SOURCE: Northway Financial, Inc.

January 30, 2008 18:00 ET

Northway Financial, Inc. Announces Fourth Quarter Results and Declares Quarterly Dividend

BERLIN, NH--(Marketwire - January 30, 2008) - Northway Financial, Inc. (the "Company") (OTCBB: NWYF) reported net income for the quarter ended December 31, 2007 of $537,000, or $0.22 per share-basic, compared to $525,000, or $0.17 per share-basic, for the same quarter in 2006, an increase of $12,000. Net income for the year ended December 31, 2007 was $3,279,000, or $1.16 per share-basic, compared to $3,215,000, or $1.08 per share-basic, for the year ended December 31, 2006, an increase of $64,000, or 2.0%. Per share results were favorably affected by the reduction in outstanding shares as a result of the previously reported reverse and forward stock split transactions.

Commenting on the fourth quarter and annual results, William J. Woodward, President and Chief Executive Officer of the Company, stated:

"This past year was notable because of the steps we took to strengthen our Management Team, further control overhead expense, and reduce our regulatory burden.

"I am especially pleased that our Management Team was enhanced in 2007 by the addition of three very experienced senior bank executives. Jeffrey Smith now serves as Chief Administrative Officer, Victor Levesque is our Director of Commercial Banking, and Richard Olson is our Senior Retail Banking Officer. Each of these officers brings to Northway several years of specialized banking experience that will help us to strengthen our competitive position in northern and central New Hampshire.

"Overhead expense was reduced approximately $700,000 from the 2006 level, even after absorbing substantial legal, auditing, and consulting services in connection with the stock split transactions, as well as the one-time cost associated with the refinancing of our Trust Preferred Securities.

"The reduction in regulatory burden was achieved through completion of reverse-then-forward stock splits followed by termination of registration of our common stock with the Securities and Exchange Commission and suspension of reporting obligations to that agency. The full impact of the cost benefit of these actions will be reflected in the Bank's net income in 2008."

On January 30, 2008, the Board of Directors declared a dividend of $0.125 cents per share, an increase of 4% over the dividend declared last quarter. This dividend is payable on February 20, 2008 to shareholders of record on February 8, 2008.

Net interest and dividend income for the fourth quarter of 2007 was $5,488,000 compared to $5,360,000 for the fourth quarter of 2006, an increase of $128,000. The provision for loan losses for the fourth quarter of 2007 increased $150,000 to $270,000, compared to $120,000 for the fourth quarter of the previous year. Net securities gains for the quarter decreased $16,000 to $25,000 compared to $41,000 for the same period last year. Other noninterest income for the quarter decreased $129,000 to $1,298,000 compared to $1,427,000 for the same period last year. Other operating expense was $5,974,000 for the quarter compared to $6,217,000 for the same period last year, a decrease of $243,000.

Net interest and dividend income for the year ended December 31, 2007 decreased $397,000 to $21,805,000 compared to $22,202,000 for the same period last year due primarily to an increase in funding costs. The provision for loan losses for the year increased $345,000 to $810,000 compared to $465,000 for the same period in 2006, primarily the result of an increase in gross loans, especially commercial and commercial real estate loans. Securities gains for the year ended December 31, 2007 increased $126,000 to $520,000 compared to $394,000 for the same period last year. Other noninterest income year-to-date decreased $190,000 to $5,287,000 compared to $5,477,000 for the same period last year. Other operating expense decreased $688,000 to $23,053,000 for the year ended December 31, 2007 compared to $23,741,000 for the same period last year due primarily to a decrease in the amortization of core deposit intangibles and equipment expense. This was partially offset by one-time expenses associated with the write-off of deferred debenture costs associated with the refinancing of two trust preferred securities earlier in the year and the reverse and forward stock split transaction. Income tax expense for the year ended December 31, 2007 decreased $182,000 from the year ended December 31, 2006 as the Company was able to reduce its federal income tax rate due to tax credits for certain charitable contributions and an increase in the level of municipal loans and investments outstanding.

At December 31, 2007, the Company had total assets of $688,773,000 compared to $650,877,000 at December 31, 2006, an increase of $37,896,000. Securities available-for-sale increased $17,705,000 to $143,543,000 at December 31, 2007 compared to $125,838,000 at December 31, 2006. Loans at December 31, 2007 increased $25,788,000 to $489,969,000 compared to $464,181,000 at December 31, 2006. Total deposits were $478,462,000 at December 31, 2007 compared to $484,677,000 at December 31, 2006, a decrease of $6,215,000. Securities sold under agreements to repurchase increased $17,933,000 to $54,430,000 at December 31, 2007 compared to $36,497,000 at December 31, 2006. Other borrowings increased $32,435,000 to $106,055,000 at December 31, 2007 compared to $73,620,000 at December 31, 2006. Total equity decreased $7,504,000 to $44,645,000 at December 31, 2007 compared to $52,149,000 at December 31, 2006 due primarily to the shares cashed out in the reverse and forward stock split transaction.

Northway Financial, Inc., headquartered in Berlin, New Hampshire, is a bank holding company. Through its subsidiary bank, Northway Bank, the Company offers a broad range of financial products and services to individuals, businesses and the public sector from its full-service banking offices.

Earnings per share and shares outstanding have been adjusted to reflect the impact of the reverse and forward stock split transaction completed September 11, 2007.

Certain statements in this press release may be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements can be identified by the use of the words "expect," "believe," "estimate," "will" and other expressions which predict or indicate future trends and which do not relate to historical matters. Forward-looking statements may include, but are not limited to, expectations for impact of changes in our branch network on new products, on noninterest income and expense, projections of revenue, income or loss, and plans related to products or services of the Company and its subsidiary. Such forward-looking statements are subject to known and unknown risks, uncertainties and contingencies, many of which are beyond the control of the Company. The Company's actual results could differ materially from those projected in the forward-looking statements as the result of, among other factors, changes in interest rates, a prolonged continuation of the current interest rate environment, changes in the securities or financial markets, a deterioration in general economic conditions on a national basis or in the local markets in which the Company operates, including changes in local business conditions resulting in rising unemployment and other circumstances which adversely affect borrowers' ability to service and repay our loans, changes in loan defaults and charge-off rates, reduction in deposit levels necessitating increased borrowing to fund loans and investments, the passing of adverse government regulation, and changes in assumptions used in making such forward-looking statements. These forward-looking statements were based on information, plans and estimates at the date of this press release, and the Company does not promise to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

                       Northway Financial, Inc.
                 Selected Consolidated Financial Data
                              (Unaudited)
        (In thousands, except for ratios and per share amounts)

Period end balance sheet data:                           December 31,
                                                   2007               2006

Total assets                                   $688,773           $650,877
Federal funds sold                                    -              8,755
Securities available-for-sale                   143,543            125,838
Federal Home Loan Bank stock                      4,779              3,782
Loans held-for-sale                                 403                263
Loans, net of unearned income                   489,969            464,181
Allowance for loan losses                         6,240              5,581
Nonperforming assets                              4,962              3,714
Deposits                                        478,462            484,677
Securities sold under agreements to
 repurchase                                      54,430             36,497
Other borrowings                                106,055             73,620
Stockholders’ equity                             44,645             52,149

Book value per share                           $  17.81           $  17.49
Tangible book value per share (1)                 12.84              13.14
Tier 1 capital to risk weighted assets            11.36%             14.02%
Total capital to risk weighted assets             13.82              15.95
Leverage ratio                                     7.34               9.31
Allowance for loan losses to total loans           1.27               1.20
Shares outstanding                            2,506,804          2,982,348

                             For the Three Months    For the Twelve Months
                                Ended Dec. 31,          Ended Dec. 31,

Operating results:              2007       2006         2007       2006
Net interest and dividend
 income(2)                    $5,488     $5,360      $21,805    $22,202
Loan loss provision              270        120          810        465
Securities gains, net             25         41          520        394
Other noninterest income       1,298      1,427        5,287      5,477
Other operating expense        5,974      6,217       23,053     23,741
Income before tax                567        491        3,749      3,867
Income tax expense                30        (34)         470        652
Net income                      $537       $525       $3,279     $3,215

Earnings per share – basic     $0.22      $0.17        $1.16      $1.08
Return on average assets        0.31%      0.33%        0.49%      0.51%
Return on average equity        4.72%      3.93%        6.53%      6.24%

1 Includes a deduction of $12,465 and $12,953 for goodwill, core deposit
  intangible and mortgage servicing assets for 2007 and 2006, respectively.
2 Net interest and dividend income FTE was $5,886 and $5,621 for the three
  months ended December 31, 2007 and 2006, respectively, and was $23,203
  and $23,202 for the twelve months ended December 31, 2007 and 2006,
  respectively.

Contact Information

  • Contact:
    Richard P. Orsillo
    Senior Vice President
    and Chief Financial Officer
    603-752-1171