Market Overview

Northway Financial, Inc. Announces Second Quarter Earnings and Declares Semi-Annual Dividend


NORTH CONWAY, N.H., July 27, 2017 (GLOBE NEWSWIRE) -- Northway Financial, Inc. (the "Company") (OTCQB:NWYF), the parent company of Northway Bank (the "Bank"), today reported net income for the quarter ended June 30, 2017 of $2.0MM, or $0.74 per basic common share.  Year-to-date, the Company reported net income of $3.7MM, or $1.35 per basic common share.

President and Chief Executive Officer, William J. Woodward, stated, "The significant efforts by management in improving the credit quality of the loan portfolio and reducing our cost of funds can be seen in the financial performance of the Bank in the first half of 2017.  Nonperforming loans as a percentage of total loans was 0.56% at the end of June and the net interest margin averaged 3.45%.  The improvement in these key metrics should translate to greater shareholder value.

"I am pleased to announce that during the second quarter, Michael Cataldo joined Northway Bank as SVP/Chief Administrative Officer.  Mike brings over 40 years of extensive banking experience, where he has managed loan and deposit operations, facilities, collections, vendor management and project management.  We are happy to have Mike join our team."

The Board of Directors has declared a semi-annual cash dividend of $0.32 per share, payable on August 14, 2017, to common stockholders of record on August 7, 2017.  The payment of this dividend results in a 24% payout ratio based on net income available to common stockholders.  Based on a share price of $28.00 on July 26, 2017, this semi-annual dividend, when annualized, results in a dividend yield of approximately 2.3%. The Company's common stock is available through brokers and is quoted on the OTCQB under the stock symbol "NWYF". 

Financial Highlights

  • The market price of our common stock increased to $28.00 as of July 26, 2017, a 4.5% improvement from the end of 2016. Compared to June 30, 2016, the stock price has increased $6.80, or 32%.
  • Total assets were $883MM, net loans were $562MM, and total deposits were $729MM at June 30, 2017.
  • Net interest margin improved to 3.45% compared to 3.17% at December 31, 2016 and 3.18% at June 30, 2016.  The yield on earning assets improved 13 basis points and 4 basis points to 3.83% compared to December 31, 2016 and June 30, 2016, respectively.  The cost of interest-bearing liabilities has been reduced to 0.47% compared to 0.65% and 0.74% at December 31, 2016 and June 30, 2016, respectively.
  • Regulatory capital ratios at June 30, 2017 were 10.34% Tier 1 Leverage, 16.54% Total Risk Based Capital, and 11.92% Common Equity Tier 1.
  • Nonperforming loans as a percentage of total loans stood at 0.56% at June 30, 2017 compared to 0.60% at December 31, 2016 and 0.74% at June 30, 2016.

Earnings Summary

As noted above, the Company recorded net income of $3.7MM or $1.35 per common share for the six months ended June 30, 2017 compared to $3.1MM or $1.12 per common share for the same period in 2016.

Net interest and dividend income for the six months ended June 30, 2017 increased $602 thousand to $13.7MM compared to $13.1MM for the same period last year.  Interest and dividend income decreased $483 thousand to $15.3MM at June 30, 2017 compared to $15.7MM at June 30, 2016 due primarily to a lower average loan yield of 29 basis points partially offset by higher average investment balances and yields of $16.6MM and 23 basis points, respectively.    Interest expense decreased $1.1MM due primarily to a decrease in the rate paid on balances of 28 basis points and a decrease in the average balance of $42MM.

Based on the continued improvement of the credit quality of our loan portfolio and other factors relevant to the adequacy of our allowance for loan losses, there was no provision for loan losses for the quarter ended June 30, 2017.  The allowance for loan losses as a percentage of nonperforming loans was 234% at June 30, 2017 compared to 236% at December 31, 2016 and 204% at June 30, 2016.

Noninterest income, excluding net gain on sales of loans and net securities gains, increased $472 thousand compared to the same period in 2016 primarily from a gain of $316 thousand related to the sale of a parcel of land adjacent to our Campton branch as well as a $112 thousand improvement in the cash surrender value of life insurance.  Net gains on sales of securities were $1.2MM, approximately the same as 2016.  Noninterest expense increased $322 thousand in 2017 due primarily to a $299 thousand payment the Bank made to the employee 401(k) Plan as part of the enhancements made to the 401(k) Plan in conjunction with the termination and subsequent liquidation of the defined benefit plan.

Balance Sheet Summary

At June 30, 2017, the Company had total assets of $883MM compared to $890MM at December 31, 2016 and $925MM at June 30, 2016.  Since year end, the decrease in total assets was the result of a reduction in cash of $25MM while total gross loans increased $16MM and investments increased $4MM.  Total deposits and securities sold under agreements to repurchase decreased $9MM due to the normal seasonal fluctuations in municipal deposits and management's decision to not renew maturing higher rate customer and institutional certificates of deposit.   This resulted in a decrease in interest-bearing time deposits of $32MM since December 31, 2016, while non-maturity deposits increased $24MM.  Stockholders' equity increased $3.9MM as a result of year-to-date income of $3.7MM and a decrease in other comprehensive loss of $1.1MM partially offset by the declaration and payment of a common stock dividend of $900 thousand.

Compared to June 30, 2016, total assets decreased $42MM, led primarily by a reduction in cash and investments of $47MM.  Loans, net, increased $7MM since June 30, 2016. Since June 30, 2016, liabilities decreased $43MM as $94MM of time deposits and wholesale borrowings were reduced while the Bank's non-maturity deposits increased $44MM. 

Stockholders' equity available to common stockholders totaled $78.3MM at June 30, 2017 resulting in a book value per common share of $28.46, based on 2,751,650 shares of common stock outstanding, an increase of $1.42 compared to December 31, 2016 and $0.68 compared to June 30, 2016.  Tangible book value per common share increased $1.43 and $0.70 to $24.83 at June 30, 2017, compared to $23.40 and $24.13 at December 31, 2016 and June 30, 2016, respectively.

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
(Dollars in thousands, except per share data)   Three Months Ended   Six Months Ended
    6/30/2017   6/30/2016   6/30/2017   6/30/2016
Interest and Dividend Income   $ 7,725   $ 8,069   $ 15,252   $ 15,735
Interest Expense     801     1,299     1,567     2,652
Net Interest and Dividend Income     6,924     6,770     13,685     13,083
Provision for Loan Losses     -     -     -     -
All Other Noninterest Income     1,458     1,314     3,027     2,553
Noninterest Expense     6,299     6,283     12,829     12,507
Net Income Before Securities Gains     2,083     1,801     3,883     3,129
Securities Gains, Net     697     343     1,179     1,195
Net Income Before Taxes     2,780     2,144     5,062     4,324
Provision for Income Tax     745     607     1,349     1,237
Net Income   $ 2,035   $ 1,537   $ 3,713   $ 3,087
Net Income Available to Common Stockholders   $ 2,035   $ 1,537   $ 3,713   $ 3,087
Earnings per Common Share, Basic   $ 0.74   $ 0.56   $ 1.35   $ 1.12

    6/30/2017   12/31/2016   6/30/2016  
Balance Sheet              
Total Assets   $ 883,476   $ 889,598   $ 925,065  
Cash and Due from Banks and Interest-Bearing Deposits     20,116     44,854     72,572  
Securities Available-for-Sale, at Fair Value     265,107     261,008     259,526  
Loans, Net     561,767     545,594     554,385  
Total Deposits     729,380     737,732     746,182  
Federal Home Loan Bank Advances     -     -     32,930  
Securities Sold Under Agreements to Repurchase     49,798     50,528     42,487  
Junior Subordinated Debentures     20,620     20,620     20,620  
Stockholders' Equity     78,307     74,403     76,435  
Profitability and Efficiency              
Net Interest Margin     3.45 %   3.17 %   3.18 %
Yield on Earning Assets     3.83     3.70     3.79  
Cost of Interest Bearing Liabilities     0.47     0.65     0.74  
Book Value Per Share of Common Shares Outstanding   $ 28.46   $ 27.04   $ 27.78  
Tangible Book Value Per Share of Common Shares Outstanding     24.83     23.40     24.13  
Capital and Credit              
Tier 1 Core Capital to Average Assets     10.34 %   9.83 %   9.95 %
Common Equity Risk-Based Capital     11.92     11.61     11.57  
Tier 1 Risk-Based Capital     15.24     14.93     14.93  
Total Risk-Based Capital     16.54     16.23     16.19  
Common Shares Outstanding     2,751,650     2,751,650     2,751,650  
Weighted Average Number of Common Shares, Basic     2,751,650     2,751,650     2,751,650  
Return on Average Assets     0.85 %   0.44 %   0.68 %
Return on Average Equity     9.82     5.38     8.44  
Nonperforming Loans as a % of Total Loans     0.56     0.60     0.74  
Allowance for Loan Losses as a % of Nonperforming Loans     234.39     236.02     204.49  

Gary Laurash
Chief Financial Officer

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