<PAGE>
=============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended June 30, 1998
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________________ to ____________________
Commission File Number 000-23129
NORTHWAY FINANCIAL, INC
------------------------------------------------------
(Exact name of registrant as specified in its charter)
New Hampshire 04-3368579
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9 Main Street
Berlin, New Hampshire 03570
-------------------------------------- ----------
Address of principal executive offices (Zip Code)
(603) 752-1171
----------------------------------------------------
(Registrant's telephone number, including area code)
No Change
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last year)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve (12) months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past ninety (90) days. YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date. At July 31, 1998, there were
1,731,969 shares of common stock outstanding, par value $1.00 per share.
=============================================================================
<PAGE>
INDEX
NORTHWAY FINANCIAL, INC.
PART I. FINANCIAL INFORMATION PAGE
Item 1.
Financial Statements (Unaudited)
Consolidated Balance Sheets at June 30, 1998 and December
31, 1997............................................................. 3
Consolidated Statements of Income for the Three Months and Six
Months Ended June 30, 1998 and 1997.................................. 4
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1998 and 1997......................................... 5
Notes to Consolidated Financial Statements........................... 6
Item 2.
Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................ 9
Item 3.
Quantitative and Qualitative Disclosures about Market Risk........... 12
PART II. OTHER INFORMATION
Item 1.
Legal Proceedings.................................................... 13
Item 2.
Changes in Securities................................................ 13
Item 3.
Default Upon Senior Securities....................................... 13
Item 4.
Submission of Matters to a Vote of Security Holders.................. 13
Item 5.
Other Information.................................................... 13
Item 6.
Exhibits and Reports on Form 8-K..................................... 13
Signatures............................................................. 14
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements.
NORTHWAY FINANCIAL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DEC. 31,
(Dollars in thousands, except per share data) 1998 1997
- -------------------------------------------------------------------------------------------------------
(Unaudited) (Audited)
<S> <C> <C>
Assets
Cash and due from banks.............................................. $ 14,240 $ 12,086
Federal funds sold................................................... 4,300 19,225
Interest bearing deposits............................................ 88 85
Investment securities available-for-sale............................. 58,292 55,103
Investment securities held-to-maturity............................... 14,201 11,312
Federal Reserve Bank stock, at cost.................................. 80 80
Federal Home Loan Bank stock, at cost................................ 1,958 1,958
Loans held for sale.................................................. 447 292
Loans................................................................ 274,954 267,283
Unearned income.................................................... (432) (526)
Allowance for possible loan losses................................. (4,344) (4,156)
-------- --------
Loans, net......................................................... 270,178 262,601
-------- --------
Real estate acquired by foreclosure
or substantively repossessed....................................... 194 222
Accrued interest receivable.......................................... 2,221 1,971
Deferred income tax asset, net....................................... 1,477 1,500
Premises and equipment, net.......................................... 9,988 9,187
Deposit purchase premium, net........................................ 1,010 1,161
Other assets......................................................... 998 1,083
-------- --------
Total assets..................................................... $379,672 $377,866
======== ========
Liabilities and stockholders' equity
Liabilities:
Interest bearing deposits.......................................... $283,351 $282,353
Non-interest bearing deposits...................................... 39,985 39,710
Repurchase agreements.............................................. 9,083 6,146
Federal Home Loan Bank advances ................................... 5,228 9,322
Other liabilities.................................................. 2,438 2,809
-------- --------
Total liabilities................................................ 340,085 340,340
-------- --------
Stockholders' equity:
Preferred stock, $1 par value;
1,000,000 shares authorized: none issued......................... -- --
Common stock, $1 par value; 9,000,000 shares
authorized: 1,731,969 shares issued and outstanding.............. 1,732 1,732
Additional paid in capital......................................... 2,101 2,101
Retained earnings.................................................. 35,763 33,744
Unrealized loss on investment securities available-
for-sale, net of tax.............................................. (9) (51)
-------- --------
Total stockholders' equity....................................... 39,587 37,526
-------- --------
Total liabilities and stockholders' equity....................... $379,672 $377,866
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
NORTHWAY FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
(Dollars in thousands, except per share data) 1998 1997 1998 1997
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest and dividend income:
Loans .................................................. $ 5,995 $ 5,773 $ 11,899 $ 11,160
Investment securities available-for-sale ............... 851 1,146 1,646 2,411
Investment securities held-to-maturity ................. 207 275 425 500
Federal funds sold ..................................... 134 51 384 132
Interest bearing deposits .............................. 2 1 3 4
---------- ---------- ---------- ----------
Total interest and dividend income .................. 7,189 7,246 14,357 14,207
---------- ---------- ---------- ----------
Interest expense:
Deposits............................................... 2,684 2,683 5,361 5,374
Borrowed funds ........................................ 200 353 433 580
---------- ---------- ---------- ----------
Total interest expense .............................. 2,884 3,036 5,794 5,954
---------- ---------- ---------- ----------
Net interest and dividend income .................... 4,305 4,210 8,563 8,253
Provision for possible loan losses ....................... 135 135 270 255
---------- ---------- ---------- ----------
Net interest and dividend income after
provision for possible loan losses ................ 4,170 4,075 8,293 7,998
---------- ---------- ---------- ----------
Noninterest income:
Service charges on deposit accounts and fees .......... 211 216 418 422
Securities gains, net ................................. 74 109 392 329
Other.................................................. 176 158 287 270
---------- ---------- ---------- ----------
Total noninterest income ............................ 461 483 1,097 1,021
---------- ---------- ---------- ----------
Noninterest expense:
Salaries and employee benefits ........................ 1,563 1,383 3,134 2,755
Office occupancy and equipment ........................ 498 436 922 864
Amortization of deposit purchase premium .............. 75 75 150 150
Merger related expenses ............................... -- 238 -- 514
Other ................................................. 926 767 1,755 1,586
---------- ---------- ---------- ----------
Total noninterest expense ........................... 3,062 2,899 5,961 5,869
---------- ---------- ---------- ----------
Income before income tax expense .................... 1,569 1,659 3,429 3,150
Income tax expense ....................................... 515 598 1,167 1,011
---------- ---------- ---------- ----------
Net income........................................... $ 1,054 $ 1,061 $ 2,262 $ 2,139
========== ========== ========== ==========
Comprehensive net income ............................. $ 1,035 $ 1,825 $ 2,304 $ 2,215
========== ========== ========== ==========
Per share data:
Net income ............................................ $ 0.61 $ 0.61 $ 1.31 $ 1.23
Weighted average number of common shares .............. 1,731,969 1,731,969 1,731,969 1,731,969
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
NORTHWAY FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months Ended
June 30,
1998 1997
---------------------------
(Dollars in Thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,262 $ 2,139
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for:
Possible loan losses 270 255
Depreciation and amortization 542 495
Deferred income taxes (11) 83
Write down of real estate acquired by foreclosure -- 5
Gains on sales of investment securities available-for-sale, net (392) (329)
Loss on sale of premises and equipment, net -- 49
Accretion of (discount) and amortization of premium
on investment and mortgage-backed securities, net 66 142
Decrease in unearned income, net (94) (101)
Gains on sales of real estate acquired by foreclosure
or substantively repossessed (65) (33)
Net increase in loans held for sale (155) (22)
(Increase) decrease in accrued income receivable (250) 194
(Increase) decrease in other assets 85 (84)
Increase (decrease) in other liabilities (371) 50
--------- --------
Net cash provided by operating activities 1,887 2,843
--------- --------
Cash flows from investing activities:
Net (increase) decrease in interest bearing deposits (3) 197
Proceeds from sales of investment securities available-for-sale 2,161 18,969
Proceeds from maturities of investment securities held-to-maturity 3,566 1,210
Proceeds from maturities of investment securities available-for-sale 8,394 9,151
Purchase of investment securities available-for-sale (15,632) (5,425)
Purchase of investment securities held-to-maturity (6,492) (6,320)
Principal payments received on investment securities available-for-sale 2,327 1,462
Net increase in loans (7,925) (20,237)
Proceeds from sales of real estate acquired by foreclosure or
substantively repossessed and principal payments received on OREO 265 158
Proceeds from sale of premises and equipment -- 290
Additions to premises and equipment (1,192) (648)
--------- --------
Net cash used in investing activities (14,531) (1,193)
--------- --------
Cash flows from financing activities:
Net increase (decrease) in deposits 1,273 (9,776)
Advances from Federal Home Loan Bank -- 21,483
Repayment of Federal Home Loan Bank advances (4,094) (14,466)
Net increase in repurchase agreements 2,937 3,162
Net increase in other borrowed funds -- 500
Cash dividends paid (243) (345)
--------- --------
Net cash provided by (used in) financing activities (127) 558
--------- --------
Net increase (decrease) in cash and cash equivalents (12,771) 2,208
Cash and cash equivalents at beginning of period 31,311 17,282
--------- --------
Cash and cash equivalents at end of period $ 18,540 $ 19,490
========= ========
Cash paid during the period for:
Interest $ 6,058 $ 6,041
========= ========
Income taxes $ 1,230 $ 807
========= ========
Supplemental disclosures of non-cash activities:
Loans transferred to real estate acquired by
foreclosure or substantively repossessed $ 251 $ 208
========= ========
Loans charged off, net of recoveries $ 82 $ 276
========= ========
Financed sales of real estate acquired by foreclosure $ 182 $ 124
========= ========
</TABLE>
The accompanying notes are an intergral part of these financial statements.
<PAGE>
NORTHWAY FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1998
1. Basis of Presentation.
The unaudited consolidated financial statements of Northway Financial,
Inc. and its two wholly owned bank subsidiaries (collectively "the Corporation")
included herein have been prepared by the Corporation in accordance with the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted in accordance with such rules and regulations. The
Corporation, however, believes that the disclosures are adequate to make the
information presented not misleading. All prior period amounts in the Form 10Q
have been restated to reflect the reorganization of the Corporation on September
30, 1997 into a multi-bank holding company. Refer to Note 4 for further
discussion of the holding company reorganization and merger transactions. The
amounts shown reflect, in the opinion of management, all adjustments necessary
for a fair presentation of the financial statements for the periods reported.
The results of operations for the three and six month periods ended June
30, 1998 and 1997 are not necessarily indicative of the results of operations ti
be expected for the full year or any other interim periods.
2. Allowance for Possible Loan Losses
Analysis of the allowance for possible loan losses for the three month
and six month periods ended June 30, 1998 and 1997 is as follows:
Six Months Three Months
Ended Ended
June 30, March 31,
1998 1997 1998 1997
------ ------ ------ ------
(Dollars in thousands)
Balance beginning of period $4,156 $3,941 $4,225 $3,901
------ ------ ------ ------
Chargeoffs 250 356 119 152
Recoveries 168 80 103 36
------ ------ ------ ------
Net chargeoffs 82 276 16 116
------ ------ ------ ------
Provision for possible loan losses 270 255 135 135
------ ------ ------ ------
Balance at end of period $4,344 $3,920 $4,344 $3,920
====== ====== ====== ======
<PAGE>
NORTHWAY FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1998
3. Commitments and Contingencies
At June 30, 1998, the Corporation had the following off-balance sheet
financial instruments with contract amounts which represent credit risk:
Contract or Notional Amount
(Dollars in thousands)
Commitments to extend credit $27,017
Standby letters of credit and
financial guarantees written $ 495
Commercial letters of credit $ -0-
Foreign exchange contracts $ -0-
4. Formation of Northway Financial, Inc.
Northway Financial, Inc. ("Northway") is a New Hampshire corporation
organized on March 7, 1997 for the purpose of becoming the holding company for
The Berlin City Bank ("BCB") pursuant to a reorganization transaction (the "BCB
Reorganization") by and among Northway, BCB and a subsidiary of BCB, and
thereafter, effecting the merger (the "Merger") between Northway and Pemi
Bancorp, Inc. ("PEMI"), pursuant to which Northway also became the holding
company for PEMI's wholly owned subsidiary, Pemigewasset National Bank ("PNB").
The BCB Reorganization and the Merger were consummated on September 30, 1997.
The Merger was treated as a "pooling of interests" for accounting purposes.
BCB is a trust company chartered under the laws of the State of New
Hampshire. BCB has eight banking offices in New Hampshire through which it
provides a range of bank-related services.
PNB is a national banking association organized under the laws of the
United States. PNB has six banking offices located in New Hampshire through
which it provides a range of bank-related services.
<PAGE>
NORTHWAY FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1998
5. Supplemental Disclosure of Separate Results
The Corporation's consolidated financial statements for periods prior
to the Merger reflect the combined results of The Berlin City Bank and Pemi
Bancorp, Inc. Supplemental disclosure of the separate results of BCB and PEMI
for periods prior to the Merger are as follows:
Berlin City Pemi Northway
Bank Bancorp Financial
-------- --------- ---------
(In thousands except per share data)
April 1, 1997 to June 30, 1997
Net interest income $ 2,672 $ 1,538 $ 4,210
Net income 833 228 1,061
Net income per share $ 0.48 $ 0.13 $ 0.61
January 1, 1997 to June 30, 1997
Net interest income $ 5,240 $ 3,013 $ 8,253
Net income 1,632 507 2,139
Net income per share $ 0.94 $ 0.29 $ 1.23
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation
Introduction
The following discussion and analysis and related consolidated
financial statements include Northway Financial, Inc. and its wholly-owned
subsidiaries, The Berlin City Bank and Pemigewasset National Bank (collectively
the "Corporation").
Certain statements in this Form 10-Q, in the Corporation's press
releases, and in oral statements made by or with the approval of an authorized
executive officer of the Corporation, constitute "forward-looking statements" as
that term is defined under the Private Securities Litigation Reform Act of 1995
(the "Act") and within the meaning of Section 27A of the Securities Act of 1933
and Section 21E of the Securities Exchange Act of 1934 promulgated thereunder.
The words "believe," "expect," "anticipate," "intend," "estimate," "project" and
other expressions which are predictions of or indicate future events and trends
and which do not relate to historical matters identify forward-looking
statements. Reliance should not be placed on forward-looking statements because
they involve known and unknown risks, uncertainties and other factors, which may
cause the actual results, performance or achievements of the Corporation to
differ materially from anticipated future results, performance or achievements
expressed or implied by such forward-looking statements. The Corporation
undertakes no obligation to publicly update or revise any forward- looking
statement, whether as a result of new information, future events or otherwise.
The following important factors, among others, may have affected the
Corporation and its subsidiaries in the past and could in the future affect the
actual results of operations of the Corporation, and could cause the actual
results of operations for subsequent periods to differ materially from those set
forth in, contemplated by, or underlying any forward-looking statement made
herein: (i) the effect of changes in laws and regulations, including federal and
state banking laws and regulations, with which the Corporation must comply,
including the effect of the cost of such compliance; (ii) the effect of changes
in accounting policies and practices, as may be adopted by the regulatory
agencies as well as by the Financial Accounting Standards Board, or of changes
in the Corporation's organization, compensation and benefit plans; (iii) the
effect on the competitive position of the Corporation's subsidiaries within
their respective market areas resulting from increased consolidation within the
banking industry and increased competition from larger regional and out-of-state
banking organizations, as well as from nonbank providers of various financial
services; (iv) the effect of unforeseen changes in interest, loan default and
charge-off rates; (v) changes in deposit levels necessitating increased
borrowing to fund loans and investments; (vi) the effect of changes in the
business cycle and downturns in the New Hampshire, New England, and national
economies; (vii) the factors detailed in the section titled "Risk Factors" in
the Corporation's Proxy Statement/Prospectus, dated Aug. 12, 1997; and (viii)
changes in the assumptions used in making such forward-looking statements.
Though the Corporation has attempted to list comprehensively these important
factors, the Corporation wishes to caution investors that other factors may in
the future prove to be important in affecting the Corporation's results of
operations. New factors emerge from time to time and it is not possible for
management to predict all of such factors, nor can it assess the impact of each
such factor on the business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from forward looking
statements.
Financial Condition
The Corporation's total assets at June 30, 1998 were $380 million
compared to $378 million at December 31, 1997, a $2 million increase. Net loans,
including loans held for sale, increased $7.7 million and investment securities
increased $6.1 million. Cash and cash equivalents decreased $12.8 million to
$18.5 million. Total deposits increased $1.3 million. Federal Home Loan Bank
advances decreased $4.1 million, which was partially offset by an increase in
repurchase agreements of $2.9 million.
The Corporation maintains an allowance for possible loan losses to
absorb future chargeoffs of loans in the existing portfolio. The allowance is
increased when a loan loss provision is recorded in the income statement. When a
loan, or portion thereof, is considered uncollectible, it is charged against
this allowance. Recoveries of amounts previously charged off are added to the
allowance when collected. At June 30, 1998 the allowance for possible loan
losses was $4.3 million, or 1.58% of total loans, as compared to $4.2 million,
or 1.55% of total loans at December 31, 1997. The adequacy of the allowance for
possible loan losses was based on an evaluation by each bank's management and
Board of Directors of current and anticipated economic conditions, changes in
the diversification, size and risk within the loan portfolio, and other factors.
Nonperforming loans totaled $2.4 million as of June 30, 1998, compared
to $1.8 million at December 31, 1997. The ratio of nonperforming loans to total
loans was 0.87% as of June 30, 1998 compared to 0.70% at December 31, 1997 and
the ratio of nonperforming assets to total assets was 0.68% as of June 30, 1998
compared to 0.53% at December 31, 1997.
Results of Operations
The Corporation reported net income of $1.1 million, or $0.61 per
share, for the three months ended June 30, 1998, the same as the three months
ended June 30, 1997. Net interest income increased $95,000 as the result of a
reduction in interest expense due to a decrease in borrowings.
Noninterest income decreased $22,000 primarily as a result of a
decrease in net securities gains from $109,000 in the second quarter of 1997 to
$74,000 in the second quarter of 1998. Noninterest expense increased $163,000
for the quarter ended June 30, 1998 compared to the same period last year due
primarily to increases in salaries and benefits expense, professional fees, and
equipment expense. These increases were partially offset by the fact that there
were no merger related expenses in 1998 compared to expenses of $238,000 in the
second quarter of 1997. The provision for possible loan losses remained steady
at $135,000 for the three months ended June 30, 1998 compared to the comparable
period in 1997.
The Corporation generated net income of $2.3 million, or $1.31 per
share, for the six month period ended June 30, 1998 compared to net income of
$2.1 million, or $1.23 per share, for the same period in 1997. Net interest
income for the six months ended June 30, 1998 was $8.6 million, an increase of
$310,000 over the same period in 1997. This improvement is primarily due to the
shift of funds from investment securities into loans as well as a decrease in
the Corporation's cost of funds.
Noninterest income for the six months ended June 30, 1998 increased
$76,000 to $1.1 million primarily as a result of increased securities gains.
Total noninterest expense was $6.0 million for the six months ended June 30,
1998 compared to $5.9 million for the same period last year. Increases in
salaries and benefits expense, professional fees, and equipment expense were
partially offset by a decrease in merger related expenses of $514,000. These
increased expenses are a direct result of new branch openings, increases to
lending staff, and the costs associated with converting to a new computer
system. The provision for possible loan losses increased slightly to $270,000
for the six months ended June 30, 1998 from the $255,000 reported for the
comparable period in 1997.
Liquidity
Liquidity risk management refers to the Corporation's and its
subsidiaries' ability to raise funds in order to meet their existing and
anticipated financial obligations. These obligations are the withdrawal of
deposits on demand or at their contractual maturity, the repayment of borrowings
as they mature, the ability to fund new and existing loan commitments and the
ability to take advantage of new business opportunities. Liquidity may be
provided through amortization, maturity or sale of assets such as loans and
securities available-for-sale, liability sources such as increased deposits,
utilization of the FHLB credit facility, purchased or other borrowed funds, and
access to the capital markets. Liquidity targets are subject to change based on
economic and market conditions and are controlled and monitored by the
Corporation's Asset/Liability Committee.
At the subsidiary bank level, liquidity is managed by measuring the net
amount of marketable assets after deducting pledged assets, plus lines of
credit, primarily with the FHLB, which are available to fund liquidity
requirements. Management then measures the adequacy of that aggregate amount
relative to the aggregate amount of liabilities deemed to be sensitive or
volatile liabilities. These include core deposits in excess of $100,000, term
deposits with short maturities, and credit commitments outstanding.
Additionally, the parent holding company requires cash for various
operating needs including dividends to shareholders, capital injections to the
subsidiary banks, and the payment of general corporate expenses. The primary
source of liquidity for the parent holding company is dividends from the
subsidiary banks.
Capital
The Corporation's Tier 1 and Total Risk Based Capital ratios were
16.70% and 17.95%, respectively, at June 30, 1998. The Corporation's leverage
ratio at June 30, 1998 was 10.19%.
As of June 30, 1998, the capital ratios of the Corporation and all its
subsidiary banks exceeded the minimum capital ratio requirements of the "well
capitalized" category under the Federal Deposit Insurance Corporation
Improvement Act of 1991 (FDICIA).
Impact of the Year 2000 Issue
The Corporation has developed plans and is addressing issues related to
the impact on its computer system of the Year 2000. The awareness phase has been
completed and the Corporation has appointed a dedicated Year 2000 Project
Manager to complete the project. Management estimates that the assessment phase
is substantially complete. This assessment involves completing inventories of
all applications and systems, including those provided by third-party vendors.
The Corporation has communicated with its' significant vendors and service
provides to determine the extent to which the Corporation is vulnerable to those
third parties' failure to remediate their own Year 2000 issues. Management is
unable to determine at this time whether or to what extent the systems of other
companies on which the Corporation's system rely will in fact be timely
remediated. However, contingency plans are being developed to address failures
by third party parties to address effectively Year 2000 issues wherever
possible.
Management estimates that the Corporation has completed 30% of required
systems renovations, with a target completion date of first quarter 1999. The
core systems hardware and software upgrade is scheduled for completion in the
fourth quarter of 1998. The Corporation has in place a plan to test and validate
the systems and 20% of the validation process has been completed.
The financial impact of making the required system changes is not
expected to be material to the Corporation's consolidated financial position,
results of operations or cash flows. Weekly meetings with the corporation's
executive committee and monthly reports to the Boards of Directors are held to
monitor the process in an effort to ensure that it remains on target and issues
are addressed on a timely basis.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
For information regarding quantitative and qualitative disclosures
about market risk, see the Corporation's discussion under Item 7A of its Annual
Report on Form 10-K for the fiscal year ended December 31, 1997. Between
December 31, 1997 and June 30, 1998, there were no material changes in the
Corporation's market risk.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on May 19, 1998.
At the Annual Meeting, the stockholders elected William J. Woodward,
Fletcher W. Adams, Arnold P. Hanson, Jr., and John H. Noyes to serve as
Directors for three-year terms until the 2001 Annual Meeting and until
their successors are duly elected and qualified. Barry J. Kelley,
Randall G. Labnon, Andrew L. Morse, Peter H. Bornstein, Charles H.
Clifford, Jr., and John D. Morris continued as Directors after the
Annual Meeting. Stockholders representing 1,364,130 shares or 78.762%
were present in person or by proxy at the Annual Meeting. There were no
broker non-votes on these proposals. A tabulation with respect to each
nominee follows:
Votes Votes Votes Against
Cast For or Withheld
William J. Woodward 1,364,130 1,353,101 11,029
Fletcher W. Adams 1,364,130 1,353,101 11,029
Arnold P. Hanson, Jr. 1,364,130 1,353,101 11,029
John H. Noyes 1,364,130 1,353,101 11,029
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Number
--------------
(27) Financial Data Schedule
(b) The Corporation did not file any Reports on Form 8-K during
the quarter ended June 30, 1998.
<PAGE>
SIGNATURES
Pursuant to requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
NORTHWAY FINANCIAL, INC.
August 13, 1998 BY: \S\William J. Woodward
-----------------------
William J. Woodward
President & CEO
August 13, 1998 BY: \S\David J. O'Connor
---------------------
David J. O'Connor
Exec. Vice President & CFO
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND INCOME STATEMENT AND FROM THE MANAGEMENT DISCUSSION AND ANALYSIS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND
MANAGEMENT DISCUSSION.
</LEGEND>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1998
<CASH> 14,240
<INT-BEARING-DEPOSITS> 88
<FED-FUNDS-SOLD> 4,300
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 58,292
<INVESTMENTS-CARRYING> 16,239
<INVESTMENTS-MARKET> 16,227
<LOANS> 275,401
<ALLOWANCE> 4,344
<TOTAL-ASSETS> 379,672
<DEPOSITS> 323,336
<SHORT-TERM> 9,083
<LIABILITIES-OTHER> 2,438
<LONG-TERM> 5,228
0
0
<COMMON> 1,732
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<INTEREST-INVEST> 2,071
<INTEREST-OTHER> 387
<INTEREST-TOTAL> 14,357
<INTEREST-DEPOSIT> 5,361
<INTEREST-EXPENSE> 5,794
<INTEREST-INCOME-NET> 8,563
<LOAN-LOSSES> 270
<SECURITIES-GAINS> 392
<EXPENSE-OTHER> 5,961
<INCOME-PRETAX> 3,429
<INCOME-PRE-EXTRAORDINARY> 3,429
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,262
<EPS-PRIMARY> 1.31
<EPS-DILUTED> 1.31
<YIELD-ACTUAL> 8.15
<LOANS-NON> 2,381
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<ALLOWANCE-CLOSE> 4,344
<ALLOWANCE-DOMESTIC> 3,692
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 652
</TABLE>
