-----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, ASevYIWWqR0hpO7ISKTZAy9joTdBCr3m1vIWuMwDMYCL3/R4DOrbxxZ8mPcHY0cz 9OoXd/altkMWsN+LpWO1MQ== 0000950156-98-000494.txt : 19980817 0000950156-98-000494.hdr.sgml : 19980817 ACCESSION NUMBER: 0000950156-98-000494 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHWAY FINANCIAL INC CENTRAL INDEX KEY: 0001041753 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [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: 98688362 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 NORTHWAY FIN. FORM 10-Q 6-30-98 ============================================================================= 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. ============================================================================= 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 PART 1. FINANCIAL INFORMATION Item 1. Financial Statements. NORTHWAY FINANCIAL, INC. CONSOLIDATED BALANCE SHEETS
JUNE 30, DEC. 31, (Dollars in thousands, except per share data) 1998 1997 - ------------------------------------------------------------------------------------------------------- (Unaudited) (Audited) 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 ======== ========
The accompanying notes are an integral part of these 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) 1998 1997 1998 1997 - -------------------------------------------------------------------------------------------------------------- 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
The accompanying notes are an integral part of these financial statements.
NORTHWAY FINANCIAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the Six Months Ended June 30, 1998 1997 --------------------------- (Dollars in Thousands) 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 ========= ========
The accompanying notes are an intergral part of these financial statements. 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 ====== ====== ====== ====== 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. 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 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. 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. 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 EX-27 2 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-31-1997 JUN-30-1998 14,240 88 4,300 0 58,292 16,239 16,227 275,401 4,344 379,672 323,336 9,083 2,438 5,228 0 0 1,732 37,855 379,672 11,899 2,071 387 14,357 5,361 5,794 8,563 270 392 5,961 3,429 3,429 0 0 2,262 1.31 1.31 8.15 2,381 0 1,169 612 4,156 250 168 4,344 3,692 0 652
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