Banknorth Group Posts Record Quarterly Earnings

Portland, Maine, July 19, 2000 - Banknorth Group, Inc. (NASDAQ: BKNG), formerly Peoples Heritage Financial Group, reported record quarterly operating earnings of $57.7 million, or 40 cents per share, for the second quarter ended June 30, 2000, the first earnings report since its acquisition of Banknorth Group on May 10 of this year. Following completion of the acquisition, the Company adopted the Banknorth name. Operating earnings per share for the quarter ended June 30, 2000 were up 8 percent over operating earnings per share of 37 cents per share for the same quarter a year ago and the first quarter of 2000 (on a pooled basis).

"Loan growth was particularly strong and we saw continued improvements in asset quality, which was already at very sound levels in prior quarters," said William J. Ryan, Chairman, President and Chief Executive Officer. "Low cost demand deposits, primarily checking accounts, also rose sharply."

Total loans at June 30, 2000 were 11 percent higher than total loans at June 30, 1999. Consumer and commercial business loans were both 17 percent higher at June 30, 2000 than twelve months previous.

At the same time, the Company's asset quality continued to improve. Nonperforming loans as a percentage of total loans dropped from 0.74% at June 30, 1999 to 0.48% at June 30, 2000, a decline of 35%. The Company's reserve coverage of nonperforming loans stood at 312% at June 30, 2000 and the allowance was at 1.5% of total loans.

On the deposit side, overall deposits grew 2 percent from June 30, 1999 to June 30, 2000 but demand deposits grew 12 percent in the same period, allowing the Company to reduce its dependence on higher cost certificates of deposit and brokered deposits.

Noninterest income rose 12 percent for the quarter ended June 30, 2000 as compared to the same quarter a year ago, excluding losses related to repositioning the Company's securities portfolio. Led by 22 percent growth in customer service fees, noninterest income exclusive of securities losses increased to 27 percent of total income in the quarter ended June 30, 2000 as compared to 25 percent in the quarter ended June 30, 1999. Noninterest income is primarily composed of fee income.

As compared to operating earnings, net income for the quarter ended June 30, 2000 was $18.9 million, or 13 cents per share, due to securities losses and merger related charges totaling $38.9 million. Merger related costs savings are expected to have a favorable impact on income in the second half of the year.

Even though the Company realized limited cost savings related to the merger during the quarter ended June 30, 2000, noninterest expenses minus the special charges were virtually unchanged in comparison to the quarter ended June 30, 1999.

Operating return on average equity (ROE) for the quarter ended June 30, 2000 was at 19.82%, as compared to 17.91% for the same quarter a year ago, continuing the progress toward the Company's announced goal of a sustainable ROE of 20.0% by the end of the year. Operating return on average assets (ROA) for the quarter ended June 30, 2000 was 1.27%, unchanged from the same quarter a year ago and in line with the Company's goals.

The Company's efficiency ratio for the quarter ended June 30, 2000 was 54.97%, compared to 56.59% for the quarter ended June 30, 1999. The Company expects its efficiency ratio to improve during the remaining two quarters of the year.

Banknorth Group, Inc., formerly known as Peoples Heritage Financial Group, is an $18.5 billion bank holding company that is the parent company of Peoples Heritage Bank with the leading market share in Maine; Bank of New Hampshire with the leading market share in that state; First Massachusetts Bank with the fifth largest market share in that state; GBT, a division of First Massachusetts Bank operating in Connecticut; Evergreen Bank in upstate New York; and Franklin Lamoille Bank, The Howard Bank, and First Vermont Bank, all in Vermont. Banknorth's combined Vermont banks have the second largest market share in that state. The Company and its banking affiliates also operate subsidiaries in insurance (Morse, Payson & Noyes Insurance and its subsidiaries), investments (Heritage Investment Planning Group), trust and money management services (The Stratevest Group), and leasing.

(Note on Forward Looking Information: This news release may contain forward-looking information for Banknorth Group, Inc. Actual results may vary materially from the forward-looking statements. Factors which could result in material variations from forward looking statements include but are not limited to: changes in interest rates which could affect net interest margins and net interest income; delays in cost savings measures or a failure to realize anticipated cost savings; competitive factors which could affect noninterest income, costs of deposits and interest income; and general economic conditions which could negatively affect the volume of loan originations, the amount of loan losses and levels of noninterest income.)

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