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Top Headlines

For Immediate Release
July 20, 1999

Contact:

Beryl Wolfe
(207) 775-5115

Web Site: http://www.tdbank.com/

Record Quarterly Earnings at Peoples Heritage Financial Group

Company to Commence Repurchase of up to 4 Million Shares

Portland, Maine, July 20, 1999 -- Peoples Heritage Financial Group, Inc. (NASDAQ: PHBK) today announced record quarterly earnings of $40.8 million, or 39 cents per diluted share, for the second quarter ended June 30, 1999. The Company also announced plans to repurchase up to 4 million shares of its common stock in the open market.

The record quarterly earnings for the quarter ended June 30, 1999 were up 11% over operating earnings for the second quarter a year ago of $36.6 million, or 35 cents per diluted share. Net income was up $28.2 million, or 225 percent, from net income for the quarter ended June 30, 1998 but the second quarter of last year was negatively affected by one-time charges related to the acquisition of CFX Corporation.

For the six months ended June 30, 1999, the Company reported net income of $54.3 million, or 52 cents per diluted share, which was 25 percent higher than net income of $43.7 million, or 41 cents per diluted share, for the same period of 1998. Operating income for the first six months of 1999 was $78.3 million, or 75 cents per diluted share, 15 percent higher than operating income of $68.3 million, or 65 cents per diluted share, for the first six months of 1998.

"With a strong record quarter in hand, we decided to further enhance shareholder value by repurchasing shares," said William J. Ryan, Company Chairman, President and Chief Executive Officer.

Mr. Ryan said that management believes that plans to repurchase up to 4 million shares constitutes an attractive use of the Company's capital at this time. He said that a repurchase program expresses the Company's confidence in its performance and its stock.

Mr. Ryan also announced that the Company will not be bidding on the divestitures resulting from the merger of Fleet Financial Group and BankBoston Corporation. He said that a key factor in the Company's decision not to bid was reaching agreement during the second quarter of 1999 to acquire Banknorth Group.

"Our early interest in the Fleet/BankBoston divestitures was to improve our Massachusetts franchise," said Mr. Ryan. "The Banknorth acquisition allows us to do that, gaining the second largest market share in the Worcester, Massachusetts area, New England's second largest city, while also providing us entry into Vermont and upstate New York and adding to our New Hampshire franchise. With that accomplished, the best next step for our shareholders is, in our view, a repurchase program."

Strengths of the quarter ended June 30, 1999 included double digit growth in consumer and commercial business loans over loan totals in those two categories at June 30, 1998. While total loans declined by 9% from June 30, 1998 to June 30, 1999, due mostly to the Company's securitization of $601 million of residential mortgages during the second quarter, net interest income grew by 3 percent because of the higher yields generated by commercial and consumer loans.

"We are consciously changing our balance sheet to focus on higher yielding consumer and commercial loans while reducing dependence on lower yielding mortgage loans," said Mr. Ryan.

Another strength of the quarter ended June 30, 1999 was a 12 percent increase in noninterest income over the same quarter a year ago. Fee income from the Company's insurance agency business increased 55% for the quarter ended June 30, 1999 over the quarter ended June 30, 1998 and trust and investment income increased 24% for the same periods.

Return on average equity (ROE) for the quarter ended June 30, 1999 was 18.08%, up a full point from the quarter ended June 30, 1998 and represented the first quarter the Company's ROE has exceeded 18 percent. Return on average assets for the second quarter of 1999 remained relatively stable at 1.25%. Net interest margin for the quarter ended June 30, 1999 was down to 3.62% for the second quarter, largely because of price competition on loans and an increased level of investment securities on the Company's balance sheet.

The Company achieved a new low in its efficiency ratio of 54.49% for the quarter ended June 30, 1999, as compared to 56.84% for the same quarter a year ago.

Peoples Heritage Financial Group is a multi-state banking and financial services holding company with total assets of $13.5 billion. The Company owns Peoples Heritage Bank with the leading market share in Maine, Bank of New Hampshire with the leading market share in the state, Family/SIS Bank in Massachusetts and Glastonbury Bank & Trust in Connecticut. On June 2, 1999, the Company announced that it had reached agreement to acquire Banknorth Group, Inc. (NASDAQ: BKNG), a $4.4 billion bank holding company with banks in Vermont, Massachusetts, upstate New York and New Hampshire. The acquisition is expected to close around year-end 1999.

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