SOURCE: Northway Financial, Inc.

Northway Financial, Inc.

July 28, 2011 09:24 ET

Northway Financial, Inc. Announces Second Quarter Results, Declares Semi-Annual Common Stock Dividend, and Announces Approval for Participation in U.S. Department of the Treasury Preferred Stock Program to Support Small Business Lending

BERLIN, NH--(Marketwire - Jul 28, 2011) - Northway Financial, Inc. (the "Company") (OTCBB: NWYF) reported net income for the six months ended June 30, 2011 of $3,610,000 compared to net income of $1,486,000 for the same period in 2010, an increase of $2,124,000. For the quarter ended June 30, 2011, the Company reported net income of $2,605,000 compared to net income of $1,210,000 for the quarter ended June 30, 2010, an increase of $1,395,000.

On July 27, 2011, the Board of Directors of the Company declared a semi-annual common stock cash dividend of $0.15 per share. This dividend is payable on August 15, 2011 to stockholders of record on August 8, 2011. On July 27, 2011, the Board of Directors declared a 5% dividend on the Preferred Stock Class A shares, and a 9% dividend on the Preferred Stock Class B shares. Both of these dividends are payable to the U. S. Department of the Treasury on August 15, 2011, and are required as part of the U.S. Department of the Treasury's investment in Northway Financial, Inc.

In addition, on July 25, 2011 the Company obtained preliminary approval of an investment of $23.6 million in the Company's preferred stock by the U. S. Department of the Treasury, under the Small Business Lending Fund (the "SBLF) program. The Company intends to use $10.5 million of the SBLF funds to redeem all of the outstanding shares of preferred stock previously issued to the U. S. Department of the Treasury under the TARP Capital Purchase Program. The SBLF is a voluntary program intended to encourage small business lending by providing capital to qualified community banks and bank holding companies at favorable rates. This additional capital is expected to support the Company's organic growth strategy. The Company's participation in the SBLF program is subject to review of the SBLF documentation and final due diligence by the U. S. Department of the Treasury, and is expected to close on or about August 24, 2011.

Financial Highlights

  • As reported in our 2010 Annual Report, on March 16, 2011 Northway Bank (the "Bank") entered into a definitive purchase and assumption agreement with Union Bank of Morrisville, Vermont for the sale of the Bank's banking centers located in Groveton, Littleton and North Woodstock, New Hampshire. The sale was consummated on May 27, 2011. The Bank sold loans totaling $33,375,000, deposits of $63,792,000, securities sold under agreements to repurchase of $3,224,000 and other related assets and liabilities. As a result of the sale, the Bank recorded a gain of $4,415,000 on the sale of deposits and real property.
  • The Bank continues to vigorously pursue its organic growth strategy through the expansion into new markets. As previously announced, this expansion began with the September 2010 opening of a banking center located in Concord, NH. In May 2011, the Bank's Meredith, NH banking center was opened. In addition, the Bank plans to open a commercial loan production office in the Manchester, NH market area during the third quarter of 2011.
  • For the six months ended June 30, 2011, net income available to common stockholders was $3,288,000, or $1.25 per common share compared to $1,163,000, or $0.44 per common share, for the same period last year, an increase of $2,125,000. Net income available to common stockholders for the quarter ended June 30, 2011 was $2,444,000, or $0.93 per common share compared to $1,048,000, or $0.40 per common share for the quarter ended June 30, 2010, an increase of $1,396,000.
  • Net income for the six-months and three-months ended June 30, 2011 included the one-time gain of $4,415,000 related to the sale of deposits and real property to Union Bank. This gain was partially offset by an $870,000 write-down of goodwill associated with one of the banking centers sold.
  • The economic climate in central and northern New Hampshire continues to adversely impact the Company's loan portfolio. Thus, the Company's provision for loan losses for the six-month and three-month periods increased to $2,630,000 and $2,015,000, respectively, $975,000 and $1,225,000 more than the same periods last year, respectively.
  • The Company's returns on average assets and average equity for the six months ended June 30, 2011 were 0.88% and 12.49%, respectively, compared to 0.38% and 5.63% for the same period last year. For the quarter ended June 30, 2011 the returns on average assets and average equity were 1.30% and 17.45%, respectively, compared to 0.59% and 8.64% for the quarter ended June 30, 2010.
  • Total assets decreased $33,182,000, or 4.1%, to $783,194,000 at June 30, 2011 from $816,376,000 at June 30, 2010 due primarily to sale of the three banking centers.

Earnings Summary

The Company recorded net income of $3,610,000 for the first six months of 2011 compared to $1,486,000 for the same period in 2010. For the six months ended June 30, 2011, $3,288,000, or $1.25 per common share, was available to common stockholders compared to $1,163,000, or $0.44 per common share, for the same period last year.

Net interest and dividend income for the six months ended June 30, 2011 decreased $72,000 to $12,016,000 compared to $12,088,000 for the same period last year. The provision for loan losses year to date 2011 increased $975,000 to $2,630,000 compared to $1,655,000 for the same period in 2010. For the six months ended June 30, 2011, the Company recorded a net gain on the sale of the three banking centers of $4,415,000. Net securities gains were $952,000 compared to a net loss of $490,000 for the six months ended June 30, 2010, an increase of $1,442,000. All other noninterest income increased $231,000 to $3,434,000 compared to $3,203,000 for the same period last year. For the six months ended June 30, 2011, as noted above, the Company, as the result of the sale of one of the banking centers included in the sale of three banking centers, recorded a write-down of goodwill in the amount of $870,000. All other total noninterest expense increased $782,000 to $12,664,000 for the six months ended June 30, 2011 compared to $11,882,000 for the same period last year. This increase resulted primarily from one-time costs associated with the sale of the three banking centers and costs associated with the Company's expansion into new markets -- Concord, Meredith and Manchester, NH. Income tax expense for the six months ended June 30, 2011 increased $1,265,000 from the same period last year.

Balance Sheet Summary

At June 30, 2011, the Company had total assets of $783,194,000 compared to $816,376,000 at June 30, 2010, a decrease of $33,182,000. Cash and due from banks and interest-bearing deposits decreased $18,162,000 to $46,993,000 at June 30, 2011 compared to $65,155,000 at June 30, 2010. Securities available-for-sale increased $85,971,000 to $205,683,000 at June 30, 2011 compared to $119,712,000 at June 30, 2010. The increase in securities available-for-sale was due primarily to a $23,000,000 leverage in January 2011 which locked in a positive interest income spread for a minimum of two years; as well as the redeployment of $42,000,000 in overnight funds during the first quarter of 2011. Loans at June 30, 2011 decreased $95,368,000 to $492,535,000 compared to $587,902,000 at June 30, 2010. This decrease was primarily the result of 1) the sale of $29,600,000 in fixed-rate portfolio mortgages during the second half of 2010 as part of a strategy to reduce our exposure to long-term fixed-rate loans secured by residential real estate; 2) the sale of $33,375,000 in loans as part of the banking center sale; and 3) the continued sale of newly originated long term fixed rate residential real estate loans in the secondary market.

Total deposits were $585,906,000 at June 30, 2011 compared to $641,867,000 at June 30, 2010, a decrease of $55,961,000 and securities sold under agreements to repurchase decreased $5,021,000 to $25,063,000 at June 30, 2011 compared to $30,084,000 at June 30, 2010. These decreases resulted from the sale of the three banking centers. Other borrowings increased $22,649,000 to $106,221,000 at June 30, 2011 compared to $83,572,000 at June 30, 2010 due primarily to the $23,000,000 leverage implemented in January 2011.

Total equity increased $8,058,000 to $61,702,000 at June 30, 2011 compared to $53,644,000 at June 30, 2010. Stockholders' equity available to common stockholders totaled $51,134,000 resulted in a book value per common share of $19.51 per share at June 30, 2011, based on 2,620,755 shares of common stock outstanding, an increase of $3.07 per share from June 30, 2010.

About Northway Financial, Inc.

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 17 full-service banking offices.

Forward-looking Statements

Statements included in this press release that are not historical or current fact are "forward-looking statements" made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995, and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. Northway Financial, Inc. disclaims any obligation to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statements, or to reflect the occurrence of anticipated or unanticipated events or circumstances.

Northway Financial, Inc.
Selected Financial Highlights
(Dollars in thousands, except per share data) Three Months Ended Six Months Ended
6/30/2011 6/30/2010 6/30/2011 6/30/2010
Interest and Dividend Income $ 8,370 $ 8,832 $ 16,362 $ 17,357
Interest Expense 2,134 2,558 4,346 5,269
Net Interest and Dividend Income 6,236 6,274 12,016 12,088
Provision for Loan Losses 2,015 790 2,630 1,655
Noninterest Income 6,754 1,947 8,801 2,713
Noninterest Expense 7,308 5,979 13,534 11,882
Provision for Income Tax 1,062 242 1,043 (222 )
Net Income 2,605 1,210 3,610 1,486
Net Income Available to Common Stockholders 2,444 1,048 3,288 1,163
Earnings Per Common Share, Basic 0.93 0.40 1.25 0.44
Dividends Declared per Common Share 0.12 0.12 0.12 0.12
(1) Diluted earnings per share are calculated using the weighted average number of shares outstanding for the period, including common stock equivalents, as appropriate.
6/30/2011 6/30/2010
Total Assets $ 783,194 $ 816,376
Cash and due from banks and interest-bearing deposits 46,993 65,155
Securities available-for-sale, at fair value 205,683 119,712
Loans, net 482,790 579,916
Total Deposits 585,906 641,867
Federal Home Loan Bank Advances 85,601 62,952
Securities Sold Under Agreements to Repurchase 25,063 30,084
Junior Subordinated Debentures 20,620 20,620
Stockholders' Equity 61,702 53,644
Book Value of Common Shares Outstanding 19.51 16.44
Tangible Book Value of Common Shares Outstanding 15.24 11.96
Tier 1 Core Capital to Assets 8.77 % 8.09 %
Common Shares Outstanding 2,620,755 2,620,755
Return on Average Assets 0.88 % 0.38 %
Return on Average Equity 12.49 5.63
Nonperforming Loans as a % of Total Loans 3.77 3.30

Contact Information

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