of management that the accompanying 
      unaudited interim consolidated financial statements have been prepared 
      in accordance with the instructions to Form 10-Q and reflect all 
      adjustments which are considered necessary to report fairly the 
      financial position as of June 30, 1998 and 1997, the Consolidated 
      Statements of Income for the three and six months ended June 30, 1998 
      and 1997, and the Consolidated Statements of Cash Flows for the six 
      months ended June 30, 1998 and 1997 and the Consolidated Statements of 
      Changes in Shareholders' Equity for the three months ended March 31, 
      1998 and June 30, 1998 and the year ended December 31, 1997. The 
      accompanying unaudited interim consolidated financial statements 
      should be read in conjunction with Banknorth Group, Inc.'s 
      consolidated year end financial statements, including notes thereto, 
      which are included in Banknorth Group, Inc.'s 1997 annual report to 
      shareholders on Form 10-K.

2.    Basic EPS excludes dilution and is computed by dividing income 
      available to common stockholders by the weighted average number of 
      common shares outstanding for the period. Issuable shares (such as 
      those related to the directors' restricted stock units), and 
      returnable shares (such as restricted stock awards) are considered 
      outstanding common shares and are included in the computation of basic 
      earnings per share as of the date that all necessary conditions have 
      been satisfied. Diluted EPS reflects the potential dilution that could 
      occur if securities or other contracts to issue common stock were 
      exercised or converted into common stock or resulted in the issuance 
      of common stock that then shared in the earnings of the entity (such 
      as the Company's stock options). All share and per share data has been 
      adjusted for the 2-for-1 stock split declared by the Company on 
      February 24, 1998.

      The following table provides calculations of basic and diluted 
earnings per share:

<TABLE>
<CAPTION>
                                                             Three Months Ended June 30,
                                       ------------------------------------------------------------------------
Dollars in thousands,                                 1998                                 1997
except for share and per share data    -----------------------------------   ----------------------------------                
                                                     Weighted                             Weighted		  
                                                      Average    Per Share                 Average    Per Share
                                       Net Income     Shares      Amount     Net Income    Shares      Amount
                                       ------------------------------------------------------------------------

<S>                                      <C>        <C>            <C>         <C>        <C>           <C>
Basic earnings per share                 $8,322     15,360,499     $0.54       $7,089     15,553,496    $0.46
Effect of dilutive securities:
Stock options                                          234,244                               166,972
Restricted stock awards                                 27,201                                35,622
                                                    ----------                            ----------
Diluted earnings per share               $8,322     15,621,944     $0.53       $7,089     15,756,090    $0.45
                                         ====================================================================


<CAPTION>
                                                               Six Months Ended June 30,
                                       ------------------------------------------------------------------------
Dollars in thousands,                                 1998                                 1997
except for share and per share data    -----------------------------------  -----------------------------------
                                                     Weighted                             Weighted
                                                      Average    Per Share                 Average    Per Share
                                       Net Income     Shares      Amount    Net Income     Shares      Amount
                                       ------------------------------------------------------------------------

<S>                                      <C>        <C>            <C>         <C>        <C>           <C>
Basic earnings per share                 $15,246    15,406,181     $0.99       $14,139    15,553,496    $0.91
Effect of dilutive securities:
Stock options                                          232,100                               165,765
Restricted stock awards                                 28,983                                34,619
                                                    ----------                            ----------    
Diluted earnings per share               $15,246    15,667,264     $0.97       $14,139    15,753,880    $0.90
                                         ====================================================================
</TABLE>

3.    On January 1, 1998, the Company adopted the provisions of Statement of 
      Financial Accounting Standards (SFAS) No. 130, "Reporting 
      Comprehensive Income." This Statement establishes standards for 
      reporting and display of comprehensive income and its components. 
      Comprehensive income includes the reported net income of a company 
      adjusted for items that are currently accounted for as direct entries 
      to equity, such as the mark to market adjustment on securities 
      available for sale, foreign currency items and minimum pension 
      liability adjustments. At the Company, comprehensive income represents 
      net income plus other comprehensive income, which consists of the net 
      change in unrealized gains or losses on securities available for sale 
      for the period. Accumulated other comprehensive income represents the 
      net unrealized gains or losses on securities available for sale as of 
      the balance sheet dates. Comprehensive income for the six month 
      periods ended June 30, 1998 and 1997 was $16.8 million and $14.6 
      million, respectively.

4.    In February 1998, the Financial Accounting Standards Board (FASB) 
      issued SFAS No. 132, "Employers' Disclosures about Pensions and Other 
      Postretirement Benefits," which amends the disclosure requirements of 
      SFAS No. 87, "Employers' Accounting for Pensions," SFAS No. 88, 
      "Employers' Accounting for Certain Settlements and Curtailments of 
      Defined Benefit Pension Plans and for Termination Benefits," and SFAS 
      No. 106,"Employers' Accounting for Postretirement Benefits Other Than 
      Pensions." SFAS No. 132 standardizes the disclosure requirements of 
      SFAS No. 87 and No. 106 to the extent practicable and recommends a 
      parallel format for presenting information about pensions and other 
      postretirement benefits. This Statement is applicable to all entities 
      and addresses disclosure only. The Statement does not change any of 
      the measurement or recognition provisions provided for in SFAS No. 87, 
      No. 88, or No. 106. The Statement is effective for fiscal years 
      beginning after December 15, 1997. Management anticipates providing 
      the required disclosures in the December 31, 1998 consolidated 
      financial statements.

5.    In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative 
      Instruments and Hedging Activities," which establishes accounting and 
      reporting standards for derivative instruments, including certain 
      derivative instruments embedded in other contracts, and for hedging 
      activities. This Statement is effective for all fiscal quarters of 
      fiscal years beginning after June 15, 1999. Management is currently 
      evaluating the impact of this Statement on the Company's consolidated 
      financial statements.


[LOGO] KPMG Peat Marwick LLP
       515 Broadway
       Albany, New York 12207


                        INDEPENDENT AUDITORS' REPORT


The Board of Directors
Banknorth Group, Inc.

      We have reviewed the accompanying consolidated balance sheets of 
Banknorth Group, Inc. and subsidiaries ("the Company") as of June 30, 1998 
and 1997, and the related consolidated statements of income for the three 
and six month periods ended June 30, 1998 and 1997, and the consolidated
statements of changes in shareholders' equity for the three months ended
March 31, 1998 and June 30, 1998, and cash flows for the six month periods
ended June 30, 1998 and 1997. These consolidated financial statements are the 
responsibility of the Company's management.

      We conducted our review in accordance with standards established by 
the American Institute of Certified Public Accountants. A review of interim 
financial information consists principally of applying analytical 
procedures to financial data and making inquiries of persons responsible for 
financial and accounting matters. It is substantially less in scope than an 
audit conducted in accordance with generally accepted auditing standards, 
the objective of which is the expression of an opinion regarding the 
financial statements taken as a whole. Accordingly, we do not express such 
an opinion.

      Based on our review, we are not aware of any material modifications 
that should be made to the consolidated financial statements referred to 
above for them to be in conformity with generally accepted accounting 
principles.

      We have previously audited, in accordance with generally accepted 
auditing standards, the consolidated balance sheet of Banknorth Group, Inc. 
and subsidiaries as of December 31, 1997, and the related consolidated 
statements of income and cash flows for the year then ended (not presented 
herein) and the consolidated statement of changes in shareholders' equity 
for the year then ended; and in our report dated January 23, 1998, except 
for note 15 which is as of February 24, 1998, we expressed an unqualified 
opinion on those consolidated financial statements. In our opinion, the 
information set forth in the accompanying consolidated balance sheet as of 
December 31, 1997 and the consolidated statements of changes in 
shareholders' equity for the year ended December 31, 1997, is fairly stated, 
in all material respects, in relation to the consolidated balance sheet and 
statement of changes in shareholders' equity from which it has been derived.


                                       /S/ KPMG PEAT MARWICK LLP

Albany, New York
July 17, 1998


         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                          AND RESULTS OF OPERATIONS

      The financial review which follows focuses on the factors affecting 
the consolidated financial condition and results of operations of Banknorth 
Group, Inc. ("the parent company") and its subsidiaries during the three and 
six months ended June 30, 1998, with comparisons to 1997, as applicable. 
Collectively, the parent company and its subsidiaries are referred to herein 
as "Banknorth" or "Company". Net interest income and net interest margin are 
presented in this discussion on a fully taxable equivalent basis (f.t.e.). 
Balances discussed are daily averages unless otherwise described. The 
unaudited consolidated interim financial statements, as well as the 1997 
annual report to shareholders' should be read in conjunction with this 
review. Amounts in prior period consolidated financial statements are 
reclassified whenever necessary to conform to the current period's 
presentation.

      Except for historical information contained herein, the matters 
contained in this review are "forward-looking statements" that involve risk 
and uncertainties, including statements concerning future events or 
performance and assumptions and other statements which are other than 
statements of historical facts. The Company wishes to caution readers that 
the following important factors, among others, could in the future affect 
the Company's actual results and could cause the Company's actual results 
for subsequent periods to differ materially from those expressed in any 
forward-looking statement made by or on behalf of the Company herein: 

      *  the effect of changes in laws and regulations, including federal 
         and state banking laws and regulations, with which the Company and 
         its banking subsidiaries must comply, the cost of such compliance 
         and the potentially material adverse effects if the Company or any 
         of its banking subsidiaries were not in substantial compliance 
         either currently or in the future as applicable;

      *  the effect of changes in accounting policies and practices, as may 
         be adopted by the regulatory agencies as well as by the Financial 
         Accounting Standards Board, or changes in the Company's 
         organization, compensation and benefit plans;

      *  the effect on the Company's competitive position within its market 
         area of increasing consolidation within the banking industry and 
         increasing competition from larger "super regional" and other 
         banking organizations as well as non-bank providers of various 
         financial services;

      *  the effect of certain customers and vendors of critical systems or 
         services failing to adequately address issues relating to becoming 
         year 2000 compliant;

      *  the effect of unforeseen changes in interest rates;

      *  the effects of changes in the business cycle and downturns in the 
         local, regional or national economies.

      The Company wishes to caution readers not to place undue reliance on 
any forward-looking statements, which speak only as of the date made, and to 
advise readers that various factors, including those described above, could 
cause the Company's actual results or circumstances for future periods to 
differ materially from those anticipated or projected.

      The Company does not undertake, and specifically disclaims any 
obligation, to publicly release the result of any revisions which may be 
made to any forward-looking statements to reflect the occurrence of 
anticipated or unanticipated events or circumstances after the date of such 
statements.

ACQUISITIONS
EVERGREEN BANCORP, INC.

      On July 31, 1998, Banknorth Group, Inc. announced a definitive 
merger agreement to acquire Evergreen Bancorp, Inc. in exchange for stock 
valued at $291.2 million ("Evergreen acquisition"). The transaction is expected 
to enhance Banknorth's earnings in 1999. Under the terms of the merger 
agreement, shareholders of Evergreen will receive a fixed exchange of 0.9
shares of Banknorth common stock for each share of Evergreen common stock plus
cash in lieu of any fractional shares. Banknorth will issue approximately 7.9
million shares in the transaction, bringing Banknorth's outstanding shares to
approximately 23.2 million.

      The merger is subject to approval by shareholders of both companies and
is expected to be completed by the end of 1998 or early in 1999.

      The proposed exchange will be tax-free and accounted for as a 
pooling-of-interests. The Company also announced the recision of its previously
announced stock repurchase program.

BANKBOSTON BERKSHIRE COUNTY

      On July 1, 1998, Banknorth Group, Inc. announced it entered into a 
definitive agreement with BankBoston, N.A. to purchase the bank's Berkshire 
County, Massachusetts, operations ("Berkshire acquisition"). Banknorth will 
pay $52.5 million to acquire ten full-service branches and one limited 
service branch, consisting of approximately $285 million of deposits, $78
million of commercial loans, $40 million of consumer loans, and Private Banking 
services that include an investment management portfolio of approximately 
$1.0 billion.

      The loans and deposits will be acquired by Banknorth's Massachusetts 
subsidiary, First Massachusetts Bank, N.A., based in Worcester, 
Massachusetts. The Private Banking business will be acquired by Banknorth's 
trust and investment subsidiary, The Stratevest Group, N.A. The acquisition, 
Banknorth's second in Massachusetts, is subject to regulatory approvals and 
is expected to close prior to year end.

      To complete the transaction, Banknorth will reallocate capital 
resources through the use of a special dividend from its subsidiary banks, 
except First Massachusetts, to the parent company. All subsidiary banks 
paying a special dividend are expected to remain well-capitalized after 
payment. The capital (estimated to be approximately $25 million) will then 
be infused into First Massachusetts to ensure adequate capital levels exist 
at this subsidiary.

      After completion of both of the above noted transactions, total assets 
of Banknorth will be approximately $4.3 billion.

OVERVIEW

      Banknorth recorded net income of $8.3 million, representing diluted 
earnings per share ("EPS") of $.53 for the three months ended June 30, 1998,
compared to $7.1 million, or $.45 diluted EPS for the three months ended 
June 30, 1997. For the year to date period ended June 30, 1998, net income 
was $ 15.2 million, or $.97 diluted EPS, as compared to $14.1 million, or 
$.90 diluted EPS.

During the second quarter of 1998:

*   Banknorth's stock price closed at $37.00 per share on June 30, 1998.

*   The Company completed a 2-for-1 stock split in the form of a 100% stock 
    dividend on April 6, 1998.

*   Shareholders' voted to increase the authorized common stock from 
    20,000,000 shares to 70,000,000 shares and to create a class of 
    preferred stock; $.01 par value, 500,000 authorized shares.

COMMON AND PREFERRED STOCK

      At the 1998 Annual Meeting of Shareholders of Banknorth Group, Inc. on 
May 12, 1998, the shareholders voted to amend the Certificate of 
Incorporation to increase the number of authorized shares of common stock 
from 20,000,000 to 70,000,000 and to create a class of preferred stock. 
500,000 shares of $.01 par value preferred stock was authorized and no 
shares of preferred stock are currently outstanding.

      On February 24, 1998, the board of directors declared a 2-for-1 split 
of its common stock effected in the form of a 100% stock dividend. The new 
shares were issued on April 6, 1998, to shareholders of record on March 20, 
1998. The stock split was recorded as of December 31, 1997 by a transfer of 
$7.8 million from surplus to common stock, representing the $1.00 par value 
for each additional share issued. All share and per share data has been 
restated to reflect the split.

ASSET/LIABILITY MANAGEMENT

      In managing its asset portfolios, Banknorth utilizes funding and 
capital sources within sound credit, investment, interest rate and liquidity 
risk guidelines. Loans and securities are the Company's primary earning 
assets with additional capacity invested in money market instruments. 
Earning assets were 92.87% and 94.07% of total assets at June 30, 1998 and 
1997, respectively.

      Banknorth, through its management of liabilities, attempts to provide 
stable and flexible sources of funding within established liquidity and 
interest rate risk guidelines. This is accomplished through core deposit 
products offered within the markets served by the Company as well as through 
the prudent use of purchased liabilities.

      Banknorth's objectives in managing its balance sheet are to limit the 
sensitivity of net interest income to actual or potential changes in 
interest rates, and to enhance profitability through strategies that promise 
sufficient reward for understood and controlled risk. The Company is 
deliberate in its efforts to maintain adequate liquidity, under prevailing 
and forecasted economic conditions, and to maintain an efficient and 
appropriate mix of core deposits, purchased liabilities and long-term debt.

Corporation-Obligated Mandatorily Redeemable Capital Securities

      On May 1, 1997, Banknorth established Banknorth Capital Trust I (the 
"Trust") which is a statutory business trust formed under Delaware law upon 
filing a certificate of trust with the Delaware Secretary of State. The 
Trust exists for the exclusive purposes of (i) issuing and selling 30 year 
corporation-obligated mandatorily redeemable capital securities ("capital 
securities") in the aggregate amount of $30.0 million at 10.52%, (ii) using 
the proceeds from the sale of the capital securities to acquire the junior 
subordinated debentures ("debentures") issued by the parent company and (iii)
engaging in only those other activities necessary, advisable or incidental
thereto. The debentures are the sole assets of the Trust and, accordingly,
payments under the debentures are the sole revenue of the Trust. All of the
common securities of the Trust are owned by the parent company. The Company has
used the net proceeds from the sale of the capital securities for general
corporate purposes. The capital securities, with associated expense that is tax 
deductible, qualify as Tier I capital under regulatory definitions. The 
parent company's primary sources of funds to pay interest on the debentures 
are current dividends from subsidiary banks. Accordingly, the parent 
company's ability to service the debentures is dependent upon the continued 
ability of the subsidiary banks to pay dividends. As noted above, the 
Company plans to reallocate capital resources through the use of a special 
dividend from certain of its subsidiary banks to the parent company. Management
does not believe that this reallocation of capital nor the impact on the 
dividend paying capacity of these subsidiary banks will adversely effect the 
parent company's ability to service the debentures. See also "Capital 
Resources" section of this document.

Earning Assets

      Earning assets were $2.8 billion during the second quarter of 1998, an 
increase of $178.3 million, or 6.9% from the second quarter of 1997 
primarily due to the growth of the loan portfolio resulting from increased 
loan demand and growth in the securities available for sale portfolio. For 
the year to date period, earning assets were $2.8 billion as compared to  
$2.5 billion in 1997. Table A, Mix of Average Earning Assets, shows how the 
mix of earning assets has changed as compared to the same period in 1997.

      Loans. Average total loans of $2.0 billion during the three months 
ended June 30, 1998, were $65.4 million, or 3.4%, above the same period of 
1997. The increase in total loans from year to year is attributable to 
strong loan demand in the Massachusetts market and improved lending activity 
in Vermont and New Hampshire. Table B, Loan Portfolio, provides the detailed 
components of the loan portfolio as of June 30, 1998 and 1997, as well as 
December 31, 1997.

      Given the current economic indicators and interest rate environment, 
management believes that the Company will see continued but slowing growth 
in the loan portfolio during 1998. If interest rates rise, a greater slow 
down in lending activity could be expected.

      Loans held for sale. Loans designated as held for sale are primarily 
single-family mortgages, originated by the Company's mortgage banking 
subsidiary or purchased through its wholesale lending operation, awaiting 
sale into the secondary market or to other Banknorth subsidiaries. Loans 
originated or purchased by the mortgage company are sold on the secondary 
market with some level of production, primarily adjustable rate mortgages, 
retained by the Company and held in its mortgage portfolio. Loans held for 
sale were $41.9 million during the second quarter of 1998, $29.2 million, or 
229.3% higher than the average for the three-month period ending June 30, 
1997, and $12.0 million or 40.1% higher than the average for the first 
quarter of 1998. New loan originations and refinancing activity are at record 
levels due to the current low market interest rates. This high production 
level results in a greater level of mortgage product awaiting sale into the 
secondary market. Management expects production will continue to be strong 
throughout the next few months due to the high application volume in 
process.

      Securities available for sale. This portfolio is managed on a total 
return basis with the objective of exceeding, by 50 basis points, the return 
that would be experienced if investing solely in U.S. Treasury instruments. 
The primary purpose of this category of investments is liquidity while 
simultaneously producing earnings, and is managed under prudent policy 
limits established for average duration, average convexity and average 
portfolio life.

      Period end balances in securities available for sale totaled $723.8 
million at June 30, 1998 as compared to $701.1 million at June 30, 1997, an 
increase of $22.7 million or 3.2%. The June 1998 balance is stated net of a 
fair value adjustment reflecting net unrealized gains of $6.0 million, 
whereas the June 1997 balance is net of a fair value adjustment reflecting 
net unrealized losses of $3.2 million. The increase in the portfolio balance 
noted above was primarily the result of the Company increasing its holdings 
of securities available for sale in order to effectively leverage the net 
proceeds of the capital securities, and the re-investment of cash flows 
generated by the held-to-maturity portfolio into the available for sale 
portfolio. These increases were partially offset by the Company's purchase 
of $40.0 million in bank-owned life insurance ("BOLI") in the fourth quarter 
of 1997. Securities available for sale were allowed to mature or were sold 
in order to provide the funding necessary to implement the BOLI program. 
Average balances for securities available for sale for the three months 
ended June 30, 1998 and 1997 were $718.6 million and $627.9 million, 
respectively.

      In January 1998, Banknorth sold approximately $85.5 million of balloon 
mortgage-backed securities from the available for sale portfolio. While the 
sales resulted in a pre-tax net loss of $504 thousand, the enhanced yield 
received through re-investment will result in recovery of the loss prior to 
the end of 1998. Investment securities yielding approximately 5.12% were 
sold and replaced with securities yielding approximately 6.48%. After 
recovering the $504 thousand loss incurred, Banknorth anticipates additional 
interest income of approximately $523 thousand during 1998 and approximately 
$994 thousand in improved interest income in 1999 as a result of this sale. 
The new investment securities purchased, as well as the characteristics of 
the portfolio after the transaction, meet all established corporate 
guidelines.

      Investment securities. The designation "investment securities" is made 
at the time of purchase or transfer based upon the intent and ability to 
hold these securities until maturity. The management of this portfolio 
focuses on yield and earnings generation, liquidity through cash flow and 
interest rate risk characteristics within the framework of the entire 
balance sheet. Cash flow guidelines and average duration targets have been 
established for management of this portfolio. As of June 30, 1998, the 
balance of securities in this category was $13.9 million, $14.1 million 
below the balance at June 30, 1997. The primary cause of the reduced 
portfolio size was the reinvestment of cash flows from maturities during 
1997, and thus far in 1998 into the available for sale portfolio.

      Table C, Securities Available for Sale and Investment Securities 
contains details of investment securities at June 30, 1998 and 1997, as well 
as December 31, 1997.

      Money market investments. Money market investments, primarily Federal 
funds sold, averaged $10.8 million during the second quarter of 1998, up 
$5.1 million, or 90.0%, from the second quarter of 1997. Subsidiary banks 
with excess overnight cash positions invest such funds with other subsidiary 
banks that may have short term funding needs. This internal settlement, 
performed prior to purchasing/selling funds in the market, reduces funding 
costs and improves overall liquidity. For the year to date period ended June 
30, 1998, money market investments were $6.9 million, 2.9% higher than the 
average for the six months ended June 30, 1997.

      Income on earning assets. Income from earning assets was $57.4 million 
for the three-month period ended June 30, 1998, as compared to $54.4 million 
for the same period in 1997. The increase of $3.0 million, or 5.4%, resulted 
from the increases in earning assets through normal growth and asset 
purchases described previously. Total earning assets during the second 
quarter of 1998 of $2.8 billion yielded 8.32%, while in 1997 earning assets 
of $2.6 billion yielded 8.41%. The increase in earning assets contributed 
$3.5 million towards the increase in interest income, while the decline in 
yield of 9 basis points resulted in $573 thousand less in interest income. 
Table D, Average Balances, Yields and Net Interest Margins and Table F, 
Volume and Yield Analysis contain details of changes by category of interest 
income from earning assets.

      For the six months ended June 30, 1998 and 1997, income from earning 
assets was $113.6 million and $105.6 million, respectively. Total earning 
assets of $2.8 billion, increased $225.7 million or 8.9% over the six month 
average of 1997. The yield on earning assets was 8.34% during the first six 
months of 1998 as compared to 8.41% during the same period of 1997. During 
the first six months of 1998, the increase in earning assets contributed 
$9.0 million towards the increase over the same period of 1997, while the 7 
basis point reduction in yield caused a $972 thousand decrease.

Funding Sources

      Banknorth utilizes various traditional sources of funding to support 
its earning asset portfolios. Average total net funding increased by $188.2 
million, or 7.6%, in the second quarter of 1998 in comparison to the average 
for the quarter ended June 30, 1997. Table E, Average Sources of Funding, 
presents the various categories of funds used and the corresponding average 
balances for the second quarter of 1998 and 1997.

      Deposits. Total core deposits averaged $2.1 billion during the three 
month period ended June 30, 1998, $145.5 million, or 7.3%, over the second 
quarter average of 1997. NOW and money market accounts increased by $181.9 
million, while retail time deposits in denominations less than $100,000 
decreased by $38.7 million and regular savings decreased $30.2 million. In 
the current low rate environment, the indexed money market product offered 
is an attractive option for our customers. Total core deposits represented 
79.6% of total net funding during the second quarter of 1998 as compared to 
79.8% during the same quarter of 1997.

      Purchased liabilities. Total purchased liabilities increased on 
average by $45.4 million to $535.2 million during the second quarter of 1998 
from $489.8 million during the second quarter of 1997. The increased 
borrowings, or purchased liabilities, were the result of the incremental 
funding requirements related to loan and investment purchases made during 
1997. As stated previously, various securities purchases were made to 
increase the Company's earning asset base and effectively utilize the net 
proceeds from the capital securities transaction. Banknorth constantly seeks 
to fund its earning assets in the most efficient and profitable manner. 
Accordingly, management expects prudent levels of short-term borrowed funds 
and long-term debt to continue to be important sources of funding.

      Bank Debt. Average bank debt of $9.7 million during the second quarter 
of 1998 represents the 1994 funding of the acquisition of North American 
Bank Corporation. Banknorth financed the transaction with a bank credit 
facility whose original terms were re-negotiated in December 1996. The re-
negotiated terms provide improved pricing and an extension of the repayment 
period. The balance of $9.1 million at June 30, 1998 will be repaid within 
four years.

      Interest expense summary. Total interest expense for the three months 
ended June 30, 1998 was $26.9 million, an increase of $2.5 million or 10.2%, 
as compared to the same period of 1997. Total interest bearing liabilities 
of $2.4 billion, increased $155.8 million or 7.1%. Increased levels of 
interest-bearing liabilities contributed $1.7 million to the increase while 
the increase in rates paid increased interest expense by $768 thousand. The 
cost of interest bearing liabilities was 4.57% in the second quarter of 
1998, an increase of 13 basis points from the second quarter of 1997.

      Total interest bearing liabilities averaged $2.3 billion during the 
six months ended June 30, 1998, $189.2 million, or 8.8%, higher than in 
1997. The cost of funds was 4.58% in 1998 as compared to 4.38% in 1997. 
Table D, Average Balances, Yields and Net Interest Margins and Table F, 
Volume and Yield Analysis contain details of changes by category of interest 
bearing liabilities and interest expense.

Net Interest Income

      Net interest income totaled $30.4 million and $30.0 million for the 
three month periods ended June 30, 1998 and 1997, respectively. The net 
interest margin was 4.41% during the second quarter of 1998 as compared to 
4.63% during the same period of 1997. The yield on earning assets of 8.32% 
for the second quarter of 1998, was 9 basis points below the corresponding 
period of the prior year. Interest rates generally decreased during 1997 and 
early 1998. This trend of the decreasing yield on earning assets was 
experienced throughout 1997 and 1998. During the fourth quarter of 1997, the 
net interest margin was 4.48%, 9 basis points below the margin for the full 
year of 1997. The net interest margin narrowed during 1997 and to date in 
1998 as competition for quality credits and retail deposits resulted in a 
tighter spread between asset yields and deposit costs. A changing mix of 
deposits where higher cost deposits, such as money market accounts, are 
increasing whereas lower cost deposits are declining contributed to the 
narrowing margin.

      Also impacting the net interest margin was the issuance of $30.0 
million in corporation-obligated mandatorily redeemable capital securities 
in May 1997. In an effort to increase interest income sufficient to offset 
the cost of the capital securities, the Company purchased approximately 
$120.0 million in earning assets. This leveraging strategy is anticipated to 
be short-term in nature, and use of these funds may change in response to 
future corporate initiatives.

      Further, the purchase of $40.0 million in BOLI adversely impacted the 
net interest margin as securities available for sale were allowed to mature 
or were sold in order to provide the funding necessary to implement the 
bank-owned life insurance program. The earnings from BOLI are recorded as 
other non-interest income and are tax exempt.

RISK MANAGEMENT

Credit Risk

      Credit risk is managed through a network of loan officer authorities, 
credit committees, loan policies and oversight from the corporate senior 
credit officer and subsidiary boards of directors. Management follows a 
policy of continually identifying, analyzing and grading credit risk 
inherent in each loan portfolio. An ongoing independent review, subsequent 
to management's review, of individual credits is performed on each 
subsidiary bank's commercial loan portfolios by the independent Loan Review 
function.

      As a result of management's ongoing review of the loan portfolio, 
loans are placed in non-accrual status, either due to the delinquent status 
of principal and/or interest payments, or a judgment by management that, 
although payments of principal and/or interest are current, such action is 
prudent. Loans are generally placed in non-accrual status when principal 
and/or interest is 90 days overdue, except in the case of consumer loans 
which are generally charged off when loan principal and/or interest payments 
are 120 days overdue.

      Non-performing assets ("NPAs"). Non-performing assets include non-
performing loans, which are those loans in a non-accrual status, loans which 
have been treated as troubled debt restructurings and loans past due 90 days 
or more and are still accruing interest. Also included in the total non-
performing assets are foreclosed and repossessed non-real estate assets.

      NPAs were $12.2 million at June 30, 1998, a decrease of $4.1 million 
from both June 30, 1997 and December 31, 1997 when NPAs amounted to $16.3 
million. The ratio of NPAs to loans plus other real estate owned and 
repossessed assets at June 30, 1998, was .62% compared to .84% at June 30, 
1997. Table G, Non-performing Assets, contains the details for June 30, 1998 
and 1997, and December 31, 1997.

      Non-performing loans ("NPLs") at June 30, 1998 were $11.0 million, a 
net decrease of $4.8 million, or 30.2%, from June 30, 1997. The decrease in 
NPLs is largely in non-accrual loans reflecting relative improvement in the 
overall credit quality of the loan portfolio. Delinquency rates in the 
residential portfolio are consistent with trends seen regionally and 
nationally. Given the possibility of increases in interest rates, management 
expects that certain credits may encounter difficulty in continuing to 
perform under the contractual terms of their loans should rates actually 
increase. While this occurrence might result in increases in NPLs and 
subsequent charge-offs, management does not expect it to materially affect 
the Company's performance during the year.

      Total other real estate owned and repossessed assets were $1.2 million 
at June 30, 1998, up $637 thousand from one year earlier and down $378 
thousand from December 31, 1997.

      Allowance for loan losses and provision. The balance of the allowance 
for loan losses ("allowance") has been accumulated over the years through 
periodic provisions and is available to absorb future losses on loans. The 
adequacy of the allowance is evaluated monthly based on review of all 
significant loans, with particular emphasis on non-performing and other 
loans, if any, that management believes warrant special attention. The 
balance of the allowance is maintained at a level that is, in management's 
judgment, representative of the amount of risk inherent in the loan 
portfolio given past, present and expected conditions.

      Table H, Summary of Loan Loss Experience, includes an analysis of the 
changes to the allowance for the six months ended June 30, 1998 and 1997, as 
well as for the year ended December 31, 1997. Loans charged off in the first 
six months of 1998 were $3.8 million, or an annualized .39% of average 
loans. This represents an improvement over the prior year's six month 
results when charge-offs totaled $5.5 million, or an annualized .58% of 
average loans. Recoveries in the first six months of 1998 on loans 
previously charged off were $2.5 million as compared to $2.3 million for the 
same period of 1997.

      The provision for loan losses ("provision") for the three months ended 
June 30, 1998 was $1.8 million, or an annualized .37% of average loans. The 
provision for the first six months of the year was $3.7 million or an 
annualized .37% of average loans. Provisions of $3.7 million, or an 
annualized .39% of average loans, and $7.7 million, or .40% of average loans 
were experienced during the first half of 1997 and the full year of 1997, 
respectively.

      Provisions recorded are those necessary to maintain the allowance at a 
level adequate enough to absorb reasonably predictable loan charge-offs. At 
June 30, 1998, the allowance provided a coverage of non-performing loans of 
255.81% as compared to 175.08% and 152.21% at December 31, 1997 and June 30, 
1997, respectively.

Market Risk

      Interest rate risk is the most significant market risk affecting the 
Company. Other types of market risk, such as foreign currency exchange rate 
risk and commodity price risk, do not arise in the normal course of the 
Company's business activities.

      The responsibility for balance sheet risk management oversight is the 
function of the Asset/Liability Committee ("ALCO"). The corporate ALCO, 
chaired by the chief financial officer and composed of various subsidiary 
presidents and other members of corporate senior management, meets on a 
monthly basis to review balance sheet structure, formulate strategy in light 
of expected economic conditions, and review performance against guidelines 
established to control exposure to the various types of inherent risk. Bank 
subsidiary ALCOs meet to implement policy, review adherence to guidelines, 
adjust product prices as necessary and monitor liquidity.

      Interest rate risk can be defined as an exposure to a movement in 
interest rates that could have an adverse effect on the Company's net 
interest income. Interest rate risk arises naturally from the imbalance in 
the repricing, maturity and/or cash flow characteristics of assets and 
liabilities. Management's objectives are to measure, monitor and develop 
strategies in response to the interest rate risk profile inherent in the 
Company's consolidated balance sheet and off-balance sheet financial 
instruments.

      Interest rate risk is managed by the Corporate ALCO. Interest rate 
risk measurement and management techniques incorporate the repricing and 
cash flow attributes of balance sheet and off-balance sheet instruments as 
they relate to potential changes in interest rates. The level of interest 
rate risk, measured in terms of the potential future effect on net interest 
income, is determined through the use of modeling and other analytical 
techniques under multiple interest rate scenarios. Interest rate risk is 
evaluated on a quarterly basis and reviewed by the Corporate ALCO with 
subsidiary risk profiles presented to the respective boards of directors.

      The Company's Asset Liability Management Policy, approved annually by 
the boards of directors, establishes interest rate risk limits in terms of 
variability of net interest income under rising, flat and decreasing rate 
scenarios. It is the role of the ALCO to evaluate the overall risk profile 
and to determine actions to maintain and achieve a posture consistent with 
policy guidelines.

      Certain imbalances that could potentially cause interest rate risk to
exceed policy limits are correctable through management of asset and liability
product offerings. Depending upon the specific nature of the imbalance, it may
be more efficient and less costly to utilize off-balance sheet instruments such
as interest rate swaps and interest rate cap or floor agreements, among other 
things, to correct the imbalance. Banknorth has historically utilized both 
swaps and floors to address certain interest rate risk exposures.

      A significant portion of the Company's loans are adjustable or 
variable rate resulting in reduced levels of interest income during periods 
of falling rates. Certain categories of deposits reach a point in this 
instance where market forces prevent further reduction in the rate paid on 
those instruments. The net effect of these circumstances would be reduced
interest income offset only by a nominal decrease in interest expense, thereby 
narrowing the net interest margin. To protect the Company from this 
occurrence, interest rate floors in the notional amount of $295.0 million are
used to mitigate the potential reduction in interest income on certain 
adjustable and variable rate loans. The notional amount of $50.0 million in 
interest rate swaps previously in use were sold in May 1998 for a net gain 
of $254 thousand. This gain is being amortized into interest income over the 
original remaining lives of the initial swap contracts of approximately one 
year. The swaps were sold in order to reduce interest rate risk sensitivity of
the Company.

      The aggregate cost of the interest rate floors was $2.8 million which 
is being amortized as an adjustment to the related loan yield on a straight-
line basis over the terms of the agreements. At June 30, 1998, the 
unamortized balance of these interest rate floors was $1.2 million. The 
estimated fair value of these floors was $845 thousand as of June 30, 1998.

      Banknorth utilizes an interest rate risk model widely recognized in 
the financial industry to monitor and measure interest rate risk. The model 
simulates the behavior of interest income and expense of all on and off 
balance sheet financial instruments under different interest rate scenarios 
together with a dynamic future balance sheet. Banknorth measures its 
interest rate risk in terms of potential changes in net interest income.

Liquidity Risk

      Banknorth seeks to obtain favorable sources of liabilities and to 
maintain prudent levels of liquid assets in order to satisfy varied 
liquidity demands. Besides serving as a funding source for maturing 
obligations, liquidity provides flexibility in responding to customer 
initiated needs. Many factors affect the Company's ability to meet liquidity 
needs, including variations in the markets served by its network of offices, 
its mix of assets and liabilities, reputation and credit standing in the 
marketplace, and general economic conditions.

      The Company actively manages its liquidity position through target 
ratios established under its liquidity policy. Continual monitoring of these 
ratios, both historically and through forecasts under multiple interest rate 
scenarios, allows Banknorth to employ strategies necessary to maintain 
adequate liquidity. Management has also defined various degrees of adverse 
liquidity situations which could potentially occur and has prepared 
appropriate contingency plans should such situations arise.

      The Company achieves its liability based liquidity objectives in a 
variety of ways. Net liabilities can be classified into three basic 
categories for the purpose of managing liability-based liquidity: core 
deposits, purchased liabilities and long-term or capital market funds. Core 
deposits consist of non-interest bearing demand deposits and retail 
deposits. These deposits result from relatively dependable customers and 
commercial banking relationships and are therefore viewed as a stable 
component of total required funding. Banknorth will continue to seek funding 
in the most efficient and cost effective manner as possible. Table E 
reflects the components of funding for June 30, 1998 and 1997.

      Among the traditional funding instruments comprising the category of 
purchased liabilities are time deposits $100 thousand and greater, Federal 
funds purchased, securities sold under agreement to repurchase, borrowings 
from the United States Treasury Department Treasury, Tax and Loan accounts, 
and short and long-term borrowings from the FHLB.

      One of the principal components of short-term borrowed funds is 
securities sold under agreement to repurchase. These borrowings generally 
represent short-term uninsured customer investments, which are secured by 
Company securities. During the second quarter of 1998, the average 
securities sold under agreement to repurchase were $137.4 million, as 
compared to $135.7 million in the second quarter of 1997.

      Borrowings from the FHLB, both short-term and long-term were up
$39.2 million, or 16.3%, from the second quarter of 1997 to the second 
quarter of 1998. The increase was needed to support asset growth and the mix 
of short and long-term funding is dependent on rates and purpose of the debt.

      As previously discussed, the Company utilized financial institution 
borrowings pursuant to a five year credit facility to finance the NAB 
acquisition. The Company's primary source of funds to pay principal and 
interest under this credit facility is dependent upon the continued ability 
of the subsidiary banks to pay dividends in an amount sufficient to service 
such debt.

      A secondary source of liquidity is represented by asset-based 
liquidity. Asset-based liquidity consists of holdings of securities 
available for sale and short-term money market investments that can be 
readily converted to cash, as well as single-family mortgage loans which 
qualify for secondary market sale.

      The Company also uses the capital markets as a source of liquidity. In 
May 1997, the Company established a trust to issue and sell $30.0 million in 
capital securities. The net proceeds were used for general corporate 
purposes. In February 1996, the Company issued 2,044,446 shares of common 
stock resulting in $32.2 million in net proceeds which were used to provide 
a portion of the initial capital of FMB and to help offset the reduction in 
the Company's regulatory capital ratios resulting from the acquisition.

OTHER OPERATING INCOME AND EXPENSES

      Other operating income is a significant source of revenue for 
Banknorth and an important factor in the Company's results of operations. 
Other operating income totaled $8.4 million for the second quarter of 1998, 
$1.8 million or 27.6% higher than the second quarter of 1997. For the six 
months ended June 30, 1998 and 1997, other operating income was $15.6 
million and $13.2 million, respectively. The improvement in other operating 
income resulted primarily from the implementation of performance initiatives 
announced in the third quarter of 1997 and the current strong mortgage 
banking environment.

      Trust and investment management. The trust function contributes the 
largest recurring portion of other operating income through fees generated 
from the performance of trust and investment management services. Income 
from trust and investment management services totaled $2.4 million in the 
second quarter of 1998, an increase of $313 thousand, or 15.0% over the same 
period of 1997. For the six months ended June 30, 1998, trust and investment 
management income was $4.6 million, up $513 thousand, or 12.5%, over the 
same period of 1997. The increase resulted from increased assets under 
management by The Stratevest Group, N.A., the Company's trust bank as well 
as strong financial market conditions. Opportunities for increases in the 
generation of trust income lie in increased penetration of the Massachusetts 
and New Hampshire markets. The company is experiencing increased sales in these
areas and, accordingly, management expects increased levels of trust and
investment management income for the entire 1998 year as compared to the
previous year.

      Service charges on deposit accounts. Service charges on deposit 
accounts, $2.2 million for the three months ended June 30, 1998, were $242 
thousand, or 12.2% above the same period of 1997. During late 1997, 
Banknorth reviewed and enhanced its policies and practices regarding service 
charges and service charge waivers. Accordingly, the level of fee income 
increased this quarter over the 1997 level. For the six months ended June 30,
1998, service charges on deposits were $4.4 million, an increase of
$549 thousand or 14.3% compared to the first six months of 1997.

      Card product income. Card product income declined $308 thousand, to 
$514 thousand, for the second quarter of 1998 as compared to the second 
quarter of 1997. The decline is the result of the sale of the merchant
processing business in late 1997. Income on card products is, therefore, 
expected to continue at a reduced level throughout 1998 as the gross 
merchant processing income, amounting to $1.4 million in 1997, will no 
longer be received by the Company. Eliminating the effect of the merchant 
services sale, card product income was up $40 thousand in the second quarter 
of 1998 compared to the second quarter of 1997 primarily as a result of the 
increased usage of the debit and Visa card product. For the six months ended 
June 30, 1998 and 1997, card product income was $922 thousand and $1.5 
million, respectively.

      Loan servicing income. Loan servicing income, primarily mortgage 
servicing at BMC, was $216 thousand in the second quarter of 1998, a 
decrease of $424 thousand, or 66.3%, from the same period of 1997. The 
decline is the result of the reduction in the balance of mortgage loans 
serviced for unrelated third parties from $991.5 million at June 30, 1997 to 
$919.5 million at the June 30, 1998, and increased amortization of mortgage 
servicing rights ("MSRs"). The amortization of MSRs was $575 thousand in the 
second quarter of 1998 compared to $294 thousand for the same period in 1997. 
During the second quarter of 1998, as a result of the high volume of 
refinancing in the current low interest rate environment, the Company wrote
down $220 thousand of its MSR balance due to impairment considerations. The
total impairment writedown for the year amounts to $300 thousand. Further
impairment writedowns or reserves may be necessary during the remainder of the
year. For the six months ended June 30, 1998 and 1997, loan servicing income
was $633 thousand and $1.3 million, respectively.

      Net loan transactions. Net loan transaction income is normally 
generated through the origination and subsequent sale of mortgage products 
into the secondary mortgage market. Net loan transaction income in the 
second quarter of 1998 amounted to $861 thousand, $678 thousand greater than 
the same period of 1997. The significant increase was the result of the 
record level production and sales during the second quarter of 1998 given 
the current low rate environment. This continued the record production and 
sales levels started during the first quarter of the year. For the six 
months ended June 30, 1998, net loan transactions were $1.5 million, $1.1 
million, or 252.2%, higher than the same period of 1997. New loan 
originations and refinancing activity was high for the first six months of 
the year and is expected to remain strong through the third quarter as the 
number of applications pending and loans in various stages of production are 
at high levels as of June 30, 1998.

      Net securities transactions. Net gains or losses from securities 
transactions are also included in other operating income. In the second 
quarter of 1998, the Company realized $69 thousand in net securities gains 
as compared to net gains of $6 thousand in the second quarter of 1997. These 
gains resulted primarily from the sale of three securities. For the six 
months ended June 30, 1998, net losses of $370 thousand were realized 
primarily as the result of the sale of approximately $85.5 million of 
securities available for sale during January 1998 at a net loss of 
approximately $504 thousand. The net loss is expected to be recovered 
through enhanced yields within a six month period after the sale. The Company
anticipates that it will consider additional sales from the securities
available for sale portfolio during 1998 as it attempts to achieve its
objectives in the total return management of the securities available for
sale portfolio. The Company also expects that future losses incurred, if any,
would be recovered through yield improvement within a one to two year period.

      BOLI income. In the fourth quarter of 1997, Banknorth purchased $40.0 
million of bank-owned life insurance which resulted in $553 thousand in 
other income in the second quarter of 1998 and $1.1 million for the six 
month period ended at that point. Securities available for sale were allowed 
to mature or were sold in order to provide the funding necessary to 
implement the bank-owned life insurance program. As a result of this fourth 
quarter transaction, the Company benefits in future periods from the tax-
free nature of income generated from the life insurance policies. In 
general, the yield received from the bank-owned life insurance is comparable 
to the yield previously received on the securities available for sale, 
thereby causing the Company's earnings stream to benefit from the tax 
characteristics of the bank-owned life insurance.

      Other income. Other income amounted to $1.6 million for the three 
months ended June 30, 1998, compared to $862 thousand for the three months 
ended June 30, 1997. The increase was primarily the result of two new 
initiatives implemented in the last year. First, in October 1997, the 
Company commenced charging a terminal usage fee for ATM transactions by non-
customers. This fee allows the Company to recover a portion of the expense 
of operating the ATM network. Additionally, a new official check process was 
implemented in February 1998. For the six months ended June 30, 1998 and 
1997, other income was $2.8 million and $1.9 million, respectively. Again 
the above noted initiatives were primarily responsible for the majority of 
the increase.

Other Operating Expenses

      Other operating expenses for the second quarter of 1998 were $24.6 
million, $612 million, or 2.5%, above expense levels in the second quarter 
of 1997. The majority of the increase in operating expenses is the 
additional $263 thousand expense of the capital securities issued in May 
1997, $240 thousand in State of Vermont franchise tax and a $303 thousand 
increase in compensation expense. The Company's efficiency ratio improved to 
59.49% in the second quarter of 1998, down from 61.43% from the same period 
one year earlier. For the six months ended June 30, 1998 and 1997, other 
operating expense was $49.7 million and $47.0 million, respectively. The 
efficiency ratio on a year date to basis was 60.91% for the first half of 1998 
compared to 61.40% for the same period of 1997.

      Compensation. Compensation expense increased by $303 thousand, or 
3.2%, in the second quarter of 1998 in comparison to the second quarter of 
1997, despite the $344 thousand, or 4.1%, decline in base salary expense. 
The increase was primarily due to the costs associated with the early
retirement of a senior officer, and the increased costs associated with 1998
incentive compensation, including the short-term management incentives, sales
commissions, and restricted stock awards. Restricted stock awards are 
directly impacted by the increase in the Company's stock price, which closed 
at $37.00 as of June 30, 1998 compared to $23.13 as of June 30, 1997. For 
the six months ended June 30, 1998, compensation expense was $1.2 million 
greater than the same period of 1997 due primarily to incentive compensation 
costs, not base salary expense. The full-time equivalent employee (FTE) 
count has fallen 160 FTEs from June 30, 1997 to June 30, 1998. The current 
FTE staffing count is 1,014 FTEs as of June 30, 1998.

      Employee benefits. Employee benefits costs were up $174 thousand or 
8.9% for the three months ended June 30, 1998 compared to the same period 
one year earlier. The increase was primarily in medical insurance premiums 
and pension costs. The pension actuarial assumptions were updated given the 
current interest rate environment and current mortality tables. The result 
was an increase in pension expense of $84 thousand more in the second 
quarter of 1998 compared to the same quarter of 1997.

      Data Processing. Data processing expense increased slightly from $1.2 
million for the three months ended June 30, 1997 to $1.3 million for the 
three months ended June 30, 1998. The Company recently extended its data 
processing contract with its current vendor for an additional 30 months. The 
data processing contract was extended to February 2001. For the six months 
ended June 30, 1998 and 1997, the data processing expenses were $2.5 million 
and $2.4 million, respectively.

      Other real estate owned. Expenses relating to other real estate owned 
and repossessed assets decreased for the second quarter of 1998 by $148 
thousand as compared to June 30, 1997. For the six months ended June 30, 
1998 and 1997, these expenses were $338 thousand and $361 thousand, 
respectively. Included in this expense category in the first six months of 
1998 are net gains on the sale of other real estate owned and repossessed 
assets in the amount of $170 thousand. Net gains on sales in the first half 
of 1997 were $177 thousand. Management anticipates the level of other real 
estate owned and repossession expenses to remain steady throughout the year.

      Legal and professional. Legal and professional expenses of $1.1 
million during the second quarter of 1998, were $448 thousand higher than 
the second quarter of 1997. For the six months ended June 30, 1998 and 1997, 
legal and other professional expenses were $2.0 million and $1.5 million, 
respectively.

      Advertising and marketing. Advertising and marketing expenses were 
$687 thousand for the three months ended June 30, 1998, $57 thousand, or 
9.0% higher than the first three months of 1997. A new branding initiative 
was announced in late 1997 and resulted in higher expenses this quarter in 
comparison to the same quarter a year ago. Marketing expenses are expected 
to be slightly higher throughout 1998 in comparison to 1997. For the six 
months ended June 30, 1998 and 1997, these marketing expenses were $1.4 
million and $1.2 million, respectively.

      Goodwill. Amortization of goodwill amounted to $1.3 million in the second
quarters of 1998 and 1997 and $2.6 million for both of the six month 
periods. The goodwill balance outstanding will increase by approximately $54 
million as a result of the Berkshire acquisition. Goodwill amortization 
expense will increase by $3.6 million annually.

      Capital securities. The capital securities issue in May 1997, which 
created Tier I capital, gave rise to expense of $789 thousand in the second 
quarter of 1998 compared to $526 thousand in the second quarter of 1997. As 
mentioned previously, incremental investment purchases were made in an 
effort to offset the cost of the capital securities through increased net 
interest income. Funding for the investments was primarily in the form of 
borrowings from the FHLB.

      Other. Other expenses totaled $2.7 million and $3.1 million for the 
three months ended June 30, 1998 and 1997, respectively. The majority of the 
$441 thousand decrease was the result of a change in the deferred 
compensation plan for directors. Prior to July 1, 1997, the directors' 
deferred compensation plan was a cash based plan and, therefore, its expense 
was effected by the change in the  stock price of Banknorth. This resulted in 
$433 thousand in director's expense in the second quarter of 1997. The plan 
was amended as of July 1, 1997 such that the ultimate distribution of director 
deferred compensation will be made in Banknorth common stock as opposed to 
cash and, therefore, this expense was eliminated. The only significant 
increase in other expenses was the $240 thousand increase in State of Vermont 
franchise tax mandated under the statewide education reform act. For the six 
months ended June 30, 1998 and 1997, other operating expense was $5.6 million 
and $5.9 million, respectively.

SUBSIDIARY BANK MERGER

      On July 30, 1998, the Company announced that it plans to merge one of
its subsidiary banks, Woodstock National Bank, into another subsidiary bank,
First Vermont Bank. The combination of the two banks is subject to regulatory
approval and is expected to take place in the fall of 1998, with Woodstock
National Bank's three offices becoming branch offices of First Vermont Bank.

YEAR 2000 COMPLIANCE

      Banknorth is addressing the significant issues relating to the 
programming code in existing computer systems as the year 2000 ("Y2k") 
approaches. The Y2k problem is pervasive and complex as virtually every 
computer operation faces the potential affects of the rollover of the two 
digit year value to 00. The issue is whether computer systems are programmed 
to recognize date sensitive information when the year changes to 2000.

      Banknorth does not write any source programming code and therefore is 
dependent upon external vendors and service providers to alter their 
programs to become Y2k compliant. In 1996, the Company began the process of 
reviewing the compliance of all programs in use and in 1997, developed a 
comprehensive plan not only to test these systems but to maintain Y2k 
compliance after successful testing has occurred. Additionally, the Company 
is working closely with all of its vendors of data processing systems in 
order to become familiar with their plans to become compliant. The Company 
has established a Y2k committee comprised of managers throughout the 
organization and will track the plan to address the significant Y2k 
challenges facing the Company.

      The cost of ensuring that computer programs are capable of 
successfully entering the year 2000 is expected to be significant in terms 
of utilization of existing resources. Incremental expenses related to this 
issue are not, at this time, expected to be material to the performance of 
Banknorth Group. The Company is continuing to evaluate appropriate courses 
of corrective action in case they become necessary.

INCOME TAXES

      In the second quarter of 1998, Banknorth recognized income tax expense 
of $3.8 million, as compared to $3.4 million in second quarter of 1997. The 
increase in tax expense is primarily reflective of increased earnings, 
despite the reduction in the effective rate from 32.3% in the second quarter 
of 1997 to 31.2% in the second quarter of 1998. The tax expense on the 
Company's income was lower than tax expense at the statutory rate of 35%, 
due primarily to tax-exempt income, including loans, and securities as well 
as BOLI, and low-income housing credits. For the six months ended June 30, 
1998 and 1997, the effective tax rates were 30.6% and 32.4%, respectively.

CORE TANGIBLE PERFORMANCE

      After removing the impact of the balance of goodwill and the related 
period amortization, "core tangible" performance as of June 30, 1998 and 
1997 was as follows:

<TABLE>
<CAPTION>
                                                             For the six months ended
                                                          June 30, 1998   June 30, 1997
                                                          -----------------------------
(Dollars in thousands, except share and per share data)
<S>                                                        <C>             <C>
Net income, as reported                                    $  15,246       $   14,139
Add: Amortization of goodwill, net of tax                      1,672            1,672
                                                           --------------------------
"Core tangible income"                                     $   16,918      $   15,811
                                                           ==========================

Average tangible assets                                    $2,909,514      $2,645,870
Average tangible equity                                    $  199,273      $  174,339
Diluted weighted average shares outstanding                15,667,264      15,753,880

"Core tangible" return on average tangible assets                1.17%           1.21%
"Core tangible" return on average tangible equity               17.12%          18.29%
"Core tangible" diluted earnings per share                      $1.08           $1.00
</TABLE>

All share and per share data has been restated for the effect of the 2-for-1 
stock split declared February 24, 1998.

CAPITAL RESOURCES

      Consistent with its long-term goal of operating a sound and profitable 
financial organization, Banknorth strives to maintain strong capital ratios. 
Prior to 1996, new issues of equity securities had not been required since 
traditionally most of its capital requirements had been provided through 
retained earnings. However, to continue the Company's growth through 
acquisition, Banknorth chose to raise approximately $32.2 million in equity 
capital through the issuance of 2,044,446 shares of its common stock in 
February 1996.

      In October 1997, Banknorth announced a stock buyback plan. In connection
with the Evergreen acquisition, the stock buyback plan was rescinded on
July 31, 1998. As of June 30, 1998, the Company had repurchased 414,000 shares
which are being held as treasury stock.

      On February 24, 1998, the Board of Directors approved a 2-for-1 split 
of its common stock effected in the form of a 100% stock dividend. The new 
shares were issued April 6, 1998, to shareholders of record on March 20, 
1998. All share and per share data has been restated for this stock split.

      During the second quarter of 1998, the board of directors declared a 
dividend of $.16 per share, resulting in a payout of 29.3% of second quarter 
1998 net income. The board of directors of the Company presently intends to 
continue the payment of regular quarterly cash dividends subject to 
adjustment from time to time, based upon the Company's earnings outlook and 
other relevant factors. The Company's principal source of funds to pay cash 
dividends is derived from dividends from its subsidiary banks. Various laws 
and regulations restrict the ability of banks to pay dividends to their 
shareholders.

      In the first quarter of 1996, as part of its plan to capitalize FMB at 
a "well-capitalized" level for regulatory capital purposes, the Company 
redeployed accumulated capital of certain of its subsidiary banks which 
included substantially all of the then current dividend paying capacity of 
such subsidiary banks. Because the special dividend exceeded applicable 
regulatory limitations, the Company obtained approval from the applicable 
regulatory agencies for the payment of that portion of the dividend, which 
exceeded such regulatory limitations. The Company is again planning for the 
redeployment of accumulated capital of certain subsidiary banks to 
capitalize FMB in order to complete the Berkshire acquisition. During the 
third quarter of 1998, the Company will request regulatory approval for the 
payment of a special dividend from certain subsidiary banks to the parent 
company. Payment of that special dividend by certain subsidiaries will 
restrict the dividend paying capacity of these subsidiary banks to 100% or 
less of prospective current period net income. Banknorth also utilizes 
dividends from its subsidiaries for the payment of the cost of the capital 
securities and long term debt. Accordingly, the payment of dividends by the 
Company in the future will require the generation of sufficient earnings by 
the subsidiary banks. The Company presently expects all subsidiary banks to 
be profitable and continue to pay sufficient dividends.

      At June 30, 1998, Banknorth's Tier I capital was $230.5 million, or 
10.51% of total risk-adjusted assets, compared to $215.3 million and 10.55% 
as of June 30, 1997. The $15.1 million increase in the Tier I capital is 
attributable to the strong earnings of the Company. The ratio of Tier I 
capital to total quarterly average adjusted assets (leverage ratio) was 
7.87%, and 7.94% as of June 30, 1998 and 1997, respectively. Banknorth, and 
its subsidiaries individually, are "well capitalized" at June 30, 1998 
according to regulatory definition, and thereby, exceed all minimum 
regulatory capital requirements. Table I, Capital Ratios, provides the 
components of capital as of various dates.


TABLE A.  Mix of Average Earning Assets

<TABLE>
<CAPTION>
                                                 Three Months                                   Percentage of
                                                 Ended June 30,                      % of    Total Earning Assets
                                            ------------------------                Total    --------------------
(Dollars in thousands)                         1998          1997        Change     Change    1998         1997
                                            ---------------------------------------------------------------------

<S>                                         <C>           <C>           <C>         <C>      <C>          <C>
Loans, net of unearned income
 and unamortized loan fees and costs:
  Commercial, financial and agricultural    $  361,065    $  324,951    $ 36,114     20.3%    13.0%        12.5%
  Construction and land development             34,262        33,894         368      0.2      1.3          1.3
  Commercial real estate                       576,665       550,592      26,073     14.6     20.8         21.3
  Residential real estate                      745,708       760,486     (14,778)    (8.3)    26.9         29.4
  Credit card receivables                       28,361        21,908       6,453      3.6      1.0          0.8
  Lease receivables                             74,846        74,387         459      0.3      2.7          2.9
  Other installment                            158,689       147,993      10,696      6.0      5.7          5.7
                                            ------------------------------------------------------

    Total loans, net of unearned income
     and unamortized loan fees and costs     1,979,596     1,914,211      65,385     36.7     71.4         73.9

Securities available for sale:
  U.S. Treasuries and Agencies                 118,466       139,067     (20,601)   (11.6)     4.3          5.4
  States and political subdivisions              7,070         2,897       4,173      2.3      0.3          0.1
  Mortgage-backed securities                   334,933       300,924      34,009     19.1     12.1         11.6
  Corporate debt securities                    219,043       151,481      67,562     37.9      7.9          5.8
  Equity securities                             39,053        33,528       5,525      3.1      1.4          1.3
                                            -------------------------------------------------------------------

    Total securities available for sale,
     at fair value                             718,565       627,897      90,668     50.8     26.0         24.2

Investment securities:
  U.S. Treasuries and Agencies                   4,523        10,359      (5,836)    (3.3)     0.2          0.4
  States and political subdivisions                777         1,124        (347)    (0.2)       -          0.1
  Mortgage-backed securities                    12,724        18,632      (5,908)    (3.3)     0.5          0.7
  Corporate debt securities                         10            10           -        -        -            -
                                            -------------------------------------------------------------------
    Total investment securities,
     at amortized cost                          18,034        30,125     (12,091)    (6.8)     0.7          1.2

Loans held for sale                             41,921        12,730      29,191     16.4      1.5          0.5

Money market investments                        10,797         5,684       5,113      2.9      0.4          0.2
                                            -------------------------------------------------------------------

Total earning assets                        $2,768,913    $2,590,647    $178,266    100.0%   100.0%       100.0%
                                            ===================================================================
</TABLE>

TABLE B.  Loan Portfolio

<TABLE>
<CAPTION>
                                                      At June 30,                    At December 31,           % Change
                                       -----------------------------------------    ------------------	 --------------------
                                              1998                  1997                  1997           06/30/98    06/30/98
                                       -------------------   -------------------    ------------------	  versus      versus
                                         Amount    Percent     Amount    Percent     Amount    Percent   06/30/97    12/31/97
                                       --------------------------------------------------------------------------------------
(Dollars in thousands)

<S>                                    <C>          <C>      <C>          <C>       <C>         <C>      <C>          <C>
Commercial, financial, and 
 agricultural                          $  358,155    18.2%   $  336,743    17.4%    $  332,385   17.0%     6.4%        7.8%

Real estate:
  Construction and land development        35,447     1.8        31,731     1.6         36,276    1.8     11.7        (2.3)
  Commercial                              578,342    29.4       551,968    28.6        563,800   28.8      4.8         2.6 
  Residential                             733,139    37.2       765,974    39.7        773,429   39.4     (4.3)       (5.2)
                                       --------------------------------------------------------------

      Total real estate                 1,346,928    68.4     1,349,673    69.9      1,373,505   70.0     (0.2)       (1.9)
                                       --------------------------------------------------------------

Credit card receivables                    28,426     1.4        21,513     1.1         25,669    1.3     32.1        10.7 
Lease receivables                          74,943     3.8        74,707     3.9         76,302    3.9      0.3        (1.8)
Other installment                         161,315     8.2       148,798     7.7        152,768    7.8      8.4         5.6 
                                       --------------------------------------------------------------

      Total installment                   264,684    13.4       245,018    12.7        254,739   13.0      8.0         3.9 
                                       --------------------------------------------------------------

Total loans                             1,969,767   100.0     1,931,434   100.0      1,960,629  100.0      2.0         0.5 

Less: allowance for loan losses            28,116     1.4        23,963     1.2         25,721    1.3     17.3         9.3 
                                       --------------------------------------------------------------

Net loans                              $1,941,651    98.6%   $1,907,471    98.8%    $1,934,908   98.7%     1.8%        0.3%
                                       ==============================================================
</TABLE>

TABLE C.  Securities Available for Sale and Investment Securities

<TABLE>
<CAPTION>
                                                        At June 30,             At December 31,
                                                    --------------------        ---------------
(Dollars in thousands)                                1998        1997                1997
                                                    -------------------------------------------

<S>                                                 <C>         <C>                 <C>
Securities available for sale:
  U.S. Treasuries and Agencies                      $114,477    $158,494            $141,245
  States and political subdivisions                    7,816       4,727               5,251
  Mortgage-backed securities                         326,202     320,065             320,473
  Corporate debt securities                          230,291     181,710             200,710
  Equity securities                                   39,044      39,245              39,044
  Valuation reserve                                    5,965      (3,178)              3,585
                                                    ----------------------------------------

  Recorded value of securities available for sale   $723,795    $701,063            $710,308
                                                    ========================================

Investment securities:
  U.S. Treasuries and Agencies                      $  2,948    $  8,847            $  7,505
  States and political subdivisions                      776       1,110                 781
  Mortgage-backed securities                          10,178      18,074              15,676
  Corporate debt securities                               10          10                  10
                                                    ----------------------------------------

  Recorded value of investment securities           $ 13,912    $ 28,041            $ 23,972
                                                    ========================================

Fair value of investment securities                 $ 14,156    $ 28,173            $ 24,246
                                                    ========================================

Excess of fair value versus recorded value          $    244    $    132            $    274

Fair value as a % of recorded value                    101.8%      100.5%              101.1%
</TABLE>

TABLE D.  Average Balances, Yields, and Net Interest Margins

<TABLE>
<CAPTION>
                                                                  Three Months Ended June 30,
                                             ---------------------------------------------------------------
                                                          1998                            1997
                                             ------------------------------   ------------------------------
                                                         Interest   Average               Interest   Average
                                              Average    Income/    Yield/     Average    Income/    Yield/
(Dollars in thousands)                        Balance    Expense     Rate      Balance    Expense     Rate
                                             ---------------------------------------------------------------

<S>                                          <C>          <C>        <C>      <C>         <C>         <C>
Earning assets:
  Money market investments                   $   10,797   $   150    5.57%    $    5,684  $    80     5.65%
  Securities available for sale,
   at fair value (1 and 2)                      718,565    11,460    6.44        627,897   10,002     6.32
  Loans held for sale                            41,921       800    7.65         12,730      243     7.66
  Investment securities (2)                      18,034       325    7.23         30,125      540     7.19
  Loans, net of unearned income and
  unamortized loan fees (2 and 3)             1,979,596    44,626    9.04      1,914,211   43,580     9.13
                                             --------------------             -------------------

      Total earning assets                    2,768,913    57,361    8.32      2,590,647   54,445     8.41
                                             ----------                       ----------

Cash and due from banks                          78,515                           73,754
Allowance for loan losses                       (27,497)                         (24,132)
Other assets                                    142,222                          103,163
                                             ----------                       ----------    

Total assets                                 $2,962,153                       $2,743,432
                                             ----------                       ----------
					     				  
Interest-bearing liabilities:
  NOW accounts & money market savings        $  975,896     9,520    3.91     $  794,001    7,069     3.57
  Regular savings                               179,147     1,087    2.43        209,308    1,249     2.39
  Time deposits $100 thousand and greater        96,910     1,359    5.62         90,634    1,235     5.47
  Time deposits under $100 thousand             666,013     8,949    5.39        704,687    9,308     5.30
                                             --------------------             ------------------- 
      Total interest-bearing deposits         1,917,966    20,915    4.37      1,798,630   18,861     4.21
  Short-term borrowed funds                     413,953     5,488    5.32        388,903    5,211     5.37
  Long-term debt                                 34,041       538    6.34         22,607      376     6.67
                                             --------------------             -------------------

      Total interest-bearing liabilities      2,365,960    26,941    4.57      2,210,140   24,448     4.44
                                             -------------------------------------------------------------

Non-interest bearing deposits                   311,010                          278,612 
Other liabilities                                25,910                           23,701 
Corporation-obligated mandatorily
 redeemable capital securities                   30,000                           20,110 
Shareholders' equity                            229,273                          210,869 
                                             ----------                       ----------
Total liabilities, corporation-obligated
 mandatorily redeemable capital securities   
 and shareholders' equity                    $2,962,153                       $2,743,432 
                                             ==========                       ==========
Net interest income                                       $30,420                         $29,997
                                                          =======                         =======

Interest rate differential                                           3.75%                            3.97%
                                                                     ====                             ====

Net interest margin                                                  4.41%                            4.63%
                                                                     ====                             ====

Notes:
<F1>  For the purpose of the average yield computations, unrealized 
      gains/(losses) are excluded from the average rate calculation.
<F2>  Tax exempt income has been adjusted to a tax equivalent basis by tax 
      effecting such interest at the Federal and state tax rates.
<F3>  Includes principal balances of non-accrual loans and industrial 
      revenue bonds.
</TABLE>

TABLE D.  Average Balances, Yields, and Net Interest Margins

<TABLE>
<CAPTION>
                                                                Six Months Ended June 30,
                                             ---------------------------------------------------------------
                                                          1998                            1997
                                             ------------------------------   ------------------------------
                                                         Interest   Average               Interest   Average
                                              Average    Income/    Yield/     Average    Income/    Yield/
(Dollars in thousands)                        Balance    Expense     Rate      Balance    Expense     Rate
                                             ---------------------------------------------------------------

<S>                                          <C>          <C>        <C>      <C>         <C>         <C>
Earning assets:
  Money market investments                   $    6,894   $   195    5.70%    $    6,699  $    194    5.84%
  Securities available for sale,								      
   at fair value (1 and 2)                      714,856    22,883    6.50        584,011    18,461    6.31
  Loans held for sale                            35,957     1,259    7.06         12,566       481    7.72
  Investment securities (2)                      20,628       743    7.26         31,630     1,135    7.24
  Loans, net of unearned income and
   unamortized loan fees (2 and 3)            1,971,756    88,480    9.05      1,889,495    85,294    9.10
                                             --------------------             --------------------

      Total earning assets                    2,750,091   113,560    8.34      2,524,401   105,565    8.41
                                             ----------                       ----------

Cash and due from banks                          75,545                           76,968
Allowance for loan losses                       (26,856)                         (23,900)
Other assets                                    140,446                          103,365
                                             ----------                       ----------     

Total assets                                 $2,939,226                       $2,680,834
                                             ==========                       ==========

Interest-bearing liabilities:
  NOW accounts & money market savings        $  947,042    18,342    3.91     $  788,024    13,777    3.53
  Regular savings                               181,189     2,184    2.43        211,290     2,490    2.38
  Time deposits $100 thousand and greater        97,789     2,719    5.61         90,918     2,456    5.45
  Time deposits under $100 thousand             675,458    18,078    5.40        705,140    18,522    5.30
                                             --------------------             --------------------
      Total interest-bearing deposits         1,901,478    41,323    4.38      1,795,372    37,245    4.18
  Short-term borrowed funds                     421,154    11,144    5.34        341,640     8,866    5.23
  Long-term debt                                 27,334       874    6.45         23,740       771    6.55
                                             --------------------             -------------------- 

      Total interest-bearing liabilities      2,349,966    53,341    4.58      2,160,752    46,882    4.38
                                             -------------------------------------------------------------

Non-interest bearing deposits                   304,997                          277,160
Other liabilities                                25,278                           23,509
Corporation-obligated mandatorily
 redeemable capital securities                   30,000                           10,110
Shareholders' equity                            228,985                          209,303
                                             ----------                       ----------  
Total liabilities, corporation-obligated
 mandatorily redeemable capital securities
 and shareholders' equity                    $2,939,226                       $2,680,834
                                             ==========			      ==========
Net interest income                                       $60,219                         $ 58,683
                                                          =======                         ========

Interest rate differential                                           3.76%                            4.03%
                                                                     ====                             ====

Net interest margin                                                  4.42%                            4.68%
                                                                     ====                             ====

Notes:
<F1>  For the purpose of the average yield computations, unrealized
      gains/(losses) are excluded from the average rate calculation.
<F2>  Tax exempt income has been adjusted to a tax equivalent basis by tax 
      effecting such interest at the Federal and state tax rates.
<F3>  Includes principal balances of non-accrual loans and industrial 
      revenue bonds.
</TABLE>

TABLE E.  Average Sources of Funding

<TABLE>
<CAPTION>
                                               Three Months                                   Percentage of
                                               Ended June 30,               Change          Total Net Funding
                                          ------------------------    -------------------   -----------------
(Dollars in thousands)                       1998          1997        Amount     Percent    1998       1997
                                          -----------------------------------------------   -----------------

<S>                                       <C>           <C>           <C>         <C>       <C>       <C>
Non-interest bearing deposits             $  311,010    $  278,612    $ 32,398     11.6%     11.6%     11.2%
Retail deposits:
  Regular savings                            179,147       209,308     (30,161)   (14.4)      6.7       8.4
  Time deposits under $100 thousand          666,013       704,687     (38,674)    (5.5)     24.9      28.3
  NOW accounts & money market savings        975,896       794,001     181,895     22.9      36.4      31.9
                                          -----------------------------------------------------------------

  Total retail deposits                    1,821,056     1,707,996     113,060      6.6      68.0      68.6
                                          -----------------------------------------------------------------

Total core deposits                        2,132,066     1,986,608     145,458      7.3      79.6      79.8

Time deposits $100 thousand and greater       96,910        90,634       6,276      6.9       3.6       3.6
Federal funds purchased                        8,461        10,397      (1,936)   (18.6)      0.3       0.4
Securities sold under agreements
 to repurchase                               137,388       135,718       1,670      1.2       5.1       5.5
Borrowings from U.S. Treasury                 12,560        12,451         109      0.9       0.5       0.5
Short- term notes from FHLB                  255,544       230,337      25,207     10.9       9.6       9.3
Long- term notes from FHLB                    24,298        10,264      14,034    136.7       0.9       0.4
                                          -----------------------------------------------------------------

  Total purchased liabilities                535,161       489,801      45,360      9.3      20.0      19.7

Bank term loan                                 9,743        12,343      (2,600)   (21.1)      0.4       0.5
                                          -----------------------------------------------------------------
							
Total net funding                         $2,676,970    $2,488,752    $188,218      7.6%    100.0%    100.0%
                                          =================================================================
</TABLE>

TABLE F.  Volume and Yield Analysis

<TABLE>
<CAPTION>
                                               Three Months
                                              Ended June 30,                     Due to
                                            ------------------              -----------------
(Dollars in thousands)                       1998       1997      Change    Volume      Rate
                                            -------------------------------------------------

<S>                                         <C>        <C>        <C>       <C>       <C>
Interest income (FTE):
  Money market investments                  $   150    $    80    $   70    $   72    $    (2)
  Securities available for sale              11,460     10,002     1,458     1,242        216 
  Loans held for sale                           800        243       557       557          - 
  Investment securities                         325        540      (215)     (217)         2 
  Loans                                      44,626     43,580     1,046     1,488       (442)
                                            ----------------------------
      Total interest income                  57,361     54,445     2,916     3,489       (573)
                                            ============================

Interest expense:
  NOW accounts & money market savings         9,520      7,069     2,451     1,619        832 
  Regular savings                             1,087      1,249      (162)     (180)        18 
  Time deposits $100 thousand and greater     1,359      1,235       124        86         38 
  Time deposits under $100 thousand           8,949      9,308      (359)     (511)       152 
  Short-term borrowed funds                   5,488      5,211       277       335        (58)
  Long-term debt                                538        376       162       190        (28)
                                            ----------------------------
      Total interest expense                 26,941     24,448     2,493     1,725        768 
                                            -------------------------------------------------
Net interest income (FTE)                   $30,420    $29,997    $  423    $1,764    $(1,341)
                                            =================================================
</TABLE>

Note:  Increases and decreases in interest income and interest expense due 
       to both rate and volume have been allocated to volume on a consistent 
       basis.

TABLE F.  Volume and Yield Analysis

<TABLE>
<CAPTION>
                                                 Six Months 
                                               Ended June 30,                     Due to
                                             ------------------		    ----------------
(Dollars in thousands)                       1998       1997      Change    Volume      Rate
                                             -----------------------------------------------

<S>                                         <C>        <C>        <C>       <C>      <C>
Interest income (FTE):
  Money market investments                  $    195   $    194   $    1    $    6   $    (5)
  Securities available for sale               22,883     18,461    4,422     3,757       665
  Loans held for sale                          1,259        481      778       895      (117)
  Investment securities                          743      1,135     (392)     (395)        3
  Loans                                       88,480     85,294    3,186     3,712      (526)
                                            ----------------------------

      Total interest income                  113,560    105,565    7,995     8,967      (972)
                                            ----------------------------

Interest expense:
  NOW accounts & money market savings         18,342     13,777    4,565     2,784     1,781
  Regular savings                              2,184      2,490     (306)     (355)       49
  Time deposits $100 thousand and greater      2,719      2,456      263       186        77
  Time deposits under $100 thousand           18,078     18,522     (444)     (780)      336
  Short-term borrowed funds                   11,144      8,866    2,278     2,062       216
  Long-term debt                                 874        771      103       117       (14)
                                            ----------------------------

      Total interest expense                  53,341     46,882    6,459     4,110     2,349
                                            ------------------------------------------------

Net interest income (FTE)                   $ 60,219   $ 58,683   $1,536    $4,857   $(3,321)
                                            ================================================
</TABLE>

Note:  Increases and decreases in interest income and interest expense due 
       to both rate and volume have been allocated to volume on a consistent 
       basis.

TABLE G.  Non-Performing Assets

<TABLE>
<CAPTION>
                                                     At          At            At
                                                  June 30,   December 31,   June 30,
                                                  --------   ------------   --------
(Dollars in thousands)                              1998         1997         1997
                                                  ----------------------------------

<S>                                               <C>          <C>          <C>
Loans on a non-accrual basis:
  Commercial, financial and agricultural          $   406      $ 2,749      $ 2,600 
  Real estate:
    Construction and land development                  36            -           39 
    Commercial                                      2,146        2,645        3,184 
    Residential                                     6,918        7,936        8,493 
  Other installment                                    31            8            - 
                                                  ---------------------------------
      Total non-accrual                             9,537       13,338       14,316 

Restructured loans:
  Real estate:
    Commercial                                          -            -          378 
    Residential                                        33           36           38 
  Other installment                                     5            6            6
                                                  ---------------------------------
      Total restructured                               38           42          422

Past-due 90 days or more and still accruing:
  Commercial, financial and agricultural              187           70          119 
  Real estate:
    Commercial                                        511          125            - 
    Residential                                       141          332          165
  Credit card receivables                              32          119          157
  Lease receivables                                   197          151           93
  Other installment                                   348          514          471
                                                  ---------------------------------
      Total past-due 90 days or more
       and still accruing                           1,416        1,311        1,005
                                                  ---------------------------------

Total non-performing loans                         10,991       14,691       15,743

Other real estate owned (OREO)                      1,185        1,074          534
Non-real estate and repossessed assets                 11          500           25
                                                  ---------------------------------

Total foreclosed and repossessed assets (F/RA)      1,196        1,574          559
                                                  ---------------------------------

Total non-performing assets                       $12,187      $16,265      $16,302
                                                  =================================

Allowance for loan losses (ALL)                   $28,116      $25,721      $23,963
ALL coverage of non-performing loans               255.81%      175.08%      152.21%
Non-performing assets as a % of (loans & F/RA)       0.62         0.83         0.84
Non-performing assets to total assets                0.41         0.56         0.57
</TABLE>

TABLE H.  Summary of Loan Loss Experience

<TABLE>
<CAPTION>
                                                    Six Months      Twelve Months       Six Months
                                                  Ended June 30,  Ended December 31,  Ended June 30,
                                                  --------------  ------------------  --------------
(Dollars in thousands)                                 1998              1997              1997
                                                  --------------------------------------------------

<S>                                                 <C>               <C>               <C>
Loans outstanding-end of period                     $1,969,767        $1,960,629        $1,931,434 
Average loans outstanding-period to date             1,971,756         1,916,097         1,889,495 

Allowance for loan losses at beginning of period    $   25,721        $   23,520        $   23,520

Loans  charged off:
  Commercial, financial and agricultural                  (132)           (1,343)             (825)
  Real estate:
    Commercial                                            (133)             (669)             (466)
    Residential                                           (928)           (1,915)             (945)
                                                    ----------------------------------------------
      Total real estate                                 (1,061)           (2,584)           (1,411)

  Credit card receivables                                 (300)             (691)             (349)
  Lease receivables                                       (781)           (1,510)             (565)
  Other installment                                     (1,559)           (4,022)           (2,362)
                                                    ----------------------------------------------
      Total installment                                 (2,640)           (6,223)           (3,276)

      Total loans charged off                           (3,833)          (10,150)           (5,512)
                                                    ----------------------------------------------

Recoveries on loans:
  Commercial, financial and agricultural                   390               592               395
  Real estate:
    Construction and land development                        9                87                71
    Commercial                                             337               638               263 
    Residential                                            409               628               288
                                                    ----------------------------------------------
      Total real estate                                    755             1,353               622 

  Credit card receivables                                   40               109                53 
  Lease receivables                                        604               970               366 
  Other installment                                        754             1,665               833
                                                    ----------------------------------------------
      Total installment                                  1,398             2,744             1,252 

      Total recoveries on loans                          2,543             4,689             2,269
                                                    ----------------------------------------------

Loans charged off,  net of recoveries                   (1,290)           (5,461)           (3,243)
                                                    ----------------------------------------------

Provision for loan losses                                3,685             7,662             3,686
                                                    ----------------------------------------------

Allowance for loan losses at end of period          $   28,116        $   25,721        $   23,963
                                                    ==============================================

Loans charged off, net (annualized),
 as a % of average total loans                            0.13%             0.29%             0.34%
Provision for loan losses (annualized)
 as a % of average total loans                            0.37              0.40              0.39
Allowance for loan losses
 as a % of period-end total loans                         1.43              1.31              1.24 
</TABLE>

TABLE I. Capital Ratios

<TABLE>
<CAPTION>
                                                          At            At             At              At              At
                                                       June 30,     March 30,     December 31,    September 30,     June 30,
(Dollars in thousands)                                   1998          1998           1997            1997            1997
                                                      -----------------------------------------------------------------------

<S>                                                   <C>           <C>            <C>              <C>            <C>
Total risk-adjusted on-balance sheet assets           $2,077,236    $2,061,517     $2,024,610       $1,960,074     $1,936,981
Total risk-adjusted off-balance sheet items              115,393       106,994        108,212          107,849        104,257
                                                      -----------------------------------------------------------------------

Total risk-adjusted assets                            $2,192,629    $2,168,511     $2,132,822       $2,067,923     $2,041,238
                                                      =======================================================================

Total risk-adjusted assets / average total  assets,
 net of fair value adjustment and goodwill (1)             74.83%        75.20%         75.02%           73.44%         75.27%

Total shareholders' equity                            $  232,600    $  229,882     $  229,872       $  228,486     $  216,866     
Fair value adjustment (1)                                 (3,820)       (2,913)        (2,311)          (1,563)         2,012     
Corporation-obligated manditorily redeemable              30,000        30,000         30,000           30,000         30,000
 capital securities                                                            
Goodwill                                                 (28,307)      (29,613)       (30,919)         (32,225)       (33,530)
                                                      -----------------------------------------------------------------------

Total Tier I capital                                     230,473       227,356        226,642          224,698        215,348
Maximum allowance for loan losses (2)                     27,417        26,850         25,721           25,061         23,963
                                                      -----------------------------------------------------------------------

Total capital                                         $  257,890    $  254,206     $  252,363       $  249,759     $  239,311
                                                      =======================================================================

Quarterly average total assets,
 net of fair value adjustment and goodwill (1)        $2,930,026    $2,883,474     $2,843,167       $2,815,958     $2,711,913
Allowance for loan losses                                 28,116        26,850         25,721           25,061         23,963

Total capital to total risk-adjusted assets                11.76%        11.72%         11.83%           12.08%         11.72%
Tier I capital to total risk-adjusted assets               10.51         10.48          10.63            10.87          10.55
Tier I capital to total quarterly average                                                                 
 adjusted assets (Leverage)                                 7.87          7.88           7.97             7.98           7.94

Notes: 
<F1> The market valuation relating to securities available for sale included 
     in shareholders' equity and total assets on
     consolidated balance sheets has been excluded in the above ratios.
<F2> The maximum allowance for loan losses used in calculating total capital 
     is the period-end allowance for loan losses or 1.25% of risk-adjusted
     assets prior to the allowance limitation, whichever is lower.
</TABLE>


SUMMARY OF UNAUDITED QUARTERLY FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                                                 1998                                  1997
                                                      --------------------------    -----------------------------------------
(Dollars in thousands, except
 share and per share data)                                Q2             Q1             Q4             Q3             Q2
                                                      -----------------------------------------------------------------------

<S>                                                   <C>            <C>            <C>            <C>            <C>
Statement of Income:				      
  Interest income                                     $    57,137    $    55,995    $    56,891    $    56,321    $    54,312
  Interest expense                                         26,941         26,400         26,339         26,103         24,448
                                                      -----------------------------------------------------------------------
      Net interest income                                  30,196         29,595         30,552         30,218         29,864
  Provision for loan losses                                 1,840          1,845          2,036          1,940          1,936
                                                      -----------------------------------------------------------------------
      Net interest income after provision
       for loan losses                                     28,356         27,750         28,516         28,278         27,928
                                                      -----------------------------------------------------------------------

  Other operating income:
    Income from trust and investment management fees        2,394          2,222          2,263          2,270          2,081 
    Service charges on deposit accounts                     2,223          2,163          2,279          1,910          1,981 
    Card product income                                       514            408            816            787            822 
    Loan servicing income                                     222            417            603            630            640 
    Gain on sale of mortgage servicing rights                  (6)             -            (23)           896              - 
    Net loan transactions                                     861            611            416            381            183 
    Net securities transactions                                69           (439)            71            163              6 
    Bank-owned life insurance                                 553            540             77              -              - 
    All other                                               1,562          1,262          3,622            964            862
                                                      -----------------------------------------------------------------------

      Total other operating income                          8,392          7,184         10,124          8,001          6,575 

  Other operating expenses:
    Compensation & employee benefits                       11,883         12,143         12,189         11,967         11,406 
    Net occupancy, equipment & software expense             3,686          3,744          3,858          3,772          3,681 
    Data processing                                         1,308          1,151          1,286          1,256          1,223 
    OREO and repossession                                     116            222            316            287            264 
    Amortization of goodwill                                1,306          1,306          1,306          1,305          1,306 
    Capital securities                                        789            789            789            789            526 
    All other                                               5,558          5,701          5,735          5,695          5,628 
                                                      -----------------------------------------------------------------------
      Total other operating expenses                       24,646         25,056         25,479         25,071         24,034
                                                      -----------------------------------------------------------------------
Income before income tax expense                           12,102          9,878         13,161         11,208         10,469 
Income tax expense                                          3,780          2,954          4,401          3,618          3,380 
                                                      -----------------------------------------------------------------------
Net income                                            $     8,322    $     6,924    $     8,760    $     7,590    $     7,089
                                                      =======================================================================

Average Balances:
  Loans                                               $ 1,979,596    $ 1,963,829    $ 1,950,504    $ 1,933,960    $ 1,914,211
  Loans held for sale                                      41,921         29,926         19,707         20,957         12,730
  Securities available for sale                           718,565        711,108        716,592        708,403        627,897
  Investment securities                                    18,034         23,250         24,853         27,074         30,125
  Money market investments                                 10,797          2,947          8,286          7,934          5,684
                                                      -----------------------------------------------------------------------
      Total earning assets                              2,768,913      2,731,060      2,719,942      2,698,328      2,590,647
  Other assets                                            193,240        184,940        156,455        151,418        152,785
                                                      -----------------------------------------------------------------------
      Total assets                                    $ 2,962,153    $ 2,916,000    $ 2,876,397    $ 2,849,746    $ 2,743,432
                                                      =======================================================================

  Non-interest-bearing deposits                       $   311,010    $   298,629    $   305,831    $   293,979    $   278,612
  Interest-bearing deposits                             1,917,966      1,884,807      1,860,793      1,830,540      1,798,630
                                                      -----------------------------------------------------------------------
      Total deposits                                    2,228,976      2,183,436      2,166,624      2,124,519      2,077,242
  Short-term borrowed funds                               413,953        428,723        412,502        430,360        388,903
  Long-term debt                                           34,041         20,553         17,577         20,196         22,607
  Other liabilities                                        25,910         24,638         21,645         21,387         23,701
  Corporation-obligated mandatorily redeemable
   capital securities                                      30,000         30,000         30,000         30,000         20,110
  Shareholders' equity                                    229,273        228,650        228,049        223,284        210,869
                                                      -----------------------------------------------------------------------
      Total liabilities, corporation-obligated
       mandatorily redeemable capital securities
       and shareholders' equity                       $ 2,962,153    $ 2,916,000    $ 2,876,397    $ 2,849,746    $ 2,743,432 
                                                      =======================================================================

Loans charged off, net of recoveries                  $       574    $       716    $     1,376    $       842    $     1,611
Non-performing assets, p.e.                                12,187         16,282         16,265         18,545         16,302

Share and Per Share Data:
  Basic wtd. avg. number of shares outstanding         15,360,499     15,450,990     15,639,784     15,694,514     15,553,496
  Basic earnings per share (Basic EPS)                $      0.54    $      0.45    $      0.56    $      0.48    $      0.46
  Diluted wtd. avg. number of shares outstanding       15,621,944     15,709,954     15,902,314     15,920,056     15,756,090
  Diluted earnings per share (Diluted EPS)            $      0.53    $      0.44    $      0.55    $      0.48    $      0.45

  Tangible book value, p.e.                                 13.41          13.06          12.84          12.54          11.71
  Cash dividends declared                                    0.16           0.16          0.145          0.145          0.145

  Closing price at quarter end                              37.00          36.50          32.13          27.32          23.13
  Cash dividends declared as a % of net income              29.25%         35.70%         25.79%         29.91%         32.02%

Key Ratios:
  Return on average assets                                   1.13%          0.96%          1.21%          1.06%          1.04%
  Return on average shareholders' equity                    14.56          12.28          15.24          13.49          13.48
  Net interest margin, fte                                   4.41           4.43           4.48           4.46           4.63
  Efficiency ratio                                          59.49          62.39          62.41          62.93          61.43
  Expense ratio                                              2.00           2.20           2.27           2.31           2.37
  As a % of risk-adjusted assets, p.e.:                                                                
      Total capital                                         11.76          11.72          11.83          12.08          11.72
    Tier 1 capital                                          10.51          10.48          10.63          10.87          10.55
  As a % of quarterly average total assets:
    Tier 1 capital (regulatory leverage)                     7.87           7.88           7.97           7.98           7.94
  Tangible shareholders' equity to tangible assets, p.e.     6.89           6.84           6.88           6.91           6.51

  Price / Basic EPS (last 4 reported quarters)               18.2           18.7           16.5           14.9           12.9
  Price / Diluted EPS (last 4 reported quarters)             18.5           19.0           16.7           14.9           13.0
</TABLE>

Note:  All share and per share data has been restated for the effect of the 
       2-for-1 stock split declared February 24, 1998.


ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

At the 1998 Annual Meeting of Shareholders, the shareholders approved an 
amendment to Article Fourth of the Company's Certificate of Incorporation, 
which (1) increased the number of authorized shares of common stock, $1.00 
par value per share, to 70,000,000 shares (from 20,000,000 shares); (2) 
authorized a class of 500,000 shares of preferred stock, $.01 par value per 
share, issuable in one or more series and having such terms, conditions, 
privileges and rights as the Company's Board of Directors may determine by 
resolution prior to issuance; and (3) eliminated unnecessary language 
relating to preemptive rights.  No preferred shares have been issued.

The amendment to Article Fourth of the Company's Certificate of 
Incorporation was filed with the Delaware Secretary of State on June 25, 
1998.  The text of the amendment is filed as Exhibit 3(i) to this Report and 
is incorporated by reference herein.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The following matters were submitted to a vote of security holders at the 
Annual Meeting of Shareholders of Banknorth Group, Inc. on May 12, 1998:

1.   To elect five directors to serve until the 2001 Annual Meeting of 
     Shareholders

2.   To amend Article Fourth of the Certificate of Incorporation to increase 
     the authorized common stock, create a class of preferred stock and 
     delete language relating to preemptive rights.

3.   To ratify the selection of independent auditors of the Company for 
     1998.


The results of the votes were as follows:

<TABLE>
<CAPTION>
                                                          WITHHELD/     BROKER
          MATTER                      FOR       AGAINST      FOR       NON-VOTE
  -----------------------------------------------------------------------------

  <S>                              <C>          <C>        <C>         <C>
  Election of Directors:
  Thomas J. Amidon                 6,441,300      ---       29,294       N/A
  Jacqueline D. Arthur             6,432,242      ---       38,352       N/A
  Robert A. Carrara                6,432,722      ---       37,872       N/A
  William H. Chadwick              6,440,628      ---       29,996       N/A
  Susan C. Crampton                6,422,959      ---       47,635       N/A

  Amend Article Fourth of the
   Certificate of Incorporation    4,305,866   1,506,507   245,525     412,696

  Selection of Auditors
   KPMG Peat Marwick LLP           6,443,831      18,547     8,216       N/A
</TABLE>


ITEM 5.   OTHER INFORMATION

Revised By-laws

The By-laws of the Corporation were amended by the Company's Board of 
Directors on June 25, 1998.  The amendments (1) eliminated the provision 
requiring that a special meeting of shareholders be called upon request of 
at least ten percent of the outstanding shares; (2) added a requirement that 
a shareholder provide advance notice to the Company for nominations of 
persons for election as Directors or for presenting other matters for action 
at an annual or special meeting of shareholders; (3) added a provision which 
requires indemnification of directors, officers and others in certain 
circumstances, establishes indemnification as a contractual right and 
provides for the advancement of litigation expense to indemnified persons; 
(4) authorized the issuance of shares without certificates;  (5) authorized 
certificates representing preferred shares; and (6) expanded the powers that 
may be delegated to a committee of the Board of Directors and changed the 
vote required to appoint a committee.  The amended By-laws are filed as 
Exhibit 3(ii) to this Report and are incorporated by reference herein.

Advance Notification Deadline

As noted above, the Company amended its By-laws on June 25, 1998.  One of 
the provisions added to the By-laws is a so-called advance notice bylaw 
which provides that a shareholder must furnish timely notice to the Company 
for nominations of persons for election as Director or for bringing other 
business before an annual or special meeting.  A shareholder must disclose 
in the notice his name and address and the number of shares of the Company 
stock he owns beneficially.  A shareholder's notice of a nomination for 
election of a director must include all information about the nominee(s) 
that is required to be disclosed in solicitations of proxies for election of 
directors in an election contest, or as otherwise required under Rule 14A 
under the Securities Exchange Act of 1934.  A notice of any other business a 
shareholder proposes to bring before the meeting must include a brief 
description of such business, the reasons for conducting such business at 
the meeting and any material interest the shareholder may have in the 
business to be presented. To be timely under the advance notice by-law, a 
shareholder's notice must generally be delivered to the secretary of the 
Company not later than the 90th day nor earlier than the 120th day prior to 
the first anniversary of the previous year's annual meeting, or (in the case 
of a special meeting) not later than the 10th day following public 
announcement of the date of a special meeting.  The advance notification 
deadline for shareholder nomination of directors or presentation of other 
business for consideration at the 1999 Annual Meeting is no earlier than 
January 12, 1999 and no later than February 11, 1999.  Director nominations 
or proposals for the transaction of other business will not be presented to 
the meeting unless the shareholder-proponent has complied with all of the 
requirements of the advance notice by-law.

The separate advance notification deadline for any submission to the Company 
of a shareholder proposal sought to be included in the Company's proxy 
statement for the 1999 Annual Meeting of Shareholders is described under the 
caption "Shareholder Proposals" in the Company's 1998 Annual Meeting proxy 
statement, previously filed with the Commission.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)   Exhibits

               3(i)   Text of amendment to Article Fourth of the Company's 
                      Certificate of Incorporation
               3(ii)  Amended By-Laws of the Company

         (b)   Reports on Form 8-K 

               Form 8-K, dated July 1, 1998, Banknorth announcing it entered 
               into a definitive agreement with BankBoston, N.A. to purchase 
               its Berkshire County, Massachusetts operations.  Banknorth will
               pay $52.5 million to acquire ten full-service branches and one 
               limited service branch, approximately $285 million in deposits, 
               $78 million in commercial loans and $40 million of consumer 
               loans, and Private Banking relationships that include a trust 
               and investment management portfolio of approximately $1.0 
               billion.

               Form 8-K, dated July 31, 1998, announcing Banknorth had signed 
               a definitive merger agreement with Evergreen Bancorp, Inc.  
               Under the terms of the agreement, dated July 31, 1998, Evergreen
               will be merged with and into the Company, with shareholders of 
               Evergreen receiving as merger consideration .90 shares of 
               Banknorth common stock for each whole share of Evergreen common
               stock, plus cash in lieu of any fractional shares.  
               Approximately 7.9 million shares of Banknorth common stock will
               be issued in the transaction.  It is expected that the merger 
               will be a tax-free reorganization and accounted for as a pooling
               of interests.  Both Banknorth and Evergreen also announced the 
               recision of their existing stock repurchase programs.


                                 SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the 
registrant has duly caused this report on Form 10-Q to be signed on its 
behalf by the undersigned thereunto duly authorized.



                                       BANKNORTH GROUP, INC.
                                       Registrant



Date: 8/12/98                                  /S/ William H. Chadwick
                                       ---------------------------------------
                                                 William H. Chadwick
                                        President and Chief Executive Officer


Date: 8/12/98                                    /S/ Thomas J. Pruitt
                                       ---------------------------------------
                                                   Thomas J. Pruitt
                                          Executive Vice President and Chief
                                                  Financial Officer