-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Os0Q0hZaVsnExSZFihoAvjNJvtdAl1/uAW6feECMB7pr24iRDez3SPvBl+KzYeyb VgBs25uZEGyodgAdO3hvVg== /in/edgar/work/20000811/0000950156-00-000398/0000950156-00-000398.txt : 20000921 0000950156-00-000398.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950156-00-000398 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHWAY FINANCIAL INC CENTRAL INDEX KEY: 0001041753 STANDARD INDUSTRIAL CLASSIFICATION: [6021 ] IRS NUMBER: 043368379 STATE OF INCORPORATION: NH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-23129-33 FILM NUMBER: 693553 BUSINESS ADDRESS: STREET 1: 9 MAIN ST CITY: BERLIN STATE: NH ZIP: 03750 BUSINESS PHONE: 6037521171 MAIL ADDRESS: STREET 1: 9 MAIN ST CITY: BERLIN STATE: NH ZIP: 03750 10-Q 1 0001.txt NORTHWAY FIN. FORM 10-Q 6-30-00 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, 2000 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 August 1, 2000, there were 1,585,069 shares of common stock outstanding, par value $1.00 per share. INDEX NORTHWAY FINANCIAL, INC. PART I. FINANCIAL INFORMATION PAGE Item 1 Financial Statements (Unaudited) Consolidated Statements of Income for the Three Months and Six Months Ended June 30, 2000 and 1999 ................................. 3 Consolidated Balance Sheets at June 30, 2000 and December 31, 1999 ............................................................ 4 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2000 and 1999 ........................................ 5 Notes to Consolidated Financial Statements .......................... 7 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations ........................................... 8 Item 3 Quantitative and Qualitative Disclosures about Market Risk .......... 11 PART II. OTHER INFORMATION Item 1 Legal Proceedings ................................................... 12 Item 2 Changes in Securities ............................................... 12 Item 3 Default Upon Senior Securities ...................................... 12 Item 4 Submission of Matters to a Vote of Security Holders ................. 12 Item 5 Other Information ................................................... 12 Item 6 Exhibits and Reports on Form 8-K .................................... 12 Signatures ................................................................ 13 PART 1. FINANCIAL INFORMATION Item 1. Financial Statements. 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) 2000 1999 2000 1999 - ----------------------------------------------------------------------------------------------------------------- Interest and dividend income: Loans $8,206 $6,306 $16,120 $12,234 Investment securities available-for-sale 844 850 1,691 1,601 Investment securities held-to-maturity 69 153 142 286 Federal funds sold 5 9 8 219 Interest bearing deposits 3 2 5 3 -------------------------------------------------------- Total interest and dividend income 9,127 7,320 17,966 14,343 -------------------------------------------------------- Interest expense: Deposits 2,584 2,427 4,993 4,923 Borrowed funds 1,420 278 2,567 440 -------------------------------------------------------- Total interest expense 4,004 2,705 7,560 5,363 -------------------------------------------------------- Net interest and dividend income 5,123 4,615 10,406 8,980 Provision for loan losses 255 135 500 270 -------------------------------------------------------- Net interest and dividend income after provision for loan losses 4,868 4,480 9,906 8,710 Noninterest income: Service charges on deposit accounts and fees 245 238 480 451 Securities gains, net 156 93 276 411 Other 259 283 462 470 -------------------------------------------------------- Total noninterest income 660 614 1,218 1,332 -------------------------------------------------------- Noninterest expense: Salaries and employee benefits 2,186 2,033 4,371 4,038 Office occupancy and equipment 641 625 1,321 1,238 Amortization of deposit purchase premium 102 75 205 150 Other 1,152 1,052 2,238 2,090 -------------------------------------------------------- Total noninterest expense 4,081 3,785 8,135 7,516 -------------------------------------------------------- Income before income tax expense 1,447 1,309 2,989 2,526 Income tax expense 435 470 973 869 -------------------------------------------------------- Net income $1,012 $ 839 $ 2,016 1,657 ======================================================== Comprehensive net income $ 966 $ 308 $ 1,743 $ 956 ======================================================== Per share data: Earnings per common share $ 0.64 $ 0.50 $ 1.26 $ 0.98 Cash dividends declared $ 0.15 $ 0.14 $ 0.30 $ 0.28 Weighted average number of common shares 1,598,618 1,675,477 1,603,181 1,695,272 The accompanying notes are an integral part of these consolidated financial statements.
NORTHWAY FINANCIAL, INC. CONSOLIDATED BALANCE SHEETS
Jun. 30, Dec. 31, (Dollars in thousands, except per share data) 2000 1999 - ----------------------------------------------------------------------------------------------------------- (Unaudited) Assets Cash and due from banks and interest bearing deposits $ 14,875 $ 16,087 Federal funds sold 2,890 -- Investment securities available-for-sale 54,585 55,998 Investment securities held-to-maturity 4,643 5,151 Loans held for sale 265 54 Loans 396,671 373,590 Unearned income (694) (824) Allowance for loan losses (4,220) (4,887) ------------------------- Loans, net 391,757 367,879 ------------------------- Real estate acquired by foreclosure 65 115 Accrued interest receivable 2,647 2,391 Deferred income tax asset, net 2,589 2,260 Premises and equipment, net 10,186 10,387 Deposit purchase premium 1,066 1,271 Other assets 1,058 959 ------------------------- Total assets $486,626 $462,552 ========================= Liabilities and stockholders' equity Liabilities: Interest bearing deposits $302,396 $293,104 Non-interest bearing deposits 50,018 49,925 Repurchase agreements 8,454 7,468 Short-term Federal Home Loan Bank advances 26,750 9,950 Long-term Federal Home Loan Bank advances 54,528 58,528 Other liabilities 4,541 4,291 ------------------------- Total liabilities 446,687 423,266 ------------------------- 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 June 30, 2000 and December 31, 1999; and 1,589,069 outstanding June 30, 2000 and 1,615,169 outstanding December 31, 1999 1,732 1,732 Additional paid-in-capital 2,101 2,101 Retained earnings 41,440 39,906 Treasury stock, at cost (142,900 and 116,800 shares, respectively) (4,006) (3,398) Accumulated other comprehensive income (loss), net of tax (1,328) (1,055) ------------------------ Total stockholders' equity 39,939 39,286 ------------------------ Total liabilities and stockholders' equity $486,626 $462,552 ========================= The accompanying notes are an integral part of these consolidated financial statements.
NORTHWAY FINANCIAL, INC. CONSOLIDATED STATEMENTS OF CASHFLOWS (Unaudited)
For the Six Months Ended June 30, (Dollars in thousands) 2000 1999 - ---------------------------------------------------------------------------------------------------------------- Cash flows from operating activities: Net income $ 2,016 $ 1,657 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 500 270 Depreciation and amortization 697 598 Deferred income taxes (149) (125) Writedown of real estate acquired by foreclosure -- 37 Gains on sales of investment securities available-for-sale, net (276) (411) Amortization of premiums & accretion of discounts on securities, net 25 52 (Decrease) increase in unearned income, net (130) 169 Gains on sales of real estate acquired by foreclosure (25) -- Net increase in loans held for sale (211) (114) Net change in other assets and other liabilities (105) 1,306 ---------------------- Net cash provided by operating activities 2,342 3,439 ---------------------- Cash flows from investing activities: Proceeds from sales of investment securities available-for-sale 1,351 4,588 Proceeds from maturities of investment securities held-to-maturity 1,363 1,729 Proceeds from maturities of investment securities available-for-sale 2,569 8,451 Purchase of investment securities available-for-sale (2,709) (18,999) Purchase of investment securities held-to-maturity (855) (9,156) Net increase in loans (24,248) (32,057) Proceeds from sales of real estate acquired by foreclosure 75 126 Additions to premises and equipment (291) (508) ---------------------- Net cash used in investing activities (22,745) (45,826) ---------------------- Cash flows from financing activities: Net increase (decrease) in deposits 9,385 (19,157) Advances from Federal Home Loan Bank 19,000 -- Repayment of Federal Home Loan Bank advances (23,000) -- Net increase in short-term Federal Home Loan Bank advances 16,800 23,715 Net increase in securities sold under agreements to repurchase 986 2,263 Purchases of treasury stock (608) (1,801) Cash dividends paid (482) (477) ---------------------- Net cash provided by financing activities 22,081 4,543 ---------------------- Net increase (decrease) in cash and cash equivalents 1,678 (37,844) Cash and cash equivalents at beginning of period 16,087 51,423 ---------------------- Cash and cash equivalents at end of period $17,765 $13,579 ====================== Continued The accompanying notes are an integral part of these consolidated financial statements.
NORTHWAY FINANCIAL, INC. CONSOLIDATED STATEMENTS OF CASHFLOWS (Unaudited)
For the Six Months Ended June 30, (Dollars in thousands) 2000 1999 - ---------------------------------------------------------------------------------------------------------------- Cash paid during the period for: Interest $ 7,528 $ 5,068 ====================== Income taxes $ 756 $ 971 ====================== Supplemental disclosures of non-cash activities: Loans transferred to real estate acquired by foreclosure $ -- $ 289 ====================== Loans charged off, net of recoveries $ 1,167 $ 37 ====================== The accompanying notes are an integral part of these consolidated financial statements.
NORTHWAY FINANCIAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2000 (Unaudited) 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. 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, 2000 and 1999 are not necessarily indicative of the results of operations to be expected for the full year or any other interim periods. 2 Impact of New Accounting Standard. In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." Statement No. 133, as amended by SFAS No. 138, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. The Statement is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. In management's opinion, SFAS No. 133 when adopted will not have a material effect on the Corporation's consolidated financial statements. 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 are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward looking statements may include, but are not limited to, projections of revenue, income or loss, plans for future operations and acquisitions, and plans related to products or services of the Corporation and its subsidiaries. Such forward looking statements are subject to known and unknown risks, uncertainties and contingencies, many of which are beyond the control of the Corporation. To the extent any such risks, uncertainties and contingencies are realized, the Corporation's actual results, performance or achievements could differ materially from anticipated results, performance or achievements. Factors that might affect such forward looking statements include, among other things, overall economic and business conditions, interest rate fluctuations, the demand for the Corporation's products and services, competitive factors in the industries in which the Corporation competes, changes in government regulations, the timing, impact and other uncertainties of future acquisitions, etc. In addition to the factors described above, the following are some additional factors that could cause our financial performance to differ from any forward looking statement contained herein; a) the rise in interest rates over the past year and the potential for further increases in interest rates during the remainder of the year 2000; b) a change in product mix attributable to changing interest rates, customer preferences or competition; c) a significant portion of the Company's loan customers are in the hospitality business and therefore could be affected by weather conditions and/or high gasoline prices; and d) the effectiveness of advertising, marketing and promotional programs. Financial Condition The Corporation's total assets at June 30, 2000 were $486.6 million compared to $462.6 million at December 31, 1999, a $24.0 million increase. Net loans, including loans held for sale, increased $24.1 million to $392.0 million and investment securities decreased $1.9 million to $59.2 million. Cash and cash equivalents increased $1.8 million to $17.8 million as a result of the increase in federal funds sold balances. Total deposits increased $9.4 million, while Federal Home Loan Bank advances increased $12.8 million and repurchase agreements increased $1.0 million. Total stockholders equity increased $0.6 million from $39.3 million at December 31, 1999 to $39.9 million at June 30, 2000. The increase in stockholders' equity was a result of net income of $2.0 million partially offset by dividends of $0.5 million, treasury stock purchases totaling $0.6 million and an increase in accumulated comprehensive loss of $0.3 million. The Corporation maintains an allowance for 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, 2000 the allowance for loan losses was $4.2 million, or 1.07% of total loans, as compared to $4.9 million, or 1.31% of total loans at December 31, 1999. The adequacy of the allowance for 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. An analysis of the allowance for loan losses for the three and six month periods ended June 30, 2000 and 1999 is as follows: Three Months Six Months Ended June 30, Ended June 30, (Dollars in thousands) 2000 1999 2000 1999 - ------------------------------------------------------------------------------- Balance at beginning of period $4,115 $4,562 $4,887 $4,404 ----------------------------------- Charge-offs (173) (77) (1,360) (166) Recoveries 23 17 193 129 ----------------------------------- Net Charge-offs (150) (60) (1,167) (37) Provision for loan losses 255 135 500 270 ----------------------------------- Balance at end of period $4,220 $4,637 $4,220 $4,637 ----------------------------------- Nonperforming loans totaled $3.3 million as of June 30, 2000, compared to $4.6 million at December 31, 1999. The decline in nonperforming loans was due to the sale of $1.2 million of non-accrual loans on February 29 and charge-offs of $1.4 million. Approximately $1.1 million of the $1.4 million in charge-offs related to one large borrowing relationship. The Company may make additional provisions to the allowance for loan losses or incur additional charge-offs related to this credit in the future. The ratio of nonperforming loans to total loans was 0.84% as of June 30, 2000 compared to 1.23% at December 31, 1999 and the ratio of nonperforming assets to total assets was 0.71% as of June 30, 2000 compared to 1.02% at December 31, 1999. Results of Operations The Corporation reported net income of $1.0 million, or $0.64 per share, for the three months ended June 30, 2000, versus $839 thousand, or $0.50 per common share, for the three months ended June 30, 1999. Net income for the six months ended June 30, 2000 was $2.0 million, or $1.26 per share, as compared to $1.7 million, or $0.98 per share, for the six months ended June 30, 1999. The increase in net income is primarily a result of increases in average loan balances resulting in increased net interest income. Net interest income for the second quarter increased $508 thousand to $5.1 million as compared to $4.6 million for the second quarter of the prior year. For the six months ended June 30, 2000 net interest income increased $1.4 million to $10.4 million as compared to $9.0 million for the same period of the prior year. Due to the above mentioned increase in loans, the provision for loan losses increased $120 thousand to $255 thousand for the three months ended June 30, 2000 compared to $135 thousand for the same quarter a year ago and increased $270 thousand to $500 thousand for the six months ended June 30, 2000 compared to $270 thousand for the same period a year ago. Noninterest income increased $46 thousand to $660 thousand in the second quarter of 2000 versus $614 thousand in the second quarter of 1999 due to increased securities gains. For the six months ended June 30, 2000 noninterest income decreased $114 thousand to $1.2 million as compared to $1.3 million for the same period of the prior year. The decrease was primarily attributable to lower securities gains on a year to date basis. Noninterest expense increased $296 thousand to $4.1 million for the quarter ended June 30, 2000 compared to the $3.8 million recorded during the same period last year. For the six months ended June 30, 2000 noninterest expense totaled $8.1 million, an increase of $0.6 million over the $7.5 million recorded for the same period of the prior year. The increase was principally attributable to the acquisition or opening of three additional branches since the second quarter of the prior year. Income Tax Expense The Corporation recognized income tax expense of $973 thousand and $869 thousand for the six months ended June 30, 2000 and 1999, respectively. The effective tax rate was 32.6% and 34.4% for those respective periods. The decrease in the effective tax rate is due to the fact that the Company has obtained a number of State of New Hampshire tax credits related to economic development grants. 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, the stock repurchase program, 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. The Corporation's current level of liquidity and funds availability from outside sources are sufficient to meet the Corporation's needs. Capital The Corporation's Tier 1 and Total Risk Based Capital ratios were 11.24% and 12.43%, respectively, at June 30, 2000. The Corporation's leverage ratio at June 30, 2000 was 8.32%. As of June 30, 2000, 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). 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, 1999. Between December 31, 1999 and June 30, 2000, there were no material changes in the Corporation's market risk. 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 16, 2000. At the Annual Meeting, the stockholders elected Peter H. Bornstein, Charles H. Clifford, Jr., Bruce W. Keough and John D. Morris to three year terms as directors expiring at the 2003 annual meeting. The final vote for each of these elected directors is as follows: For Withheld --- -------- Peter H. Bornstein 1,319,810 20,075 Charles H. Clifford, Jr. 1,322,546 17,339 Bruce W. Keough 1,316,957 22,928 John D. Morris 1,319,202 20,683 Directors continuing in office are William J. Woodward, Fletcher W. Adams, Arnold P. Hanson, Jr., John H. Noyes, Stephen G. Boucher, Barry J. Kelley, and Randall G. Labnon 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, 2000. 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 11, 2000 BY: \S\ William J. Woodward ------------------------- William J. Woodward President & CEO (Principal Executive Officer) August 11, 2000 BY: \S\ George L. Fredette ------------------------- George L. Fredette Senior Vice President & CFO (Principal Financial and Accounting Officer) EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
9 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. 1,000 6-Mos Dec-31-1999 Jun-30-2000 14,775 100 2890 0 54,585 4,643 4,588 396,242 4,220 486,626 352,414 26,750 4,541 54,528 0 0 1,732 38,207 486,626 16,120 1,833 13 17,966 4,993 7,560 10,406 500 276 8,135 2,989 2,989 0 0 2,016 1.26 1.26 8.09 3,316 0 1,131 207 4,887 1,360 193 4,220 4,220 0 0
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