Northway Financial, Inc. Announces Fourth Quarter Earnings

NORTH CONWAY, NH -- (Marketwired) -- 02/08/16 -- Northway Financial, Inc. (the "Company") (OTCQB: NWYF), the parent company of Northway Bank, today reported net income for the quarter ended December 31, 2015 of $1.6MM or $0.54 per basic common share. For the year ended December 31, 2015, the Company reported net income of $6.5MM, or $2.26 per basic common share. 

President and Chief Executive Officer, William J. Woodward, stated, "During the fourth quarter we redeemed the outstanding preferred stock issued to the US Department of the Treasury under the Treasury's Small Business Lending Fund. We were able to accomplish this with our existing capital; which we had built up over the past few years with record earnings. After this redemption, our capital ratios remain in excess of the regulatory "well-capitalized" designation. With the SBLF capital we received in 2011 from the U.S. Treasury, we were able to increase our small business loans by $44 million and we remain firmly committed to continuing to provide financial solutions to small businesses in our markets.

Net income for 2015 was positively impacted by a decrease in both the provision for loan losses and operating expenses. We remain focused on asset quality improvement and expense management and have been successful during the past 12 months in both of these areas."

Financial Highlights

• Noninterest expense decreased $1.5MM or 5.5% for the year ended December 31, 2015 compared to the same period in 2014.
• Nonperforming loans as a percentage of total loans stood at 1.18% at December 31, 2015 compared to 1.71% at December 31, 2014.
• Total deposits increased $31MM or 4.3% from December 2014. Demand deposit balances increased $21MM, or 22.7% from one year ago.
• Total Assets were $934MM, total loans were $547MM, and total deposits were $758MM at December 31, 2015.
• On December 31, 2015, the Company redeemed $24MM of Senior Non-cumulative Perpetual Preferred Stock, Series C (the "Preferred Stock") that had been issued to the United States Department of the Treasury (the "Treasury") in September 2011 pursuant to the Treasury's Small Business Lending Fund ("SBLF") program.
• Regulatory capital ratios at December 31, 2015 were 9.03% Tier 1 Leverage, 16.31% Total Risk Based Capital, and 11.57% Common Equity Tier 1 Ratio.

Earnings Summary

As noted above, the Company recorded net income of $6.5MM for the year ended December 31, 2015 compared to $7.9MM for the same period in 2014. For the year ended December 31, 2015, $6.2MM, or $2.26 per common share, was available to common stockholders compared to $7.6MM, or $2.76 per common share, for the same period last year. 

Net interest and dividend income for the year ended December 31, 2015 decreased $1.3MM to $27.1MM compared to $28.4MM for the same period last year. Interest income decreased $1.3MM to $32.9MM at December 31, 2015 compared to $34.2MM at December 31, 2014 due primarily to a decrease in the yield on earning assets of 20 basis points as well as a shift in average earning asset balances from higher yielding loans to cash and investments. Interest expense decreased $44 thousand due primarily to a decrease in average FHLB advances of $29.6MM partially offset by an increase in average deposit balances of $26.5MM.

The provision for loan losses for the year ended December 31, 2015 decreased $1.5MM; no provision expense was recorded in 2015 compared to $1.5MM for the same period in 2014. The allowance for loan losses as a percentage of nonperforming loans increased to 129% at December 30, 2015 compared to 85% at December 31, 2014.

Noninterest income, excluding net gain on sales of loans and net securities gains, decreased $1.2MM from 2014. Net gain on sales of loans decreased $695 thousand to $105 thousand compared to $800 thousand in 2014. The 2014 gain includes a gain of $245 thousand resulting from the sale of the Company's mortgage servicing asset. Net gains on sales of securities were $3.1MM compared to $4.2MM in 2014. Noninterest expense decreased $1.5MM in 2015 due primarily to decreases in marketing expense, OREO expenses including write-downs on other real estate owned, FDIC insurance, software expense and a decrease in the unfunded allowance for loan commitments.

Balance Sheet Summary

At December 31, 2015, the Company had total assets of $934MM compared to $926MM at December 31, 2014. The asset composition has seen a shift from loans to cash and investments as net loans decreased $48MM since December 31, 2014. Conversely, cash and investments have increased $25MM and $33MM, respectively, since December 31, 2014. 

Total deposits were $758MM at December 31, 2015 compared to $727MM at December 31, 2014, an increase of $31MM, or 4.3%. The increase in deposits was primarily attributed to growth in demand deposit balances of $21MM and an increase in municipal deposits of $12MM partially offset by a decrease in time deposits of $16MM. Securities sold under agreements to repurchase with the Company's customers, also known as customer sweep accounts, totaled $44MM at December 31, 2015, an increase of $9MM from December 31, 2014. Other borrowings decreased $10MM to $55MM at December 31, 2015, compared to $65MM at December 31, 2014. The decrease in other borrowings is attributable to long term FHLB advances that matured and were not replaced.

Stockholders' equity decreased $20.6MM due primarily to the redemption of the Preferred Stock. Stockholders' equity was also reduced by an increase in accumulated other comprehensive loss of $1.5MM and dividends declared and paid to common and preferred shareholders of $2.0MM partially offset by the recording of net income for the year ended December 31, 2015 of $6.5MM. Stockholders' equity available to common stockholders totaled $70.3MM resulting in a book value per common share of $25.55 at December 31, 2015, based on 2,751,650 shares of common stock outstanding; an increase of $1.07 compared to December 31, 2014. Tangible book value per common share increased $1.09 to $21.89 at December 31, 2015, compared to $20.80 at December 31, 2014. 

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 17 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                       
                                 (Unaudited)                                
                                                                            
(Dollars in thousands,                                                      
 except per share data)         Three Months Ended          Year Ended      
                             ----------------------- -----------------------
                              12/31/2015  12/31/2014  12/31/2015  12/31/2014
                             ----------- ----------- ----------- -----------
                                                                            
Interest and Dividend Income $     7,948 $     8,380 $    32,872 $    34,196
Interest Expense                   1,420       1,534       5,792       5,836
                             ----------- ----------- ----------- -----------
Net Interest and Dividend                                                   
 Income                            6,528       6,846      27,080      28,360
Provision for Loan Losses              -         138           -       1,503
All Other Noninterest Income       1,153       1,670       4,836       6,766
Noninterest Expense                6,863       6,969      26,018      27,535
                             ----------- ----------- ----------- -----------
Net Income Before Securities                                                
 Gains                               818       1,409       5,898       6,088
Securities Gains, Net              1,323       2,030       3,067       4,189
                             ----------- ----------- ----------- -----------
Net Income Before Taxes            2,141       3,439       8,965      10,277
Provision for Income Tax             589         656       2,480       2,424
                             ----------- ----------- ----------- -----------
Net Income                   $     1,552 $     2,783 $     6,485 $     7,853
                             =========== =========== =========== ===========
Net Income Available to                                                     
 Common Stockholders         $     1,480 $     2,716 $     6,212 $     7,585
                             =========== =========== =========== ===========
Earnings per Common Share,                                                  
 Basic                       $      0.54 $      0.99 $      2.26 $      2.76
                                                                            

                                                                            
                                                    12/31/2015   12/31/2014 
                                                   ------------ ------------
                                                                            
Balance Sheet                                                               
Total Assets                                       $   933,604  $   925,713 
Cash and Due from Banks and Interest-Bearing                                
 Deposits                                               91,727       66,693 
Securities Available-for-Sale, at Fair Value           254,476      221,647 
Loans, Net                                             547,299      594,787 
Total Deposits                                         757,922      726,630 
Federal Home Loan Bank Advances                         34,907       44,814 
Securities Sold Under Agreements to Repurchase          44,042       34,850 
Junior Subordinated Debentures                          20,620       20,620 
Stockholders' Equity                                    70,307       90,918 
Profitability and Efficiency                                                
Net Interest Margin                                       3.23%        3.42%
Yield on Earning Assets                                   3.88         4.08 
Cost of Interest Bearing Liabilities                      0.79         0.79 
Book Value Per Share of Common Shares Outstanding  $     25.55  $     24.48 
Tangible Book Value Per Share of Common Shares                              
 Outstanding                                             21.89        20.80 
Capital and Credit                                                          
Tier 1 Core Capital to Average Assets                     9.03%       10.83%
Common Equity Risk-Based Capital                         11.57          n/a 
Tier 1 Risk-Based Capital                                15.06        17.94 
Total Risk-Based Capital                                 16.31        19.22 
Common Shares Outstanding                            2,751,650    2,751,650 
Weighted Average Number of Common Shares, Basic      2,751,650    2,751,650 
Return on Average Assets                                  0.69%        0.84%
Return on Average Equity                                  7.01         8.96 
Nonperforming Loans as a % of Total Loans                 1.18         1.71 
Allowance for Loan Losses as a % of Nonperforming                           
 Loans                                                  128.83        85.16 
                                                                            

   Contact: Gary LaurashChief Financial Officer603-326-7377

Source: Northway Financial, Inc.

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