SC 13E3/A

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13E-3

RULE 13e-3 TRANSACTION STATEMENT UNDER

SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934

(AMENDMENT NO. 3)

Northway Financial, Inc.

         

(Name of Issuer)

Northway Financial, Inc.

(Name of Person(s) Filing Statement)

Common Stock, Par Value $1.00 Per Share

(Title of Class of Securities)

667270102

(CUSIP Number of Class of Securities)

Richard P. Orsillo

Northway Financial, Inc.

9 Main Street

Berlin, New Hampshire 03570

(603) 752-1171

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of Persons Filing Statement)

With a copy to:

William P. Mayer

Goodwin Procter LLP

One Exchange Place

Boston, MA 02109

(617) 570-1534

This statement is filed in connection with (check the appropriate box):

a.   |X| The filing of solicitation materials or an information statement subject to Regulation 14A, Regulation 14C, or Rule 13e-3(c) under the Securities Exchange Act

  of 1934 (the “Act”).

b. |_| The filing of a registration statement under the Securities Act of 1933.

c. |_| A tender offer.

d. |_| None of the above.

Check the following box if the soliciting materials or information statement referred to in checking box (a) are preliminary copies. |X|

Check the following box if the filing is a final amendment reporting the results of the transaction: |_|

CALCULATION OF FILING FEE

                                                                 Transaction Valuation(*)                                                           Amount of Filing Fee**

                                                                     ------------------------                                                                         ----------------------

                                                                            $4,889,000                                                                                     $977.80

*Estimated maximum price to be paid in lieu of issuance of fractional shares of common stock to persons who would hold less than one whole share of common stock of record after the proposed reverse stock split and based on an amount per share equal to the product obtained by multiplying (A) $37.50 by (B) the total number of shares of common stock owned by all such stockholders of record immediately prior to the reverse stock split.

**Determined pursuant to Rule 0-11(b)(1) as $4,889,000 multiplied by .0002.

|x| Check Box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

(1)    Amount previsously paid:  $911.80

(2)    Form or Registration No.:    Schedule 13E-3

(3)    Filing Party:    Northway Financial, Inc.

(4)    Date Filed:    April 10, 2007

INTRODUCTION

Northway Financial, Inc. a New Hampshire Corporation (“Northway") is proposing that Northway's stockholders adopt amendments to the amended and restated articles of incorporation of Northway that will result in a reverse/forward stock split transaction. If the split transaction is completed our stockholders of record who hold only fractional shares after giving effect to the 1-for-400 reverse stock split will receive a payment of $37.50 per share for each pre-split share. If the split transaction is completed, stockholders of record with fewer than 400 shares prior to the reverse stock split will have no interest in Northway and will become entitled only to a cash payment for their shares. Based upon an analysis of the stockholder base as of March 28, 2007, Northway expected to pay approximately $4,889,000 to its stockholders in the aggregate in the reverse stock split. Based upon recent trading activity, Northway believes that the amount payable to non-continuing stockholders will change, and the cost of the transaction could increase significantly as a result of further trading activity in Northway’s shares between the date hereof and the effective date of the split transaction.After Northway completes the reverse stock split and identifies those stockholders entitled to payment for their pre-split shares, it will complete a forward stock split in which each share of common stock will be converted into 800 shares of common stock post-split. As a result, stockholders of record who hold 400 or more shares prior to the split transaction will ultimately hold twice the number of shares following the split transaction. The effect of the split transaction will be to reduce the number of stockholders of record to less than 300, which will allow Northway to suspend its reporting obligations under the Securities Exchange Act of 1934, as amended (the "Exchange Act").

This Rule 13e-3 Transaction Statement on Schedule 13E-3 is being filed by Northway pursuant to Section 13(e) of the Exchange Act and Rule 13e-3 thereunder.

This Schedule 13E-3 is being filed with the Securities and Exchange Commission and includes a preliminary proxy statement filed by Northway pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, pursuant to which the holders of the common stock of Northway will be given notice of the annual meeting at which they will be asked to approve the reverse and forward stock splits, and to transact any other business properly brought before the annual meeting.

The information contained in the proxy statement is hereby expressly incorporated herein by reference and the responses to each item are qualified in their entirety by reference to the information contained in the proxy statement. As of the date hereof, the proxy statement is in preliminary form and is subject to completion or amendment. This Schedule 13E-3 will be further amended to reflect such completion or amendment of the proxy statement.

All parenthetical references under the various Items contained in this Schedule 13E-3 are references to the corresponding Items contained in Regulation M-A under the Exchange Act.

TRANSACTION STATEMENT

ITEM 1. Summary Term Sheet.

(Reg. M-A 1001)

The information set forth in the proxy statement under the caption "SUMMARY TERM SHEET" is hereby incorporated by reference.

ITEM 2. Subject Company Information.

(Reg. M-A 1002)

(a) The information set forth in the proxy statement under the caption "SUMMARY TERM SHEET" is hereby incorporated herein by reference.

(b) The information set forth in the proxy statement under the caption "ABOUT THE ANNUAL MEETING--Record Date; Voting Power" is hereby incorporated herein by reference.

(c) The information set forth in the proxy statement under the caption "MARKET PRICE OF NORTHWAY FINANCIAL, INC. COMMON STOCK AND DIVIDEND INFORMATION" is hereby incorporated herein by reference.

(d) The information set forth in the proxy statement under the caption "MARKET PRICE OF NORTHWAY FINANCIAL, INC. COMMON STOCK AND DIVIDEND INFORMATION" is hereby incorporated herein by reference.

(e) Not applicable.

(f) The information set forth in the proxy statement under the caption "COMMON STOCK PURCHASE INFORMATION" is hereby incorporated herein by reference.

ITEM 3. Identity and Background of Filing Person.

(Reg. M-A 1003(a) through (c))

(a)-(c) The information set forth in the proxy statement under the caption "SUMMARY TERM SHEET" is hereby incorporated herein by reference.

The (i) name, (ii) current principal occupation or employment, and the name and principal business of any corporation or other organization in which the employment or occupation is conducted, and (iii) material occupations, positions, offices or employment during the past five years, of each of the Directors of Northway is incorporated by reference to "Election of Directors of Northway-Information Concerning Directors and Nominees" in the proxy statement. Each such person is a United States citizen. Unless otherwise noted, the principal address of each person identified in that section of the proxy statement is 9 Main Street, Berlin, New Hampshire 03570.

The principal business addresses of the businesses for whom such Directors have worked during the last 5 years, other than those Directors employed by the Company, are as follows:

    

Directors	Business Address of Employer
Fletcher W. Adams	Retired
John H. Noyes	Noyes Insurance Agency
	63 Main Street
	Plymouth NH 03264
Barry J. Kelley	White Mountain Lumber Co.
	30 East Milan Road
	Berlin NH 03570
Randall G. Labnon	Town and Country Motor Inn
	Route 2
	Shelburne NH 03581
Frederick C. Anderson	NH Electric Cooperative, Inc.
	579 Tenney Mountain Highway
	Plymouth NH 03264
Arnold P. Hanson, Jr.	Isaacson Structural Steel, Inc.
	Jericho Road
	Berlin NH 03570
Stephen G. Boucher	Airmar Technology Corp.
	35 Meadowbrook Drive
	Milford NH 03055
Brien L. Ward, Esq	Brien L. Ward, Esquire
	74 Cottage Street
	Littleton NH 03561

Information, including business experience, concerning the Executive Officers of the Company and Northway Bank who are not also Directors of the Company is incorporated by reference to “Election of Directors of Northway-Executive Officers” in the proxy statement. Each of such Executive Officers is a United States citizen. Their principal business address is 9 Main Street, Berlin, New Hampshire, 03570.

Neither Northway, Northway Bank, nor, to our knowledge, any of the Directors or Executive Officers has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or has been a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws.

ITEM 4. Terms of Transaction.

(Reg. M-A 1004(a) and (c) through (f))

(a) The information set forth in the proxy statement under the captions "SUMMARY TERM SHEET," "THE SPLIT TRANSACTION—SPECIAL FACTORS--Overview of the Split Transaction," "--Background of the Split Transaction," "--Reasons for the Split Transaction," "--Fairness of the Split Transaction; "--Board Recommendation," "--Effect of the Split Transaction on Affiliates," "--Determination of Fairness of Split Transaction By Affiliates," "--Effects of the Split Transaction on Northway," "--Accounting Treatment," "--Federal Income Tax Consequences" and "ABOUT THE ANNUAL MEETING-- Vote Required for Approval" is hereby incorporated herein by reference.

(b) Securities held by directors, officers or affiliates holdling fewer than 400 shares will be repurchased pursuant to the transaction upon the same terms as all other shareholders holding fewer than 400 shares.

(c) The information set forth in the proxy statement under the caption "THE SPLIT TRANSACTION--SPECIAL FACTORS--Fairness of the Split Transaction," "--Structure of the Split Transaction," and "--Effect of the Split Transaction on Affiliates as Stockholders."

(d) The information set forth in the proxy statement under the caption "THE SPLIT TRANSACTION--SPECIAL FACTORS--Appraisal Rights and Dissenters' Rights" is hereby incorporated herein by reference.

(e) The information set forth in the proxy statement under the caption "THE SPLIT TRANSACTION--SPECIAL FACTORS--Fairness of the Split Transaction - Procedural Fairness" is hereby incorporated herein by reference.

(f) Not applicable.

ITEM 5. Past Contacts, Transaction, Negotiations and Agreements.

(Reg. M-A 1005(a) through (c) and (e)

(a) The information set forth in the proxy statement under the caption "ELECTION OF DIRECTORS OF NORTHWAY--Certain Relationships and Related Transactions," is hereby incorporated herein by reference.

(b) Not applicable.

(c) The information set forth in the proxy statement under the caption "THE SPLIT TRANSACTION--SPECIAL FACTORS--Background of the Split Transaction" is hereby incorporated herein by reference.

(e) Certain of the Directors and Executive Officers hold stock options for shares of the Company's common stock. Information concerning these stock options is incorporated by reference to "ELECTION OF DIRECTORS OF NORTHWAY—Security Ownership of Management and Principal Stockholders" in the proxy statement.

ITEM 6. Purposes of the Transaction and Plans or Proposals.

(Reg. M-A 1006(b) and (c)(1)-(8))

(b) The fractional shares acquired in the reverse stock split will be retired and returned to the status of authorized but unissued shares of Company Common Stock.

(c) (1)-(8) The information set forth in the proxy statement under the captions "THE SPLIT TRANSACTION--SPECIAL FACTORS--Background of the Split Transaction" and "--Effects of the Split Transaction on Northway."

ITEM 7. Purposes, Alternatives, Reasons and Effects.

(Reg. M-A 1013)

(a)-(c) The information set forth in the proxy statement under the captions "THE SPLIT TRANSACTION--SPECIAL FACTORS--Background of the Split Transaction," "--Reasons for the Split Transaction," "--Fairness of the Split Transaction," "--Board Recommendation," "--Structure of the Split Transaction" is hereby incorporated herein by reference.

(d) The information set forth in the proxy statement under the captions "THE SPLIT TRANSACTION--Effects of the Split Transaction on Northway," "--Fairness of the Split Transaction," "--Effect of the Split Transaction on Affiliates," and "--Material Federal Income Tax Consequences" is hereby incorporated herein by reference. The Split Transaction will have no effect on Northway Bank.

ITEM 8. Fairness of the Transaction.

(Reg. M-A 1014)

(a)-(b) The information set forth in the proxy statement under the captions "THE SPLIT TRANSACTION--Background of the Split Transaction," --Reasons for the Split Transaction," "--Fairness of the Split Transaction," "--Board Recommendation," "--Determination of Fairness of Split Transaction by Affiliates," and "--Fairness Opinion of Financial Advisor" is hereby incorporated herein by reference.

(c) The information set forth in the proxy statement under the captions "THE SPLIT TRANSACTION--SPECIAL FACTORS--Background of the Split Transaction," and "--Fairness of the Split Transaction" is hereby incorporated herein by reference.

(d)-(f) The information set forth in the proxy statement under the captions "THE SPLIT TRANSACTION--SPECIAL FACTORS--Background of the Split Transaction" is hereby incorporated herein by reference.

ITEM 9. Reports, Opinions, Appraisals and Negotiations.

(Reg. M-A 1015)

(a)-(c) The information set forth in the proxy statement under the captions "THE SPLIT TRANSACTION--SPECIAL FACTORS--Fairness Opinion of Financial Advisor" is hereby incorporated herein by reference.

Appendix B to the proxy statement is hereby incorporated in its entirety herein by reference.

Exhibits

Ex 99.1	Northeast Capital August 2, 2006 Presentation entitled "Cost-Benefit Analysis - Reverse Stock Split"
Ex 99.2	Northeast Capital September 18, 2006 Presentation entitled "Typical Community Bank Shareholder Profile"
Ex 99.3	Northeast Capital October 5, 2006 Summary of Key Findings
Ex 99.4	Northeast Capital October 9, 2006 Presentation entitled "The Advantages and Disadvantages of Going Private"
Ex 99.5	Northeast Capital December 19, 2006 Discussion Agenda
Ex 99.6	Northeast Capital March 15, 2007 Worksheet entitled "Transactions over Last Two Years"
Ex 99.7	Northeast Capital January 22,2007 "Impact of a Reverse Split" 125 shares
Ex 99.8	Northeast Capital January 30, 2007 Presentation entitled "Enhancing Shareholder Value Through a Reverse Stock Split"
Ex 99.9	Northeast Capital February 26, 2007 "Potential Impact of a Reverse Split" 350 shares
Ex 99.10	Northeast Capital March 5, 2007 "Potential Impact of a Reverse Split" 350 shares revised
Ex 99.11	Northeast Capital April 9, 2007 Presentation entitled "The Potential Impact of a Going Private Reverse Stock Split"
Ex 99.12	Northeast Capital  April 10, 2007 "Potential Impact of a Reverse Split" 400 shares
Ex 99.13	Northeast Capital June 21, 2006 Presentation entitled “Investor Relations Analysis”
Ex 99.14	Northeast Capital August 4, 2006 Presentation entitled “Top 50 Bottom 100 Shareholders”

ITEM 10. Source and Amount of Funds or Other Consideration.

(Reg. M-A 1007)

(a) The information set forth in the proxy statement under the captions "THE SPLIT TRANSACTION--SPECIAL FACTORS--Financing of the Split Transaction" is hereby incorporated herein by reference.

(b) Not applicable.

(c) The information set forth in the proxy statement under the caption "THE SPLIT TRANSACTION--SPECIAL FACTORS--Fees and Expenses" is hereby incorporated herein by reference.

(d) Not applicable.

ITEM 11. Interest in Securities of the Subject Company.

(Reg. M-A 1008)

(a) The information set forth in the proxy statement under the caption "ELECTION OF DIRECTORS OF NORTHWAY--Voting Securities and Principal Holders Thereof" is hereby incorporated herein by reference.

(b) The information set forth in the proxy statement under the caption "COMMON STOCK PURCHASE INFORMATION" is hereby incorporated herein by reference.

ITEM 12. The Solicitation or Recommendation.

(Reg. M-A 1012(d) and (e))

(d) The information set forth in the proxy statement under the caption "ABOUT THE ANNUAL MEETING--Vote Required for Approval," is hereby incorporated herein by reference.

(e) The information set forth in the proxy statement under the caption "THE SPLIT TRANSACTION--SPECIAL FACTORS--Determination of Fairness of Split Transaction by Affiliates" is hereby incorporated herein by reference.

ITEM 13. Financial Statements.

(Reg. M-A 1010(a) and (b))

(a) The information set forth in the proxy statement under the captions "SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA" and "INFORAMTION INCORPORATED BY REFERENCE" is hereby incorporated herein by reference.

(b) The information set forth in the proxy statement under the caption "SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA" is hereby incorporated herein by reference.

ITEM 14. Persons/Assets, Retained, Employed, Compensated or Used.

(Reg. M-A 1009)

(a)-(b) The information set forth in the proxy statement under the captions "ABOUT THE ANNUAL MEETING--Solicitation of Proxies; Expenses of Solicitation" is hereby incorporated herein by reference.

ITEM 15. Additional Information.

(Reg. M-A 1011(b))

(b) The information set forth in the proxy statement, including all appendices attached thereto, is hereby incorporated herein by reference.

ITEM 16. Exhibits.

(Reg. M-A 1016(a) through (d), (f) and (g))

(a) Preliminary Proxy Statement, together with the proxy card.*

(b) Not applicable.

(c) Fairness Opinion provided by Northeast Capital & Advisory, Inc., dated April 9, 2007**

(f) Statement describing Security Holders’ Appraisal Rights***

(g) Not applicable.

  

Ex 99.1	Northeast Capital August 2, 2006 Presentation entitled "Cost-Benefit Analysis - Reverse Stock Split"
Ex 99.2	Northeast Capital September 18, 2006 Presentation entitled "Typical Community Bank Shareholder Profile"
Ex 99.3	Northeast Capital October 5, 2006 Summary of Key Findings
Ex 99.4	Northeast Capital October 9, 2006 Presentation entitled "The Advantages and Disadvantages of Going Private"
Ex 99.5	Northeast Capital December 19, 2006 Discussion Agenda
Ex 99.6	Northeast Capital March 15, 2007 Worksheet entitled "Transactions over Last Two Years"
Ex 99.7	Northeast Capital January 22,2007 "Impact of a Reverse Split" 125 shares
Ex 99.8	Northeast Capital January 30, 2007 Presentation entitled "Enhancing Shareholder Value Through a Reverse Stock Split"
Ex 99.9	Northeast Capital February 26, 2007 "Potential Impact of a Reverse Split" 350 shares
Ex 99.10	Northeast Capital March 5, 2007 "Potential Impact of a Reverse Split" 350 shares revised
Ex 99.11	Northeast Capital April 9, 2007 Presentation entitled "The Potential Impact of a Going Private Reverse Stock Split"
Ex 99.12	Northeast Capital  April 10, 2007 "Potential Impact of a Reverse Split" 400 shares
Ex 99.13	Northeast Capital June 21, 2006 Presentation entitled “Investor Relations Analysis”§
Ex 99.14	Northeast Capital August 4, 2006 Presentation entitled “Top 50 Bottom 100 Shareholders”§

*      Incorporated by reference to Amendment No. 2 to the Company's Schedule 14A, filed with the SEC on June 19, 2007

**    Incorporated by reference to Appendix B of Exhibit (a).

*** Incorporated by reference to the information set forth in the section entitled “THE SPLIT TRANSACTION -- SPECIAL FACTORS - Appraisal and Dissenters’ Rights” in

        Exhibit (a)

  §Confidential status has been requested for certain portions of this document.  Such provisions have been filed separately with the Commission

SIGNATURES

After due inquiry and to the best of my knowledge and belief, the undersigned certify that the information set forth in this statement is true, complete and correct.

Dated: April 13, 2007

NORTHWAY FINANCIAL, INC.

By: /S/ William J. Woodward

William J. Woodward

Chairman of the Board, President, and Chief Executive Officer

Exhibit Index

(a) Preliminary Proxy Statement, together with the proxy card.*

(b) Not applicable.

(c)(1) Fairness Opinion provided by Northeast Capital & Advisory, Inc., dated April 9, 2007**

(d) Not applicable.

(f) Statement describing Security Holders’ Appraisal Rights***

(g) Not applicable.

Ex 99.1	Northeast Capital August 2, 2006 Presentation entitled "Cost-Benefit Analysis - Reverse Stock Split"
Ex 99.2	Northeast Capital September 18, 2006 Presentation entitled "Typical Community Bank Shareholder Profile"
Ex 99.3	Northeast Capital October 5, 2006 Summary of Key Findings
Ex 99.4	Northeast Capital October 9, 2006 Presentation entitled "The Advantages and Disadvantages of Going Private"
Ex 99.5	Northeast Capital December 19, 2006 Discussion Agenda
Ex 99.6	Northeast Capital March 15, 2007 Worksheet entitled "Transactions over Last Two Years"
Ex 99.7	Northeast Capital Janaury 22,2007 "Impact of a Reverse Split" 125 shares
Ex 99.8	Northeast Capital January 30, 2007 Presentation entitled "Enchancing Shareholder Value Through a Reverse Stock Split"
Ex 99.9	Northeast Capital February 26, 2007 "Potential Impact of a Reverse Split" 350 shares
Ex 99.10	Northeast Capital March 5, 2007 "Potential Impact of a Reverse Split" 350 shares revised
Ex 99.11	Northeast Capital April 9, 2007 Presentation entitled "The Potential Impact of a Going Private Reverse Stock Split"
Ex 99.12	Northeast Capital  April 10, 2007 "Potential Impact of a Reverse Split" 400 shares
Ex 99.13	Northeast Capital June 21, 2006 Presentation entitled "Investor Relaions Analysis"§
Ex 99.14	Northeast Capital August 4, 2006 Presentation entitled "Top 50 Bottom 100 Shareholders"§

 *  Incorporated by reference to Amendment No. 2 to the Company's Schedule 14A, filed with the SEC on June 19, 2007.

**  Incorporated by reference to Appendix B of Exhibit (a).

  *** Incorporated by reference to the information set forth in the section entitled “THE SPLIT TRANSACTION -- SPECIAL FACTORS - Appraisal and Dissenters’ Rights” in

          Exhibit (a)

     §Confidential status has been requested for certain portions of this document.  Such provisions have been filed separately with the Commission

EX-99.1

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 Exhibit 99.1

Cost-Benefit Analysis:

Reverse Stock Split

Presented to:

Prepared by:

August 2, 2006

Contents

SUMMARY OF FINDINGS	1
REVERSE STOCK SPLIT	2
ADVANTAGES	2
DISADVANTAGES	3
PRO FORMAS	3
OTHER CONSIDERATIONS	6

Northeast Capital & Advisory, Inc.

Cost-Benefit Analysis

Summary of Findings

As of March 31, 2006, Northway Financial had approximately 1,491,174 shares of common stock outstanding and approximately 1,221 shareholders of record. Of the 1,221 shareholders, approximately 282 hold less than 50 shares of stock apiece. These shareholders hold approximately 7,961 shares, or .54% of Northway’s total shares outstanding, but represent 23.10% of Northway’s total number of record holders. In addition, while approximately 441 shareholders, or 36.12% of the total number of record holders, hold less than 100 shares each, these shareholders only own 20,023 shares, or 1.34% of the total shares outstanding. As a result, a disproportionate amount of Northway’s expenses for the administration of shareholder accounts is attributable to stockholders with small positions.

Individuals holding:	Shareholders	% of Total Shareholders	Shares	% of Total Shares
< 50 shares	282	23.10%	7,961	0.54%
< 100 shares	441	36.12%	20,023	1.34%

Distribution of Shares Held by Investors Holding Less than 50 or 100 Shares by State

As shown by the charts above, the majority of the shareholders with small positions live in New Hampshire. In addition, we compared the list of shareholders as of March 31, 2006 to the list of shareholders as of November 20, 2000, and found that of the 282 shareholders that own less than 50 shares each, approximately 223, or 79.08%, have not purchased or sold shares since 2000. Similarly, approximately 345 of the 441 shareholders with less than 100 shares have not changed their positions since 2000.

Cost-Benefit Analysis (Continued)

Reverse Stock Split

To reduce the cost of servicing stockholders with small positions, Northway can do the following:

1.   Effect a 1 for 50 (100) reverse stock split.

Ø   Each holder of less than 50 (100) shares immediately before the reverse stock split will receive [$xx.00] in cash, without interest, for each share held immediately before the reverse stock split and will no longer be a stockholder of Northway; and

Ø   Each holder of 50 (100) or more shares immediately prior to the reverse stock split will receive a fractional share for each common share held immediately before the reverse stock split. Since fractional shares held by holders of 50 (100) or more shares will not be purchased by Northway, these holders will not be entitled to receive any cash payment from Northway.

2.   Immediately after the reverse stock split is complete, initiate a 50 (100) for 1 forward stock split.

Ø   As a result, the continuing holders will hold the same number of shares as they did before the stock splits; however, their portion of total shares outstanding will be slightly higher.

Advantages

§   Reduce expenses related to administering small stockholder accounts. Currently, a disproportionate amount of Northway’s expenses relating to the administration of shareholder accounts is attributable to stockholders holding less than 0.54% (1.34%) of Northway’s issued and outstanding shares. See Pro Formas for estimates of cost savings.

§   Provides a valuable use for excess capital.

§   Provides small holders with less than 50 (100) shares with an opportunity to liquidate their shares without paying brokerage commissions or other transaction fees.

Cost-Benefit Analysis (Continued)

Disadvantages

§   Costs associated with performing the stock splits; however, since Northway would be in effect performing a repurchase of 7,961 (20,023) shares, we must net out the costs Northway would have incurred of $1,990 ($5,006) on broker fees had typical share repurchases been performed. See Pro Formas for cost estimates.

§   Small holders, who are mostly loyal, local investors, will no longer hold a financial interest in Northway.

Pro Formas

Cost Estimates (for a 1 for 50 Split)

Legal Fees	50,000
Accounting Fees	5,000
Filing Fees	400
Financial Advisory/ Valuation Fees	15,000
Printing and Mailing Costs	5,000
Proxy Solicitor Fees	0
Less Cost Savings (Broker Fees)	(1,990)
Total	73,410

Cost Savings (for a 1 for 50 Split)

  Variable Shareholder Expenses     5,728  

Cost-Benefit Analysis (Continued)

        

Cost-Benefit Analysis (Continued)

   

Cost-Benefit Analysis (Continued)

Other Considerations

§   Stock splits require the approval of a majority of the outstanding shares under Northway’s Articles of Incorporation.

§   To exercise dissenters’ rights under New Hampshire law, Northway shareholders must deliver to Northway, before the taking of the necessary stockholder vote pertaining to the transactions, written objection to such transactions.

§   No insiders own less than 50 (100) shares.

§   The stock splits will have a minimal effect on the relative voting power of the continuing shareholders. An estimated 7,961 (20,023) shares will be eliminated in connection with the stock splits, which is only 0.54% (1.34%) of Northway’s outstanding shares. As a result, each continuing holder’s ownership will increase by approximately 0.54% (1.34%). As of March 31, 2006, the executive officers and directors of Northway own approximately 15.82% of the shares outstanding. Following the stock splits, they will collectively own approximately 15.90% (16.04%) of the shares outstanding.

§   Jeffrey Gendell currently owns 146,801 shares, or 9.84% of total shares outstanding. Following the 1 for 50 (1 for 100) stock split, he will own approximately 9.90% (9.98%).

EX-99.2

 Exhibit 99.2

Typical Community Bank Shareholder

Profile vs. NWFI

	Institutional Holders	Retail Holders	Insiders2
New England Banks & Thrifts1	23.6%	60.2%	11.3%
Peer Group1	13.8%	72.5%	11.6%
NWFI	18.9%	64.1%	17.0%

1 - Median values for each group are shown above.

2 - Includes stock options.

Average Daily Trading Volume (over 1 year)

	New England Banks & Thrifts	Peer Group	NWFI
Shares	9,569	2,428	508
% of Shares Outstanding	0.12%	0.05%	0.03%

Average Shares Held per Shareholder

	New England Banks & Thrifts	Peer Group	NWFI1
Shares	6,841	5,015	1,321
% of Shares Outstanding	0.08%	0.11%	0.09%

1 - If we eliminate holders under 20 shares, then this becomes 1,478 and 0.10%, respectively.

Local Ownership

Most of the peer group members ($500 million - $1.3 billion) have 75% - 80% held by local investors. This is comparable to Northway’s 58% position. Typically, larger banks start to experience declines in local ownership composition as the size exceeds $2 billion in assets, dropping to 70% held by local investors.

Largest Holders/ Concentrations

Using the most recent proxy statements of each bank and thrift in Northway’s peer group, we found that almost half of the banks and thrifts do not have any principal holders (which own 5% or more of the company’s stock), excluding management and directors. The table on the following page shows the percentages held by non-insider, principal holders, as well as the number of non-insider, principal holders, of each company’s stock.

Peer Group for Northway Financial

 

Peer Group for Northway Financial (continued)

   

Principal Holders

    

EX-99.3

Exhibit 99.3

Summary of Key Findings

Report/ Analysis	Date	Conclusions
Investor Relations Analysis	06/21/06	§The top 50 shareholders own 747,372 shares (or 50.12% of shares outstanding), while the bottom 100 shareholders own 1,451 shares (or 0.10% of shares outstanding). §Excluding objecting owners, 616 shareholders (or 50.45% of total) live within a 60 mile radius of Berlin, NH and hold approximately 623,169 shares (or 41.79% of all outstanding shares). §The only non-insider, principal shareholder is Jeffrey Gendell with 146,801 shares (or 9.84% of shares outstanding). §Of the 1,491,174 shares outstanding, 53.82% (or 802,496 shares) are held in street name through 56 different brokerages. §Shareholders reside in 35 different states. §Ninety-three investors hold a total of 258,582 shares (or 17.34% of shares outstanding) in trust.
Reverse Stock Split	08/02/06	§282 shareholders (or 23.10% of total) hold under 50 shares, or 7,961 shares (or 0.54% of total outstanding). §Roughly 441 shareholders (or 36.12% of total) hold under 100 shares, or 20,023 shares (or 1.34% of total outstanding). §Approximate costs for performing a reverse stock split are $75,400.
Top 50/ Bottom 100 Shareholder Analysis (NWFI)	08/04/06	§Of the largest 50 shareholders, 29 have deposits totaling $6.029 million (or $207,904 on average) and 1 has a loan with a balance of $114,818. §Of the smallest 100 shareholders, 46 have deposits totaling $2.742 million (or $59,606 on average) and 8 have loans with balances of $431,586 (or $53,948 on average).
Typical Community Bank Shareholder Profile	09/18/06	§NWFI had larger percentages of institutional holders (18.9% vs. 13.8%) and insiders (17.0% vs. 11.6%) than the peer group median, comprised of banks and thrifts of similar size and loan and deposit compositions, and less retail holders (64.1% vs. 72.5%). §Most of the peer group members have 75% - 80% held by local investors; this compares to Northway’s 58% position. §NWFI’s average daily trading volume over the last year was one-fifth the peer group median (508 vs. 2,428 shares). §In terms of average shares held per holder as a percentage of shares outstanding, NWFI is comparable to the peer group (0.09% vs. 0.11%); however, in comparing average shares held, NWFI’s average is much lower than the peer median (1,321 vs. 5,015 shares). §Nearly half of NWFI’s peer group members do not have any non-insider, principal holders.

EX-99.4

Exhibit 99.4

The Advantages and Disadvantages of

Going Private

Presented to:

Prepared by:

October 9, 2006

Northeast Capital & Advisory, Inc.

Contents

Advantages of Going Private

§   Less disclosure and reporting. A publicly traded company is subject to a much higher degree of ongoing disclosure and reporting than that of a private company. As such, companies that regain private status will immediately have lower ongoing legal, accounting, director and officer insurance and investor relations expenses.

§   Management time. The listing itself, as well as the continuing obligations required for a publicly-traded company, can use up significant amounts of management time, which might otherwise be directed to running the business.

§   Regaining control. The sale of equity in a company inevitably involves surrendering a degree of management control to outside shareholders, whose views must be taken into account by the board in the operation of the company’s business. The market usually rewards publicly-traded companies for short-term quarterly results rather than long-term value creation and performance. As such, management of a publicly traded company may focus on short-term performance in order to attain a certain return for shareholders, rather than focusing on long-term shareholder value. In addition, depending on the portion of the equity held by insiders, the company may also run the risk of being taken over by an unwelcome acquirer at some point in the future.

§   More privacy. Since there is a greater degree of accountability to outside shareholders for a publicly-traded company, officers and directors lose much of the privacy and autonomy they may have enjoyed when running a private company. While a higher degree of interest can be beneficial during good times, it can be detrimental during bad times.

§   Other. Greater disclosure of salaries, restrictions on share dealing, and the time and money needed to devote to investor relations are a few of the additional burdens that are unlikely to arise with a private company. In addition, private companies do not have to publicly distribute their financial and other strategic information, which can be used by competitors.

Northeast Capital & Advisory, Inc. Section 1 - Page 1

Going Private (Continued)

Disadvantages of Going Private

§   Access to capital and acquisition opportunities. Public companies are generally able to raise capital or finance acquisitions more easily than private companies due to the liquid nature of their stock.

§   Reduces stock liquidity. Removing access to a public market, with an externally agreed price, reduces liquidity in the company’s shares (no longer enables shareholder’s to realize the value of their holdings) and narrows the company’s shareholder base.

§   Financial substance. Public companies are often perceived to have greater staying power and financial substance than their private company competitors, given their capital bases and greater access to capital.

§   Public profile. A publicly-traded company and its activities will receive more extensive coverage in the press and may receive coverage by analysts, hence widening the awareness of the company, as well as its products and services.

§   Efficiency. The requirement for more rigorous disclosure tends to lend itself to better systems and controls and greater operating efficiency for the company as a whole.

§   Employee Commitment. Publicly-traded companies can use stock based compensation, which has a visible value and a market for trading, to help recruit and retain high-quality employees and officers with a long-term commitment to the business.

§   Shareholders. Going private can possibly result in dissatisfied shareholders, due to the illiquid market and lack of ongoing financial information, and could potentially lead to litigation.

Northeast Capital & Advisory, Inc. Section 1 - Page 2

Going Private (Continued)

Process of Going Private

§   Reduce the number of holders below 300. To reduce the number of holders, Northway could perform a reverse stock split or a Dutch auction self-tender offer.

Reverse Stock Split: Effect a 1 for 300 (or 1 for 325) reverse stock split.

§   Each holder of less than 300 (325) shares immediately before the reverse stock split will receive a pre-determined amount in cash, without interest, for each share held immediately before the reverse stock split and will no longer be a stockholder of Northway; and

§   Each holder of 300 (325) or more shares held immediately prior to the reverse stock split may receive a fractional share for each common share held immediately before the reverse stock split. In this case, since fractional shares held by holders of 300 (325) or more shares will not be purchased by Northway, these holders will not be entitled to receive any cash payment from Northway. Otherwise, Northway may also offer cash for these fractional shares, which would eliminate the need for the forward stock split described below.

Immediately after the reverse stock split is complete, initiate a 300 (325) for 1 forward stock split.

§   As a result, the continuing holders will hold the same number of shares as they did before the stock splits; however, their portion of shares outstanding will be higher.

A 1 for 300 (or 1 for 325) reverse stock split would result in approximately 300 holders (or 266 holders) for Northway.

Dutch Auction Self-Tender Offer: This procedure allows the shareholders to select the price at which they are willing to sell, or tender, all or part of their shares within a price range set by Northway. For example, Northway could offer a range of not more than $36.08 and not less than $37.72 per share, which represents premiums of 10% and 15% over Northway’s 9/29/06 share price of $32.80. Upon expiration of the offer, Northway may select the lowest purchase price from those shares tendered that will allow the Bank to buy a pre-determined amount shares. All shares purchased in the offer will receive the same purchase price, even those shares that are tendered below the purchase price. In the offer, priority may be given to certain holders, such as holders with less than 300 shares. In this case, if a Northway shareholder owns less than 300 shares and tenders all of their shares at or below the purchase price, they would receive priority and have all of their shares purchased even if the amount of shares tendered exceeded the original amount of shares offered. However, using this method will most likely not result in less than 300 holders due to the overwhelmingly large number of holders that would need to agree to tender their shares.

Northeast Capital & Advisory, Inc. Section 1 - Page 3

§   De-list from NASDAQ. A listed NASDAQ company that wishes to de-list must contact NASDAQ via written letter and state the reason for its decision to de-list, accompanied with an application to withdraw the securities from the listing (must comply with requirements in Rule 12d2-2(e). Delisting the securities will eliminate the registration requirements of Section 12(b); however, the securities will automatically become registered under Section 12(g), unless it meets certain exceptions, such as having fewer than 300 holders of record.

Holders of Record: Under Exchange Act Rule 12g5-1, “the number of holders of record of a class of a company’s stock includes each person who is identified as the owner of such securities on records of security holders maintained on or behalf of the issuer.” Securities held by pre-existing entities, such as a corporation, partnership or trust, are counted as being held by one holder. In addition, to determine the number of holders of record, the beneficial investors that hold their shares in street name are generally discarded, unless the company has reason to know that the form of holding securities of record is used primarily to circumvent the Exchange Act, in which case the beneficial owners of those securities are counted as record holders.

§   Terminate registration under Section 12(g). To terminate the registration of a class of securities under Section 12(g), the company must file a Form 15 with the SEC certifying that either:

1.   the number of holders of record of the class of the company’s securities sought to be deregistered is less than 300; or

2.   the number of holders of record of the class of the company’s securities sought to be deregistered is less than 500 and the company’s total assets have not exceeded $10 million on the last day of each of the company’s three most recent fiscal years.

Northeast Capital & Advisory, Inc. Section 1 - Page 4

Going Private (Continued)

Costs of Going Private

Cost Estimates (for a 1 for 300 Split)

Legal Fees	$75,000 - $100,000
Accounting Fees	$10,000
Filing Fees	$400
Financial Advisory/ Valuation Fees	$25,000 - $35,000
Printing and Mailing Costs	$15,000
Proxy Solicitor Fees	$10,000
Less Cost Savings (*Broker Fees)	($19,027)
Total	$136,373

* Broker fees that would have been incurred had a typical share repurchase been performed.

Cost Savings (for a 1 for 300 Split)

  Variable Shareholder Expenses     $13,571  

Northeast Capital & Advisory, Inc. Section 1 - Page 5

Going Private (Continued)

Reverse Split: 1 for 300

       

Northeast Capital & Advisory, Inc. Section 1 - Page 6

Going Private (Continued)

Reverse Split: 1 for 325

Northeast Capital & Advisory, Inc. Section 1 - Page 7

Going Private (Continued)

Dutch Auction (10.68% Premium)

Northeast Capital & Advisory, Inc. Section 1 - Page 8

Going Private (Continued)

Dutch Auction (12.26% Premium)

Northeast Capital & Advisory, Inc. Section 1 - Page 9

EX-99.5

Exhibit 99.5

Discussion Agenda

I.   Near Term Outlook for New England Banks

§   Interest rate environment

§   Demographic situation

§   Peer group performance comparison

§   Stock price implications

II.   Shareholder Strategies

§   Do nothing.

§   Forward split

§   Reverse split - To 500 shareholders (One share for approximately 300 shares)*

§   Reverse split - To 300 shareholders (One share for approximately 550 shares)**

§   Tender offer

III.   Evaluation of Strategies

§   Legal perspective

§   Financial perspective

§   Business judgments

IV.   Conclusions/ Recommendations

* For purposes of going private, all shareholders with shares held in street name (OBOs and NOBOs) are considered one shareholder. The one for 300 split assumes all NOBOs cease being held in street name and become physical shareholders (holding the shares in a safety deposit box, for example).

** Similarly, the one for 550 split considers NOBOs as separate shareholders even though they are a part of the single shareholder of “street name”. Thus, these splits will comfortably cause NWFI to be below 300 shareholders.

EX-99.6

Exhibit 99.6

	Transactions Over the Last Two Years
							Cost Saves (Estimates)
	Company Name	Ticker	Proxy Date	Date Splits Completed	Assets ($000s)	Splits	Annual Recurring - Personnel	Annual Recurring - Other	Non-Recurring	Total Shares(Prior to Splits)	Shares Eliminated (Estimates)	Reason
1	Home Loan Financial Corporation	HLFN	7/13/2005	8/26/2005	160,342	1 for 600/ 600 for 1	65,000	200,000	34,200	1,699,913	84,538	Going Private
2	Home City Financial Corporation	HCFC	8/28/2006	11/1/2006*	148,159	1 for 210/ 210 for 1	30,000	96,300	125,000	835,690	14,778	Going Private
3	Community Investors Bancorp	CIBI	7/15/2005	9/22/2005	122,762	1 for 300/ 300 for 1	50,000	150,000	110,000	1,054,717	40,152	Going Private
4	FFD Financial Corporation	FFDF	8/2/2005	Aborted**	139,705	1 for 350/ 350 for 1	40,000	133,000	125,000	1,189,977	78,000	Going Private
5	ABS Financial	ASBP	5/4/2005	7/11/2005	172,961	1 for 300/ 300 for 1	20,000	178,000	145,000	1,705,047	86,333	Going Private
6	Northeast Indiana Bancorp	NIDB	4/18/2005	6/16/2005	228,672	1 for 125/ 125 for 1	43,500	134,250	100,000	1,417,279	17,656	Going Private
7	Central Federal Corporation	CFBK	1/12/2005	Aborted***	107,011	1 for 325/ 325 for 1	103,000	177,000	Indeterminable	2,225,987	89,323	Going Private
8	KS Bancorp Inc.	KSBI	1/18/2005	3/18/2005	223,208	1 for 200/ 250 for 1	100,000	152,500	Indeterminable	1,197,029	59,085	Going Private
9	County Bank Corp.	CNBC	12/2/2005	3/1/2006	256,972	1 for 500/ 500 for 1	13,400	47,600	75,000	1,118,315	51,476	Going Private
10	South Street Financial Corp.	SSFC	2/2/2007	Pending	268,848	Less than 750: Convert to Series A Preferred on 1:1 basis or receive cash	129,000	156,000	Indeterminable	2,954,696	76,864	Going Private
	* Held two shareholder meetings as a result of a large number of individuals purchasing less than 210 shares in order to cash out and receive the redemption price.
	** Aborted due to a large number of shareholders buying less than 350 shares to obtain the redemption price.
	*** The Board recognized arbitrage activity and reserved the right to abandon the transaction if costs were to exceed $2 million.

EX-99.7

Exhibit 99.7

  

Data as of March 31, 2006	Shares	Shareholders
Total Shares	1,731,969
Treasury	240,795
CEDE	802,496
NOBOs	335,424
OBOs	467,072
Individual SHs1& NOBOs	1,024,102	1,221

To estimate the cash outlay of a 1 for 125 reverse split and then a 125 for 1 forward split, we first identified the approximate amount for individual shareholders and NOBOs:

§   Purchase approximately 28,851 shares at $39.00² per share = $1,125,189

(28,851/ 1,024,102) = 2.82%

§   Eliminate approximately 523 out of 1,221 shareholders.

Applying the same composition ratio to OBOs, we estimate the following:

§   Purchase approximately 13,171 shares (2.82% of 467,072) at $39.00² per share = $513,669

Total Cash Outlay = $1,638,858

If Northway decides to pay cash for fractional shares to shareholders with over 125 shares, we estimate the following to be paid to individual shareholders and NOBOs with over 125 shares (1,221-523 = 698):

§   Assuming the remaining holders each have a .9 fractional share remaining, Northway will need to purchase approximately 78,525 shares at $39.00² per share = $3,062,475

(.9 * 698 * 125 = 78,525)

Total Cash Outlay for Worst Case Reverse Split = $4,701,333

Total Cash Outlay for Reverse Split plus Forward Split = $1,638,858

1- Individual shareholders are defined as shareholders that do not hold shares in street name.

2 - Assumes shares are repurchased at an 18.18% premium, based on the 1/19/07 closing price of $33.00.

EX-99.8

            Exhibit 99.8

EX-99.9

Exhibit 99.9

  

Data as of March 31, 2006	Shares	Shareholders
Total Shares	1,731,969
Treasury	240,795
CEDE	802,496
NOBOs	335,424
OBOs	467,072
Individual SHs1& NOBOs	1,024,102	1,221

To estimate the cash outlay of a 1 for 350 reverse split and then a 350 for 1 forward split, we first identified the approximate amount for individual shareholders and NOBOs:

§   Purchase approximately 95,515 shares at $39.00² per share = $3,725,085

(95,515/ 1,024,102) = 9.33%

§   Eliminate approximately 826 out of 1,221 shareholders.

Applying the same composition ratio to OBOs, we estimate the following:

§   Purchase approximately 43,578 shares (9.33% of 467,072) at $39.00² per share = $1,699,542

Total Cash Outlay = $5,424,627

EX-99.10

Exhibit 99.10

  

EX-99.11

Exhbit 99.11

 

EX-99.12

Exhibit 99.12

EX-99.13

Exhibit 99.13

WHENEVER CONFIDENTIAL INFORMATION IS OMITTED HEREIN (SUCH OMISSIONS ARE DENOTED BY TEXT THAT IS BLACKED OUT), SUCH CONFIDENTIAL INFORMATION HAS BEEN SUBMITTED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.

Investor Relations Analysis

Presented to:

Prepared by:

June 21, 2006

Discussion Agenda

Review Of Findings                 SECTION 1

Shareholder Analysis

Options          & #160;     SECTION 2

Do Nothing

Target Accredited Investors

Focus on Increasing Local Shareholder Base

Going Private

Sell Now or in the Future

Anecdotal Evidence

Community

Factory Point

NBT

Wilber

Northeast Capital & Advisory, Inc.

Review of Findings

Like the April 16, 2001 study, the following analysis examines the shareholder base of Northway Financial, Inc. To better understand the profile of individual shareholders of NWFI stock, we have collected and analyzed data from various sources, including information on Non Objecting Beneficial Owners or NOBOs from Northway Financial. NOBOs permit their names and shareholdings to be released to the proxy services company. The Objecting Beneficial Owners, or OBOs, decline to permit their names and shareholdings to be released to anyone. Typically, this choice of being OBO or NOBO is on an account opening form for a brokerage firm. Naturally, we were unable to get any detailed information on OBOs; however, we were able to determine the names of the brokerage firms holding the shares and the amounts held by each using the Depository Trust Company report and the NOBO list. Since the information on OBOs is limited, some of the analyses exclude data on OBOs, unless otherwise specified.

We used the shareholder list provided by Northway Financial as a base, then supplemented it with data from the NOBO list, the Depository Trust Company report and SEC filings. In certain circumstances, OBO shares held by an officer or director, while shown in Northway’s list, was not able to be linked to a specific brokerage firm. Consequently, not all of the shares owned by an individual may be shown in our charts. If anything, the shares will be either accurate or low. Only in the cases where we can reconcile to shares indicated in the proxy statement, such as Mr. Kelley’s shares, do we even venture a guess on the extent of his OBOs. In order to match our final numbers with that of published documents, such as the Company’s proxy statement, we had to assume that any differences between the NWFI shareholder report and the information from the other sources were these OBOs. The following diagram illustrates how our data sources were used to reconcile numbers provided by the proxy statement for Mr. Kelley’s shares:

      *Proxy data as of March 31, 2006

Review of Findings (Continued)

As of March 31, 2006, Northway Financial had approximately 1,491,174 shares (was 1,532,823 shares as of March 16, 2001) of common stock outstanding, which is held by approximately 1,221 individual investors (down 482 from 2001) or 1,221 shares per person on average (up from 900 shares in 2001). Of the 1,491,174 shares outstanding, 53.82% or 802,496 shares (up from 704,040 shares in 2001) are held in street name through 55 different brokerages (up from 49 in 2001) with the largest being UBS Securities holding 179,499 shares, or 12.04% of all outstanding shares. Of these 802,496 shares, approximately 467,072 are registered as objecting owners (or 30.7% of total outstanding shares and 58.2% of all street name shares). As a result, we were only able to obtain detailed information on the 335,424 shares held in street name and NOBO, or 22.49% of all outstanding shares (down from 27.76% in 2001), and 697,685 shares held in physical name (down nearly 20% from 866,729 in 2001), or 46.79% of all outstanding shares.

It should also be noted that the top twenty-five individual investors (brokers excluded) control approximately 41.53% of the total shares outstanding (up from 37.46% in 2001). Insiders of Northway own approximately 15.82% of the total outstanding stock (down from 16.40% in 2001). The largest shareholder that we are able to determine as of March 31, 2006 is Jeffrey Gendell, an activist investor from Greenwich, CT. Mr. Gendell is a general partner of Tontine Financial Partners and holds approximately 146,801 shares, or 9.84% of shares outstanding. Mr. Gendell will trigger the 10% level if NWFI repurchases at least 23,164 shares.

The second largest shareholder is William Woodward from Berlin, NH. Mr. Woodward is currently the Chairman, President, and Chief Executive Officer of Northway Financial and holds approximately 76,088 shares, or 5.10% of shares outstanding, excluding options. This represents an increase of 3,000 shares since the 2001 study.

The third largest shareholder is Fletcher Adams from Plymouth, NH who is currently the Vice Chairman at Northway Financial. Mr. Adams, through three different trust accounts (down from nine trust accounts), holds 55,000 (3.69%) shares, excluding options. This represents an increase of 4,000 shares since 2001. Of the 55,000 shares attributed to Mr. Adams, . ., both

Review of Findings (Continued)

related to Fletcher Adams, own 2,000 apiece. The fourth largest shareholder is Northway director Barry Kelley who holds 42,439 (2.85%) shares. The fifth largest shareholder at 25,640 shares (1.72%) is . . who is . . of director Randall Labnon. In addition, Randall owns 3,072 shares. In the following tables, all 28,712 shares are shown under Randall’s name. The sixth largest shareholder is Northway director John Noyes with 24,708 shares (1.66%), which includes 14,185 shares held in a trust for which Mr. Noyes serves as a trustee and 10,523 shares held in a trust for which Mr. Noyes has the Power of Attorney.

While the average individual shareholder holds roughly 1,221 shares, there are at least 283 shareholders (down 31.48% from 413 in 2001) that own 50 shares or less. When you combine this block of stock (8,011 shares) and the shares owned by insiders (235,915), you find that approximately 243,926 shares (or 16.36%) of Northway stock is held in accounts that create very little trading volume.

Review of Findings (Continued)

Over the last five years, the average daily trading volume has only been 396, which is significantly less than average daily volume of 1,244 in 2001. In order to derive this number, we divided the average daily volume by 2.1 in order to account for the buying and selling of shares by investment banks, which causes reported volume numbers to be greater than actual volume. In the 2001 report, trading volume was shrinking at a 28.28% compound annual rate over the previous four years; this compares to a rate of -20.46% over the last five years. Continued deterioration in trading volume may be attributable to the fact that many Northway shareholders are long-term holders of either Pemi or Berlin shares.

We also ran an analysis of all the shareholders, excluding OBOs, within 60 miles of Berlin, NH. We found that within the sixty-mile radius, 614 (down from 986, or nearly 38% in 2001) or 50.29% (down from 57.9% in 2001) of all individual investors hold approximately 622,122 shares (down from 807,333 shares in 2001 or 22.9%) or 41.72% (down from 52.67% in 2001) of all outstanding stock. The first and second largest zip codes within this range remained 03570 and 03264, compared to the 2001 study, with approximately 330,636 and 101,827 shares, respectively (was 401,447 and 168,927 shares, respectively in 2001). The change between 2001 and 2006 has been an erosion of 24% in shares held by persons in the most loyal zip codes of Berlin and Plymouth. Interestingly, the greatest level of erosion has occurred in the Berlin zip code, too.

The tables on the following pages illustrate the shareholder base under various constraints.

Review of Findings (Continued)

With a large percentage of shares currently held in trust accounts and demographics that indicate this number will rise over the next five years, Northway needs to actively communicate with trust companies, shareholders and analysts to keep them apprised of NWFI’s future plans and opportunities in order to increase their awareness of its value.

In addition, the amounts of shares held in trust and by brokers have increased since 2001, possibly contributing to the greater dispersion of Northway’s shareholder base.

Review of Findings (Continued)

Top Ten Shareholders (Including Brokers)
2001 Rank	2006 Rank	Name	Shares		2001 to 2006 Change	Dollar Value**	% of Shares Outstanding***	Zip Code	Other
NA	1	Jeffrey Gendell	146,801	*	146,801	$5,196,755	9.84	06830	Activist Investor
37	2	UBS Securities LLC	177,191		143,902	$6,272,561	11.88		Broker
1	3	William J Woodward	76,088		3,000	$2,693,515	5.10	03570	Insider
4	4	Fletcher W Adams	55,000		4,000	$1,947,000	3.69	03264	Insider
5	5	Barry J Kelley	42,439		1,695	$1,502,341	2.85	03570	Insider
20	6	Merrill Lynch, Pierce Fenner & Smith Safekeeping	37,442		-8,801	$1,325,447	2.51		Broker
3	7	Citigroup Global Markets Inc.	29,276		-196,225	$1,036,370	1.96		Broker
6	8	Randall G Labnon	28,712		0	$1,016,405	1.93		Insider
28	9	John H Noyes	24,708		12,883	$874,663	1.66	03264	Insider
7	10	Bank of America, National Association	24,384		-11,441	$863,194	1.64	00000	Broker
		TOTALS	441,165			$15,617,241	29.59

* Mr. Gendell accumulated shares by purchasing ........... 67,236 shares (also was part of 225,501 shares held at Smith Barney) and from ................. All shares shown were modified to reflect proxy numbers; however, the OBO shares were not deducted from the brokerage firms where they are held, as we do not know which brokerage accounts to reduce.

** Based on NWFI's closing price on June 13, 2006 of $35.40.

***Based on 1,491,174 shares outstanding.

Review of Findings (Continued)

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The table on the following page shows the share previously held by trust accounts that hve left Northway since our last report.

Review of Findings (Continued)

According to Northway and NOBO data, the 29 shareholders listed above no longer own shares of NWFI stock in trust. In 2001, 21 of the 29 shareholders lived in New Hampshire and held 78% of the 79,752 shares listed above. Meanwhile, roughly half of the new investors reside in New Hampshire, as shown on the previous page, and hold 73% of the 90,585 new shares held in trust.

Review of Findings (Continued)

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As shown from the table above, current shareholders are more widely dispersed than the shareholder base in 2001.

According to Northway and NOBO data, it should also be noted that of the 1,221 total shareholders, at least 751 or 61.51% live within New Hampshire (down from 1,177 or 69.11% in 2001). These shareholders hold approximately 668,908 or 44.86% of the total outstanding stock (down from 875,918 shares or 57.14% in 2001).

Review of Findings (Continued)

  

These shareholders hold approximately 869,011 or 58.28% of the total outstanding stock. Of the 560 shareholders who reside in the zip codes listed above, 95.71% live in NH; however, these shareholders only account for 69.26% of the shares listed above. In 2001, of the 885 shareholders who lived in zip codes with at least 10,000 shares, 98.65% lived in NH. Those shareholders accounted for 89.22% of the 876,147 shares held by the total group.

Review of Findings (Continued)

In comparing current results to 2001 data, shares declined significantly in Berlin and Plymouth, NH. Since 2001, one investor accumulated 146,801 shares making Greenwich, CT the second largest shareholder base. Meanwhile, David Sands, a professional investor from West Ossipee, NH, no longer holds 5% of Northway’s shares. As a result, based on our resources, we found that no investors currently reside in West Ossipee, which was ranked third in 2001. In addition, the only shareholder from Stephens City, VA, which ranked seventh in 2001, has since sold their holding of 17,000 shares. West Ossipee and Stephens City were the only two cities with over 10,000 shares in 2001 and no shares in 2006.

The map on the following page details the locations of four of the five largest bases of Northway stock by zip code. In our last report, all five of these zip codes were located in New Hampshire; however, since that time, Jeffrey Gendell accumulated a significant holding making Greenwich, CT the second largest shareholder base. The largest zip code, 03570, Berlin, NH contains approximately 300 or 24.57% of all individual shareholders holding 330,636 shares or 22.17%. The second largest zip code is, 06830, Greenwich, CT, which contains one investor holding 146,801 shares or 9.84%. While the third, fourth and fifth largest were Plymouth, Gorham, and Canterbury, NH, containing 46 or 4.50%, 90 or 7.37% and 2 or 0.16%, respectively of all individual shareholders, who in turn held 101,827 shares or 6.83%, 63,104 shares or 4.23% and 29,280 or 1.96% of all outstanding shares, respectively.

While the shareholder base is more widely dispersed geographically than in 2001, Northway’s stock ownership remains concentrated in a few towns within NH. As such, we ran a demographic analysis of the top cities and highlighted trends that could affect the ownership of Northway stock (see pages 27 - 29). In all seven markets, the 55+ age group was expected to grow the fastest through 2010. This age group is generally classified as savers and investors, while the 35-54 age group is classified as spenders. The growth in this age group, coupled with an investor relations program, could boost investor purchasing demand of Northway stock.

Review of Findings (Continued)

 

Review of Findings (Continued)

As shown by the tables above, the populations of both Berlin and Gorham, NH are expected to decline slightly through 2010. In all four markets shown above, the 55+ age group is expected to experience the highest growth , ranging from 8.55% to 28.33% (all percentage growth numbers reflect total growth not annual growth rates), respectively, from 2005 to 2010. Meanwhile, the growth in households with income over $50K is expected to grow over 17% in each market.

Review of Findings (Continued)

While the composition of age groups is similar among the other markets, Plymouth is unique in that nearly 74% of its population is comprised of the 15-34 age group. While Plymouth has the youngest market, its projected growth in households with income over $50k is expected to grow by 26.75% from 2005 to 2010, which is the second highest growth rate of the seven markets we examined in New Hampshire. During this time, the 55+ age group is expected to grow by 15.53%, while all other age groups are expected to decline or increase only slightly.

Review of Findings (Continued)

As shown by the tables above, overall, the populations of Glen and Holderness, Campton, and Milan are expected to decline or grow slightly from 2005 to 2010. However, in all markets, the 55+ age group is projected to experience double-digit growth. In addition, strong growth is also expected in households making over $50k.

Review of Findings (Continued)

In conclusion, we see stronger growth in the southern part of New Hampshire. With Plymouth and Canterbury exhibiting strong growth, a focus on increased promotional efforts to potential shareholders should be made to these cities. With slowing growth in the more northern parts of New Hampshire including, Berlin, Gorham, and Milan, Northway should strategize as to whether they can bolster investor purchasing demand in these markets or if resources should be expended to expand into new investor markets.

Review of Findings (Continued)

Outside of New Hampshire, Northway has some significant representation as Northway’s investors reside in 35 other states. The chart below shows the top seven states, excluding New Hampshire.

     

If we excluded Jeffrey Gendell’s shares, the state of Florida would be ranked first with 93,064 shares or 6.24%. We believe that the large numbers in Florida are primarily made up of New Hampshire natives escaping the cold winters. This population of investors is most likely to be more interested in dividend income than the rest of the shareholder pool as they may rely on it for income. While demographic trends show us that $50k+ households are rising, as shown by the table on the following page, it is unlikely that any general publicity would be worthwhile in Florida. The best way to reach these investors would be through direct mailings, phone calls or contact with the brokers with whom they hold shares.

Review of Findings (Continued)

From 2005 to 2010, the populations of Connecticut and New Jersey are expected to rise, but at lesser rates than New Hampshire. In both states, the 55+ age group is expected to rise by over 10%.

Review of Findings (Continued)

Vermont, Maine, New York, and Massachusetts are all similar as population growth is only expected to rise between 2.18% to 2.79% over the next five years. In each state, the 15 to 34 and 55+ age groups are expected to decline, while the 0 to 14 and 35 to 54 age groups are expected to increase modestly.

Review of Findings (Continued)

Northway would be more successful in increasing new purchasing demand over the long run by focusing their attention on the faster growth regions of New Hampshire. Within the higher growth areas, people with increasing net worth will likely be interested in Northway’s presentations. While in Northern New Hampshire, it is likely that most of the people with discretionary incomes have already heard of Northway.

OPTIONS

At this particular junction, Northway has the following options:

1)   Do nothing, but expect a Factory Point Bancorp result

2)   Augment current trend toward non-local shareholders

3)   Focus on increasing local shareholder base and remain public

4)   Go private

5)   Sell now or in the future

Do Nothing

As shown by the tables in Section 1 on pages 24 and 25, shareholders living within a 60 mile radius of Berlin, NH currently hold 622,122 shares (down from 807,333 in 2001) or 41.72% of shares outstanding (down from 52.67% of shares outstanding in 2001). This represents a 22.94% decline in shares since the 2001 study. This trend may continue if Northway chooses to do nothing, potentially leading to the majority of Northway’s shares held by out of market owners, similar to Factory Point’s situation (see Section 2 - Page 6).

Augment Non-Local Shareholder Base

As shown by the data in Section 1, shares held by non-local shareholders have increased since 2001. Northway could augment this trend by meeting with accredited investors in Albany, New York, New York City, Hartford, Providence, Worcester, Boston, Portland, Maine, and Nashua. While audiovisual presentations with clear messages, followed by a question and answer session, are more popular among investors and analysts, some prefer talking to management directly and are less interested in formal presentations. As such, it is important to know your audience beforehand. Presentations should include information such as the Bank’s strategy, how the Bank differentiates itself from competitors, the impact of current projects, and how the Bank deals with interest rate risk. Upon request, Northeast Capital personnel could prepare an investor presentation for the Bank and arrange meetings with potential accredited investors.

Options (Continued)

Increase Local Shareholder Base

In addition to setting up formal meetings with potential accredited investors, the Bank can reach local retail investors, which tend to be loyal investors and powerful allies of community bank managements in proxy fights, through investment clubs and corporate advertising. Such investor solicitations, made to existing customers of the Bank, may also augment the depth of the overall relationship, which protects against competitors poaching your best clients. However, maintaining communications with individual shareholders will be more time consuming than dealing with institutions. In addition, because of the loyalty of these retail investors, a heavy retail shareholder base may impact the liquidity of the Bank’s stock, due to low trading volume.

Going Private

When access to equity capital markets is only of limited benefit and may not outweigh the costs and burdens of being a public company, a company may consider going private. Some of the advantages to going private include avoiding the pressures of disclosure requirements, corporate governance, and compliance costs of federal securities laws, including Sarbanes-Oxley, thereby reducing the company’s ongoing legal, accounting, directors and officers insurance, and investor relations expenses. It also alleviates any pressure to meet the “Street’s” quarterly expectations, which may allow the company to focus on long-term value creation. On the other hand, going private reduces the liquidity of the company’s stock and is not a quick and easy process.

In order to terminate a registration of a class of securities registered under Section 12(g), a company must file Form 15 with the Securities and Exchange Commission certifying that either:

Options (Continued)

1.   the number of holders of record of the class of the company’s securities sought to be deregistered is less than 300; or

2.   the number of holders of record of the class of the company’s securities sought to be deregistered is less than 500 and the company’s total assets have not exceeded $10 million on the last day of each of the company’s three most recent fiscal years.

Holders of record are defined as the owners of securities on record maintained by or on behalf of the issuer. As such, beneficial investors holding shares of stock in “Street name” are generally disregarded. In addition, a family of five generations will be considered one holder of record.

Typically, going private transactions are structured in one of the following ways:

1)   cash out merger (a management buyout or a leveraged buyout);

2)   an odd-lot tender offer;

3)   a reverse stock split; or

4)   a sale of all of the company’s assets to a newly formed private company followed by the dissolution of the public company.

Of the four options listed above, the most feasible options for Northway are an odd-lot tender offer or a reverse stock split.

For the typical community bank, costs of going private range from $100,000 to $250,000, which includes professional fees, printing costs, and filing fees.

Options (Continued)

Odd-Lot Tender Offer

Northway may register a self-tender, giving priority to odd-lot holders if oversubscribed. Odd-lot holders could be defined as any shareholder with less than 500 shares. If this offer would not reduce the holders of record to less than 300, Northway could execute the tender offer and also carry out a reverse split.

Reverse Stock Split

According to the data provided by Northway and the NOBO list, there are 1,221 holders of record. To reduce the number of holders of record, Northway may issue one share for each block of 350, 500, or 1,000 shares, resulting in a number of holders of 270, 190, or 103, respectively. At the current price of $35.40, this would require $3.229 million, $4.417 million, and $6.429 million, respectively, in cash, before any transaction costs, resulting in tier 1 capital ratios of 6.15%, 5.96%, and 5.65%, respectively.

Sell Now or in the Future

Another option to unlock value of a sparsely traded company is to be acquired for cash or for the stock of a more liquid acquirer. Of course, this option should only be considered if management feels they can no longer add value by remaining independent.

Options (Continued)

Anecdotal Evidence

Several institutions outside the immediate NWFI market are offered as examples of investor relations programs which have succeeded and those that, typically through inaction, have experienced undesirable shareholder changes.

Two of the anecdotal institutions are in upstate New York and two are in Vermont. The institutions are NBT and Wilber in New York, and Factory Point and Community Bancorp in Vermont. The tables below and on the following three pages summarizes the trends, over time, each of these four banks experienced.

Community	Assets ($mil)	Comments
	1991
	$149	Local ownership @ 100%.
	1996
	$209
	2001
	$289	Institutions hold 5.8% of shares. Directors and officers (“D&O”) hold 10.23%. A successful dividend reinvestment plan (“DRIP”) adds 100,000 new shares annually to outstanding shares since 1997.
	2005
	$354 (CAGR = 6.4%)	No institutional ownership. Tightly controlled process when shares become available. Management in close contact with brokers and have lists of buyers. D&O hold 11.60%. DRIP adding 40,000 new shares annually now. Only 30% held in street name.
		Local ownership now at 70%. No large shareholders. Three largest hold 4.9%, 3.5% and 2.5% respectively. Have 942 shareholders with top 188 (20%) holding 86.1% of shares (average holding among these holders is 18,703 shares or 0.46% of outstanding shares. Remaining 754 shareholders hold an average of 753 shares each.

Options (Continued)

Factory Point	Assets ($mil)	Comments
	1991
	$129	Local ownership is 80%, outside is 20%. Board and management own approximately 25% of shares. Over time, stock always shows to Bank, who never bought it or placed it. Very hands-off approach. Local shareholders sold to summer residents with money. They, in turn, sold to out of market holders. Local shareholders never sought shares of the Bank.
	1996
	$144
	2001
	$266
	2005
	$319 (CAGR = 6.8%)	Institutions hold 1.9% and D&O own approximately 11%, with 9.38% held by a director, Tyler Dann. Tyler is part of a 45% block held by clients of a Morgan Stanley broker in Albany. Local ownership is now 20% with 80% not local. Passive oversight by Bank management contributed to this predicament.

Options (Continued)

NBT	Assets ($mil)	Comments
	1987
	$477	Bought $294 million in assets (4 Irving Banks) in 1989 and issued $20mm in stock to local community. At time, it was 80% or more locally owned. No institutional ownership. D&O own just 2% of shares.
	1991
	$839
	1996
	$1,139	Bought $125 million in branches in interim. D&O own 2.5% of shares. Institutions own 19.9% with NBT trust department holding 14.2% (1.186 million shares).
	2001
	$3,638	Bought $2.178 billion in 4 banks and 8 branches between 1998 and 2001. Issuing stock to purchase the banks. D&O own 7.65% (due to acquisitions). Institutions own 14.4%, with NBT trust department holding 5.5% of shares (1.817 million shares). Did not purchase any more shares here, these are all stock split driven, actually sold 105,000 shares during the period.
	2005
	$4,427 (CAGR = 13.2%)	Bought $440.6 million in assets in one bank and two branch transactions between 2001 and 2005. Seventy-nine institutions hold 23.6%, with NBT trust not even appearing on the list anymore. D&O own 6.83%. Local ownership is now under 20%, but franchise extends from Albany to Syracuse and south to Scranton, Pennsylvania.

Options (Continued)

Wilber	Assets ($mil)	Comments
	1991
	$385	Brian Wright and David Wilber families own over 50% of shares outstanding. 100% of shares held locally. Officer and director holdings unknown, but Board controls over 75%. The Bank is very focused on who buys the stock. Transactions are closely monitored and management is in constant communication with brokerage firms when blocks become available.
	1996
	$492
	2001
	$608
	2005
	$753 (CAGR = 4.9%)	D&O now hold 35.18% of stock. 90% of shares are held locally with just 10% outside branch footprint, Chairman is Brian Wright, who holds 30.72% of shares. Institutions hold 16.98% of shares, with the trust department holding 7.89% and the Farone Foundation holding another 7.49%. Wilber recently launched a dutch auction tender offer to repurchase 536,155 shares at $11.40 per share in furtherance of a plan to go private. Shares sold by David Wilber in the tender offer leave him owning 94,000 shares by trust and 177,000 shares with his wife. Before the tender there were 532 shareholders, 90 held only 3,260 share (or 36 shares on average). The impact of the tender on the stockholder profile has not been announced.

EX-99.14

Exhibit 99.14

WHENEVER CONFIDENTIAL INFORMATION IS OMITTED HEREIN (SUCH OMISSIONS ARE DENOTED BY TEST THAT IS GRAYED OUT), SUCH CONFIDENTIAL INFORMATION HAS BEEN SUBMITTED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.