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Northway Financial, Inc. Announces First Quarter Earnings

NORTH CONWAY, NH -- (Marketwired) -- 04/25/14 -- Northway Financial, Inc. (the "Company") (OTCQB: NWYF), the parent company of Northway Bank, today reported net income for the quarter ended March 31, 2014 of $1,307,000, or $0.45 per basic common share, compared to net income of $2,028,000, or $0.74 per basic common share, for the quarter ended March 31, 2013, a decrease of $721,000. The result of the first quarter of 2013 included securities gains of $1,616,000, compared to $428,000 for the first quarter of 2014.

CEO William J. Woodward said, "We continue to execute our strategic objective of improving core earnings, which have increased over last year. Loans and deposits have each increased $53 million compared to the prior year and have resulted in an increase in net interest income of $611,000. I am also pleased with the execution of our strategy to improve asset quality, which has allowed us to reduce our provision for possible loan losses by $515,000 compared to the previous year.

We continue to experience strong traction as we move into Southern New Hampshire and are particularly pleased with the deposit growth at our two newest branches located in Manchester and Portsmouth."

Financial Highlights

  • Net loans increased $53,331,000, or 9.3%, to $625,015,000 at March 31, 2014, compared to $571,684,000 at March 31, 2013. Commercial loans increased $44,956,000 and comprise 62.1% of gross loans. This growth is reflective of our efforts to increase small business lending throughout the state.

  • Total deposits increased $52,873,000, or 8.0%, to $709,842,000 at March 31, 2014, compared to $656,969,000 at March 31, 2013. For the quarter ended March 31, 2014, total deposits increased $15,483,000, which is an annualized growth rate of 8.9%.

  • The Company's returns on average assets and average equity for the quarter ended March 31, 2014 were 0.58% and 6.31%, respectively, compared to 0.96% and 10.06% for the same period last year.

  • Core earnings comprise 71.8% of net income for the quarter ended March 31, 2014, compared to 43.4% for the same period last year. Core earnings exclude non-recurring items such as gains on sales of investment securities and represent earnings generated from our principal banking activities. Interest income has increased $678,000 over last year due primarily to the increase in the loan portfolio. Further, the provision for loan losses has decreased $515,000 as many of our problem credits have been resolved. Overall, net income has decreased due primarily to a decrease in gains on sales of investments and loans of $1,188,000 and $477,000, respectively.

  • Regulatory capital ratios at March 31, 2014 exceeded minimum requirements. The Company's total risk-based capital ratio was 17.24% compared to the regulatory requirement of 10.0%; Tier 1 risk-based capital was 15.91% compared to the regulatory requirement of 6.0% and Tier 1 capital to average assets was 10.75% compared to the regulatory requirement of 5.0%.

Earnings Summary

As noted above, the Company recorded net income of $1,307,000 for the quarter ended March 31, 2014 compared to $2,028,000 for the same period in 2013. For the quarter ended March 31, 2014, $1,240,000, or $0.45 per common share, was available to common stockholders compared to $1,948,000, or $0.74 per common share, for the same period last year.

Net interest and dividend income for the quarter ended March 31, 2014 increased $611,000 to $7,148,000 compared to $6,537,000 for the same period last year. The provision for loan losses for the quarter ended March 31, 2014 decreased $515,000 to $405,000 compared to $920,000 for the same period in 2013. Net gains on sales of securities were $428,000 compared to $1,616,000 for the quarter ended March 31, 2013, a decrease of $1,188,000. Gains on sales of loans decreased $477,000 to $165,000 for the quarter ended March 31, 2014, compared to $642,000 for the same period last year. 2013 gains were positively impacted by the high level of refinance activity that occurred given the then record low level of long-term interest rates. All other noninterest income decreased $7,000 to $1,330,000 compared to $1,337,000 for the same period last year. Total noninterest expense increased $585,000 to $7,025,000 for the quarter ended March 31, 2014, compared to $6,440,000 for the same period last year. The increase was due primarily to higher salaries expense, pension, and consulting expense. Income tax expense decreased $410,000 to $334,000 for the quarter ended March 31, 2014, compared to $744,000 for the same period last year; the effective tax rates were 20.4% and 26.8%, respectively.

Balance Sheet Summary

At March 31, 2014, the Company had total assets of $920,287,000 compared to $849,928,000 at March 31, 2013, an increase of $70,359,000, or 8.3%. Net loans at March 31, 2014, increased $53,331,000, or 9.3%, to $625,015,000 compared to $571,684,000 at March 31, 2013. Securities available-for-sale increased $20,567,000 to $228,086,000 at March 31, 2014, compared to $207,519,000 at March 31, 2013.

Total deposits were $709,842,000 at March 31, 2014, compared to $656,969,000 at March 31, 2013, an increase of $52,873,000, or 8.0%. Securities sold under agreements to repurchase increased $6,600,000 to $23,308,000 at March 31, 2014, compared to $16,708,000 at March 31, 2013. Other borrowings increased $7,464,000 to $95,155,000 at March 31, 2014, compared to $87,691,000 at March 31, 2013.

Total stockholders' equity increased $3,067,000 to $84,435,000 at March 31, 2014, compared to $81,368,000 at March 31, 2013. Stockholders' equity available to common stockholders totaled $60,903,000, resulting in a book value per common share of $22.13 per share at March 31, 2014, based on 2,751,650 shares of common stock outstanding, an increase of $0.05 per share, from March 31, 2013. Tangible book value per common share increased $0.25, or 1.4%, to $17.89 at March 31, 2014, compared to $17.64 at March 31, 2013.

About Northway Financial, Inc.

Northway Financial, Inc., headquartered in North Conway, 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 18 full-service banking offices and its loan production offices located in Bedford and Portsmouth, New Hampshire.

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
                                                      3/31/2014   3/31/2013
                                                     ----------- -----------

Interest and Dividend Income                         $     8,486 $     7,808
Interest Expense                                           1,338       1,271
                                                     ----------- -----------
Net Interest and Dividend Income                           7,148       6,537
Provision for Loan Losses                                    405         920
Gains on Sales of Loans, Net                                 165         642
All Other Noninterest Income                               1,330       1,337
Noninterest Expense                                        7,025       6,440
                                                     ----------- -----------
Net Income Before Securities Gains                         1,213       1,156
Securities Gains, Net                                        428       1,616
                                                     ----------- -----------
Net Income Before Taxes                                    1,641       2,772
Provision for Income Tax                                     334         744
                                                     ----------- -----------
Net Income                                           $     1,307 $     2,028
                                                     =========== ===========
Net Income Available to Common Stockholders          $     1,240 $     1,948
                                                     =========== ===========
Earnings per Common Share, Basic                     $      0.45 $      0.74

                                                      3/31/2014   3/31/2013
                                                     ----------  ----------

Balance Sheet
Total Assets                                         $  920,287  $  849,928
Cash and Due from Banks and Interest-Bearing
 Deposits                                                20,659      18,933
Securities Available-for-Sale, at Fair Value            228,086     207,519
Loans, Net                                              625,015     571,684
Total Deposits                                          709,842     656,969
Federal Home Loan Bank Advances                          74,535      67,071
Securities Sold Under Agreements to Repurchase           23,308      16,708
Junior Subordinated Debentures                           20,620      20,620
Stockholders' Equity                                     84,435      81,368
Profitability and Efficiency
Net Interest Margin                                        3.51%       3.43%
Yield on Earning Assets                                    4.13        4.06
Cost of Interest Bearing Liabilities                       0.74        0.75
Book Value Per Share of Common Shares Outstanding    $    22.13  $    22.08
Tangible Book Value Per Share of Common Shares
 Outstanding                                              17.89       17.64
Capital and Credit
Tier 1 Core Capital to Average Assets                     10.75%      10.89%
Tier 1 Risk-Based Capital                                 15.91       16.71
Total Risk-Based Capital                                  17.24       18.05
Common Shares Outstanding                             2,751,650   2,620,755
Weighted Average Number of Common Shares, Basic       2,751,650   2,620,755
Return on Average Assets                                   0.58%       0.96%
Return on Average Equity                                   6.31       10.06
Nonperforming Loans as a % of Total Loans                  2.37        2.64
Allowance for Loan Losses as a % of Nonperforming
 Loans                                                    75.91       66.34

Russell A. Cronin, Jr.
Senior Vice President
and Chief Financial Officer

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