Record Quarterly Earnings at Peoples Heritage

Third Quarter 1999 up 14% Over Same Quarter 1998

Portland, Maine, October 19, 1999 -- Peoples Heritage Financial Group, Inc. (NASDAQ: PHBK) today reported record quarterly net earnings of $42.6 million, or 41 cents per diluted share, for the third quarter ended September 30, 1999, up 14 percent from net income of $37.2 million or 35 cents per diluted share from the same quarter a year ago.

For the first nine months of the year, net income was up 20 percent as compared to the first nine months of 1998, from $80.9 million, or 76 cents per diluted share, to $96.8 million or 93 cents per diluted share.

"The quarter was highlighted by double digit growth in commercial and consumer lending and noninterest income, increased efficiency, and a stabilization of our net interest margin and noninterest expenses," said William J. Ryan, chairman, president, and chief executive officer. "These have been points of emphasis as we emerge as a commercial banking force in New England and we are gratified by the results."

Commercial business loans were up 13 percent at September 30, 1999 from September 30, 1998 and consumer loans were up 15 percent. Net interest income was up 7 percent for the quarter ended September 30, 1999, as compared to the same quarter a year ago.

Noninterest income increased by 11 percent for the quarter ended September 30, 1999 over the same quarter a year ago, led by double digit increases in trust income, commissions from the Company's insurance agencies, and customer service fees. The increase came despite a slowdown in home mortgage originations largely because of rising rates and, as a result, a drop in mortgage banking income. Exclusive of mortgage banking and securities gains, noninterest income increased by 30 percent for the third quarter of 1999 as compared to the third quarter of 1998.

The Company's efficiency ratio, essentially a measurement of the cost of generating income, dropped to an historically low 53.05% for the quarter ended September 30, 1999 as compared to 56.33% for the quarter ended September 30, 1998. The Company's net interest margin for the third quarter stabilized at 3.61%, down from 4.05% from the same quarter a year ago but down only a single basis point from 3.62% for the previous quarter ended June 30, 1999.

Noninterest expense also remained relatively stable at $79.5 million for the quarter ended September 30, 1999, up only 2 percent from the same quarter a year ago and virtually even with noninterest expense of $79.3 million for the previous quarter ended June 30, 1999.

Return on average equity reached an historically high level of 19.62% for the quarter ended September 30, 1999, up from 17.23% for the same quarter a year ago. Return on average assets was off slightly at 1.23% for the quarter ended September 30, 1999, as compared to 1.27% for the same quarter a year ago.

The Company's asset quality continues to improve. Total nonperforming loans dropped to $48.8 million at September 30, 1999, down more than $10 million from September 30, 1998. Nonperforming loans at September 30, 1999 represented just 0.73% of total loans, as compared to 0.81% at September 30, 1998 and 0.78% at June 30, 1999. As a percentage of total assets, nonperforming assets declined to 0.43% at September 30, 1999 as compared to 0.60% at September 30, 1998 and 0.46% at June 30, 1999.

Peoples Heritage Financial Group, Inc. is a $13.9 billion banking and financial services holding company headquartered in Portland, Maine. The Company's banking subsidiaries include Peoples Heritage Bank in Maine, Bank of New Hampshire in that state, Family Bank in Massachusetts, and Glastonbury Bank and Trust in Connecticut. Early next year, subject to all required regulatory and shareholder approvals, the Company expects to complete the acquisition of Banknorth Group, Inc., which will extend its banking operations into Vermont and upstate New York and increase its banking franchise in Massachusetts.

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