Peoples Heritage Announces Record Earnings for 1999

4th Quarter '99 EPS 44 Cents vs. 30 Cents in '98

Portland, Maine, January 19, 2000 ö Peoples Heritage Financial Group, Inc.(NASDAQ: PHBK) today announced its sixth consecutive record earnings year with net income of $142.4 million, or $1.37 per diluted share, for the year ended December 31, 1999, a 26 percent increase over the year ended December 31, 1998 when net income was $112.8 million, or $1.07 per diluted share. On an operating basis, exclusive of special charges, net income was $164.1 million, or $1.58 per diluted share, for the year ended December 31, 1999, up 16 percent from operating earnings of $141.8 million, or $1.34 per diluted share, for the year ended December 31, 1998.

For the quarter ended December 31, 1999, the Company earned $45.6 million, or 44 cents per diluted share, up 43 percent from $31.9 million, or 30 cents per diluted share. On an operating basis, excluding merger-related income, the Company earned $43.2 million, or 42 cents per diluted share, for the quarter ended December 31, 1999, up 24 percent from operating income of $36.2 million, or 34 cents per diluted share, for the quarter ended December 31, 1998.

ãIt is very gratifying to continue what has become an unbroken string of six consecutive record earnings years,ä said William J. Ryan, Chairman, President and Chief Executive Officer. ãWe continue to have strong commercial and consumer loan growth, expanding fee income and good expense control.ä

The year and quarter ended December 31, 1999 evidenced continuing
strengthening of several key financial ratios:

The operating Return on Average Equity (ROE) was 20.16% and 18.85% for the quarter and year, respectively, ended December 31, 1999, as compared to 16.13% and 16.45% for the quarter and year, respectively, ended December 31, 1998.

The operating Return on Average Assets (ROA) was 1.24% for both the
quarter and year ended December 31, 1999 as compared to 1.22% for the
quarter and year ended December 31, 1998.

The Companyâs efficiency ratio improved to 53.56% for the quarter ended December 31, 1999 as compared to 57.44% for the quarter ended December 31, 1998.

Nonperforming assets as a percentage of total assets dropped to 0.40
percent at December 31, 1999 as compared to 0.56% at December 31, 1998.

Other financial highlights of 1999 included double digit growth in consumer and commercial lending; strong growth in key categories of noninterest income including a 56 percent increase in insurance commissions, a 37 percent increase in income from investment advisory services and a 15 percent growth in trust income; and a 4 percent decline in noninterest expense for the year ended December 31, 1999 from the year ended December 31, 1998.

Despite a record 1999, Mr. Ryan cautioned against overly high expectations in 2000.

ãIn the coming year, given the calendar- year dilution of the anticipated Banknorth acquisition, a decline in mortgage banking originations and associated business given higher rates, and pressure on spreads and margins created by strong price competition in commercial lending, I think an anticipated earnings per share increase of 5 to 6 percent is more realistic than double digit estimates,ä said Mr. Ryan. ãIn subsequent years, assuming reasonable economic conditions, I believe that we will return to annual earnings per share growth in the 10 to 12 percent range.ä

Peoples Heritage Financial Group is a multi-state banking and financial services holding company. Its subsidiary banks include Peoples Heritage Bank, with the top market share in Maine, Bank of New Hampshire, with the leading market share in New Hampshire, Family Bank, one of the six largest banks in Massachusetts and Glastonbury Bank & Trust in Connecticut. The Company and its affiliate banks also operate subsidiaries in the fields of trust and investments, insurance brokerage, and leasing.

Total assets of the Company at December 31, 1999 were $13.9 billion. The Company expects to complete the acquisition of $4.6 billion Banknorth Group in the second quarter of 2000. Based on 102,181,789 shares outstanding at December 31, 1999, book value per share was $8.33. Shareholdersâ equity at December 31, 1999 was $851.0 million.

Note on forward looking information: This release contains forward looking information for Peoples Heritage Financial Group, Inc. on a stand alone basis and on a pro forma combined basis with Banknorth Group, Inc. The merger of the two companies is dependent upon the receipt of shareholder and regulatory approvals, neither of which can be assured, as well as other customary closing conditions. Forward looking financial information could vary materially depending upon changes in interest rates, which could affect net interest margins and net interest income; delays in cost savings measures to be adopted in connection with the merger or a failure to realize anticipated cost savings, delays in obtaining revenue enhancements from the merger or a failure to realize anticipated revenue enhancements; 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.