NWYF Northway Financial Inc (QB)

Northway Financial, Inc. (the "Company") (OTCBB: NWYF) reported net income for the quarter ended March 31, 2012 of $1,483,000 compared to net income of $1,005,000 for the quarter ended March 31, 2011, an increase of $478,000. For the quarter ended March 31, 2012, net income available to common stockholders was $1,340,000, or $0.51 per common share, and was 59% more than the same period last year.

Other Financial Highlights

• Taking into account the level of net income for the quarter ended March 31, 2012, the Company's returns on average assets and average equity for this period were 0.72% and 7.81%, respectively, compared to 0.48% and 7.19% for the same period last year.

• Total equity increased $18,829,000, or 32.9%, to $75,987,000 at March 31, 2012, compared to $57,158,000 at March 31, 2011. Approximately $13,000,000 of the increase was due to the Company's participation in the Small Business Lending Fund, a program designed to encourage lending to small business. This is described in greater detail in the Company's 2011 Annual Report. In addition, net income for the twelve month period ended March 31, 2012 accounted for $5,600,000 of the increase.

• Total deposits decreased $14,440,000, or 2.3%, to $617,923,000 at March 31, 2012, compared to $632,363,000 at March 31, 2011. The sale of three banking centers in May 2011 resulted in a reduction in deposits of $63,800,000. This was partially offset by organic deposit growth of $49,360,000.

• Net loans increased $7,951,000, or 1.6%, to $507,584,000 at March 31, 2012, compared to $499,633,000 at March 31, 2011. The sale of the three banking centers in May 2011 included the sale of loans totaling $33,375,000, which was more than offset by a $41,326,000 increase in the Company's loan portfolio.

• Nonaccrual loans as a percentage of total loans at March 31, 2012 decreased to 3.27% from 4.03% as of March 31, 2011 as a result of a focused effort to resolve problem loans.

Earnings Summary

As noted above, the Company recorded net income of $1,483,000 for the quarter ended March 31, 2012 compared to $1,005,000 for the same period in 2011. For the quarter ended March 31, 2012, $1,340,000, or $0.51 per common share, was available to common stockholders compared to $844,000, or $0.32 per common share, for the same period last year.

Net interest and dividend income for the quarter ended March 31, 2012, increased $571,000 to $6,351,000 compared to $5,780,000 for the same period last year. The provision for loan losses year-to-date 2012 increased $123,000 to $738,000 compared to $615,000 for the same period in 2011. Net gains on sales of securities were $1,060,000 compared to $306,000 for the quarter ended March 31, 2011, an increase of $754,000. Gains on sales of loans decreased $147,000 as of March 31, 2012 compared to the same period last year. All other noninterest income decreased $186,000 to $1,204,000 compared to $1,390,000 for the same period last year due primarily to a decrease in service charges and fees on deposit accounts. Total noninterest expense increased $98,000 to $6,324,000 for the quarter ended March 31, 2012, compared to $6,226,000 for the same period last year. This increase resulted primarily from an increase in pension expense and higher staffing levels and advertising expense to support our expansion strategy which was partially offset by lower FDIC insurance, legal fees, OREO and loan workout expenses and consulting expense. Income tax expense for the quarter ended March 31, 2012, increased $293,000 from the same period last year.

Balance Sheet Summary

At March 31, 2012, the Company had total assets of $821,167,000 compared to $831,026,000 at March 31, 2011, a decrease of $9,859,000. Cash and due from banks and interest-bearing deposits decreased $36,044,000 to $15,228,000 at March 31, 2012 compared to $51,272,000 at March 31, 2011. Securities available-for-sale increased $23,052,000 to $251,147,000 at March 31, 2012, compared to $228,095,000 at March 31, 2011. Loans at March 31, 2012, increased $7,951,000 to $507,584,000 compared to $499,633,000 at March 31, 2011. The sale of three banking centers in May 2011 included the sale of loans totaling $33,375,000, which was more than offset by a $41,326,000 increase in the Company's loan portfolio.

Total deposits were $617,923,000 at March 31, 2012, compared to $632,363,000 at March 31, 2011, a decrease of $14,440,000. Securities sold under agreements to repurchase decreased $9,040,000 to $19,048,000 at March 31, 2012 compared to $28,088,000 at March 31, 2011. These decreases were due to the sale of the three banking centers, which resulted in a reduction in total deposits and securities sold under agreements to repurchase of $63,800,000 and $3,200,000, respectively. Excluding the impact of the banking center sale, total deposits increased $49,360,000 and securities sold under agreements to repurchase decreased $5,840,000. Other borrowings decreased $7,340,000 to $99,247,000 at March 31, 2012, compared to $106,587,000 at March 31, 2011.

Total equity increased $18,829,000 to $75,987,000 at March 31, 2012 compared to $57,158,000 at March 31, 2011, of which approximately $13,000,000 was an additional investment from the U. S. Department of the Treasury during 2011 under the Small Business Lending Fund program. Stockholders' equity available to common stockholders totaled $52,519,000, resulting in a book value per common share of $20.04 per share at March 31, 2012, based on 2,620,755 shares of common stock outstanding, an increase of $2.26, or 12.7% per share, from March 31, 2011.

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
                                                    -----------------------
                                                     3/31/2012   3/31/2011
                                                    ----------- -----------

Interest and Dividend Income                        $     8,207 $     7,992
Interest Expense                                          1,856       2,212
Net Interest and Dividend Income                          6,351       5,780
Provision for Loan Losses                                   738         615
Noninterest Income                                        2,468       2,047
Noninterest Expense                                       6,324       6,226
Provision for Income Tax                                    274         (19)
Net Income                                                1,483       1,005
Net Income Available to Common Stockholders               1,340         844
Earnings Per Common Share, Basic                           0.51        0.32
Dividends Declared per Common Share                           -           -


                                                 3/31/2012      3/31/2011
                                               -------------  -------------

Total Assets                                   $     821,167  $     831,026
Cash and Due from Banks and Interest-Bearing
 Deposits                                             15,228         51,272
Securities Available-for-Sale, at Fair Value         251,147        228,095
Loans, Net                                           507,584        499,633
Total Deposits                                       617,923        632,363
Federal Home Loan Bank Advances                       78,627         85,967
Securities Sold Under Agreements to Repurchase        19,048         28,088
Junior Subordinated Debentures                        20,620         20,620
Stockholders' Equity                                  75,987         57,158
Book Value Per Share of Common Shares
 Outstanding                                           20.04          17.78
Tangible Book Value Per Share of Common Shares
 Outstanding                                           15.82          13.14
Tier 1 Core Capital to Average Assets                  10.45%          7.69%
Common Shares Outstanding                          2,620,755      2,620,755
Return on Average Assets                                0.72%          0.48%
Return on Average Equity                                7.81           7.19
Nonperforming Loans as a % of Total Loans               3.27           4.03

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