NWYF Northway Financial Inc (QB)

Northway Financial, Inc. (the "Company") (OTCBB: NWYF) reported net income for the first quarter ended March 31, 2011 of $1,005,000 compared to net income of $276,000 for the quarter ended March 31, 2010, an increase of $729,000.

Financial Highlights

--  Net income available to common stockholders was $844,000, or $0.32 per
    common share, for the quarter ended March 31, 2011, compared to
    $115,000, or $0.04 per common share, for the quarter ended
    March 31, 2010, an increase of $729,000.

--  The Company's returns on average assets and average equity for the
    quarter March 31, 2011 were 0.48% and 7.19%, respectively, compared to
    0.14% and 2.13% for the same period last year.

--  Total assets increased $49,014,000, or 6.3%, to $831,026,000 at
    March 31, 2011 from $782,012,000 at March 31, 2010.

--  As a result of our strategy to reduce our exposure to long-term
    fixed-rate loans secured by real estate, net loan balances decreased
    $76,114,000, or 13.2%, to $499,633,000 at March 31, 2011 from
    $575,747,000 at March 31, 2010.

--  The cash flow generated from the implementation of the strategy
    described above was invested in securities available-for-sale which
    increased $94,255,000, or 70.4%, to $228,095,000 at March 31, 2011 from
    $133,840,000 at March 31, 2010.

--  Borrowings increased $22,967,000, or 27.5%, to $106,587,000 at
    March 31, 2011 from $83,620,000 at March 31, 2010 due to an increase in
    FHLB advances in order to fund a leverage strategy.

--  Deposits increased $15,296,000, or 2.5%, to $632,363,000 at March 31,
    2011 from $617,067,000 at March 31, 2010.

Earnings Summary

Net interest and dividend income for the quarter ended March 31, 2011 decreased $34,000 to $5,780,000 compared to $5,814,000 for the same period last year. The provision for loan losses for the quarter ended March 31, 2011 decreased $250,000 to $615,000 compared to $865,000 for the same period in 2010. Noninterest income increased $1,281,000 to $2,047,000 for the quarter ended March 31, 2011 compared to $766,000 for the same period a year ago. During the first quarter of 2010, the Company recorded a write-down on securities available-for-sale of $1,128,000. In addition, net gains on sales of loans increased $195,000 from the prior year. Total noninterest expense increased $323,000 to $6,226,000 for the quarter ended March 31, 2011 compared to $5,903,000 for the same period last year. Income tax expense for the quarter ended March 31, 2011 increased $445,000 from the quarter ended March 31, 2010.

Balance Sheet Summary

At March 31, 2011, the Company had total assets of $831,026,000 compared to $782,012,000 at March 31, 2010, an increase of $49,014,000. Cash and due from banks and interest-bearing deposits increased $31,379,000 to $51,272,000 at March 31, 2011 compared to $19,893,000 at March 31, 2010. Securities available-for-sale increased $94,255,000 to $228,095,000 at March 31, 2011 compared to $133,840,000 at March 31, 2010. The increase in securities available-for-sale is due primarily to a $30 million leverage strategy in January to lock in a positive income spread for two years as well as the deployment of $35 million in excess overnight funds during March. Loans at March 31, 2011 decreased $76,114,000 to $499,633,000 compared to $575,747,000 at March 31, 2010. This decrease was primarily the result of the sale of $29.6 million 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 that are secured by real estate. In addition, the Company's decision to sell new originations in the secondary market has contributed to the decline in residential real estate loans. Total deposits were $632,363,000 at March 31, 2011 compared to $617,067,000 at March 31, 2010, an increase of $15,296,000. Securities sold under agreements to repurchase increased $6,907,000 to $28,088,000 at March 31, 2011 compared to $21,181,000 at March 31, 2010. Other borrowings increased $22,967,000 to $106,587,000 at March 31, 2011 compared to $83,620,000 at March 31, 2010 due to the previously referenced leverage strategy.

Total equity increased $4,749,000 to $57,158,000 at March 31, 2011 compared to $52,409,000 at March 31, 2010. Stockholders' equity available to common stockholders of $46,590,000 resulted in a book value of $17.78 per share at March 31, 2011, based on 2,620,755 shares of common stock outstanding, an increase of $1.81 per share from March 31, 2010.

Dividends

On April 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 Treasury on May 16, 2011, and are required as part of the U.S. Department of Treasury's investment in Northway Financial, Inc.

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 20 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
                                                    ----------------------
                                                    3/31/2011   3/31/2010
                                                    ----------  ----------
Interest and Dividend Income                        $    7,992  $    8,525
Interest Expense                                         2,212       2,711
Net Interest and Dividend Income                         5,780       5,814
Provision for Loan Losses                                  615         865
Noninterest Income                                       2,047         766
Noninterest Expense                                      6,226       5,903
Provision for Income Tax                                   (19)       (464)
Net Income                                               1,005         276
Net Income Available to Common Stockholders                844         115
Earnings Per Common Share, Basic                          0.32        0.04
Dividends Declared per Common Share                          -           -




                                                    3/31/2011   3/31/2010
                                                    ----------  ----------
Total Assets                                        $  831,026  $  782,012
Cash and due from banks and interest-bearing deposits    51,272      19,893
Securities available-for-sale, at fair value           228,095     133,840
Loans, net                                             499,633     575,747
Total Deposits                                         632,363     617,067
Federal Home Loan Bank Advances                         85,967      63,000
Securities Sold Under Agreements to Repurchase          28,088      21,181
Junior Subordinated Debentures                          20,620      20,620
Stockholders' Equity                                    57,158      52,409
Book Value of Common Shares Outstanding                  17.78       15.97
Tangible Book Value of Common Shares Outstanding         13.14       11.48
Tier 1 Core Capital to Assets (1)                         7.54%       7.86%
Common Shares Outstanding                            2,620,755   2,620,755
Return on Average Assets                                  0.48%       0.14%
Return on Average Equity                                  7.19        2.13
Nonperforming Loans as a % of Total Loans                 4.03        3.51

(1) Effective March 31, 2011 the quantitative limits applied to the amount
    of qualifying trust preferred securities became subject to stricter
    standards. The result was a decrease in the Tier 1 Core Capital to
    Assets ratio of 32 basis points. Without the change in regulation, this
    ratio would have increased 13 basis points.

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