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Northway Financial, Inc. Announces 2018 Earnings and Declares Semi-Annual Dividend

February 1, 2019

NORTH CONWAY, N.H., Feb. 01, 2019 (GLOBE NEWSWIRE) -- Northway Financial, Inc. (the “Company”) (OTCQB: NWYF), the parent company of Northway Bank (the “Bank”), today reported net income for the year ended December 31, 2018 of $2.9MM, or $1.07 per basic common share, compared to $7.3MM, or $2.64 per basic common share for the year ended December 31, 2017.

The Board of Directors has declared a semi-annual cash dividend of $0.35 per share, payable on February 19, 2019, to common stockholders of record on February 11, 2019. William J. Woodward President and Chief Executive Officer stated, “We are continuing our current level of dividend as we believe our investment in loan growth will continue to generate revenue for years to come.”

In 2018, the Bank adopted ASU 2016-01, “Financial Instruments – overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” The adoption of this ASU requires equity investments to be measured at fair value with changes in fair value recognized in net income. With the current volatility in the stock market, net income for 2018 was negatively impacted by a $1.8MM unrealized loss on equity securities, net of taxes.

The investment we made to support loan growth has begun to pay dividends as we saw interest and dividend income improve $3.4MM compared to the prior year primarily as a result of an increase in average loan balances of $67MM, an increase of 12%, partially offset by an increase in noninterest expense related to the hiring of additional resources to support our growth strategy.

Financial Highlights

-- Total assets were $927MM, total loans, net, were $628MM, and total deposits were $726MM at December 31, 2018. -- Loans, net, increased $63MM, or 11.1%, from December 31, 2017, which is the result of the implementation of our organic growth strategy. -- Net interest income increased $1.5MM for the year ended December 31, 2018 when compared to the same period last year. -- Net income for the year ending December 31, 2018 was $4.3MM less than the same period last year, primarily due to the previously mentioned unrealized loss on equity securities, a decrease in realized gains on securities, the previously mentioned increase in noninterest expense, and an increase in interest expense. -- The net interest margin at December 31, 2018 was 3.36%. -- The yield on earning assets was 3.91% and the cost of interest-bearing liabilities was 0.70%, for the year ended December 31, 2018. -- For the year ended December 31, 2018, Return on Average Assets was 0.31% and Return on Average Equity was 3.75% -- Regulatory capital ratios at December 31, 2018 were 9.83% Tier 1 Leverage, 15.27% Total Risk Based Capital, and 16.44% Common Equity Tier 1. -- Nonperforming loans as a percentage of total loans stood at 0.35% at December 31, 2018. -- The market price of our common stock, as of January 30, 2019, was $30.50

Northway Financial, Inc. Selected Financial Highlights (Unaudited) (Dollars in thousands, except per share data) Three Months Ended Year Ended ------------------- -------------------- 12/31/2018 12/31/20 12/31/2018 12/31/201 17 7 ---------- ------- ---------- -------- Interest and Dividend Income $ 9,259 $ 7,878 $ 34,364 $ 30,920 Interest Expense 1,530 740 4,986 3,034 - ------ - - ----- - ------ - - ------ Net Interest and Dividend Income 7,729 7,138 29,378 27,886 Provision for Loan Losses 195 - 390 - All Other Noninterest Income 938 1,055 4,662 5,478 Noninterest Expense 7,554 7,084 29,022 26,342 - ------ - - ----- - ------ - - ------ Net Income Before Securities Gains 918 1,109 4,628 7,022 Realized Securities Gains, Net 54 1,102 590 2,704 Unrealized Securities (Losses) Gains, Net (2,464 ) - (2,498 ) - - ------ - - ----- - ------ - - ------ Net Income Before Taxes (1,546 ) 1,109 2,130 7,022 Provision for Income Tax (255 ) 492 (218 ) 2,448 - ------ - - ----- - ------ - - ------ Net Income $ (1,291 ) $ 617 $ 2,348 $ 4,574 - ------ - - ----- - ------ - - ------ Net Income Available to Common Stockholders $ (1,237 ) $ 1,719 $ 2,938 $ 7,278 - ------ - - ----- - ------ - - ------ Earnings per Common Share, Basic $ (0.45 ) $ 0.62 $ 1.07 $ 2.64

12/31/2018 12/31/2017 ----------- ----------- Balance Sheet Total Assets $ 926,898 $ 884,084 Cash and Due from Banks and Interest-Bearing Deposits 18,132 25,091 Securities Available-for-Sale, at Fair Value 243,387 258,109 Loans, Net 627,915 565,294 Total Liabilities 847,480 802,895 Retail non-maturity deposits 494,793 503,391 Municipal non-maturity deposits 101,746 108,918 Certificates of deposit 128,993 110,446 Federal Home Loan Bank Advances 13,848 - Securities Sold Under Agreements to Repurchase 79,340 53,380 Junior Subordinated Debentures 20,620 20,620 Stockholders’ Equity 79,418 81,189 Profitability and Efficiency Net Interest Margin 3.36 % 3.48 % Yield on Earning Assets 3.91 3.84 Cost of Interest Bearing Liabilities 0.70 0.45 Book Value Per Share of Common Shares Outstanding $ 28.86 $ 29.51 Tangible Book Value Per Share of Common Shares Outstanding 25.25 25.88 Capital and Credit Tier 1 Core Capital to Average Assets 9.83 % 10.45 % Common Equity Risk-Based Capital 12.08 12.08 Tier 1 Risk-Based Capital 15.27 15.35 Total Risk-Based Capital 16.44 16.66 Common Shares Outstanding 2,751,650 2,751,650 Weighted Average Number of Common Shares, Basic 2,751,650 2,751,650 Return on Average Assets 0.31 % 0.82 % Return on Average Equity 3.75 9.32 Nonperforming Loans as a % of Total Loans 0.35 0.52 Allowance for Loan Losses as a % of Nonperforming Loans 323 242

About Northway Financial, Inc.

Northway Financial, Inc., headquartered in North Conway, New Hampshire, is a bank holding company. Through its subsidiary bank, Northway Bank, the Company offers a broad range of financial products and services to individuals, businesses and the public sector from its 16 full-service banking offices and its loan production offices located in Bedford and Portsmouth, New Hampshire.

Forward-looking Statements

Statements included in this press release that are not historical or current fact are “forward-looking statements” made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995, and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. Northway Financial, Inc. disclaims any obligation to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statements, or to reflect the occurrence of anticipated or unanticipated events or circumstances.

Contact: Gary Laurash Chief Financial Officer 603-326-7377

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