<PAGE>
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                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                    FORM 10-K

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934. For the fiscal year ended December 31, 2001

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934 (No Fee Required)

                        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)


    Securities Registered Pursuant to Section 12(b) of the Act:

    None

    Securities Registered Pursuant to Section 12(g) of the Act:

    Common Stock, Par Value $1.00

    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 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 days.      YES [X] NO [ ]

    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

    The number of shares of common stock, par value $1.00 per share, held by
nonaffiliates of the registrant as of March 15, 2002 was 1,295,868 shares with
an aggregate market value, computed by reference to the last reported sales
price on the NASDAQ National Market on such date, of $37,450,585.

    At March 15, 2002, there were 1,511,324 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's Annual Report to Stockholders are incorporated by
reference in Item 1 of Part I and Items 7 and 8 of Part II.

Portions of the registrant's proxy statement for its 2002 Annual Meeting of
Stockholders are incorporated by reference in Items 10, 11, 12 and 13 of Part
III.
===============================================================================
<PAGE>

                           FORM 10-K TABLE OF CONTENTS

                            NORTHWAY FINANCIAL, INC.

                                     PART I

ITEM 1    Business........................................................    1

ITEM 2    Properties......................................................    9

ITEM 3    Legal Proceedings...............................................    9

ITEM 4    Submission of Matters to a Vote of Security Holders.............    9

                                 PART II

ITEM 5    Market for the Registrant's Common Stock and Related
            Security Holder Matters.......................................    9

ITEM 6    Selected Financial Data.........................................   10

ITEM 7    Management's Discussion and Analysis of Financial
            Condition and Results of Operations. .........................   12

ITEM 7A   Quantitative and Qualitative Disclosures About Market Risk......   12

ITEM 8    Financial Statements and Supplementary Material.................   12

ITEM 9    Changes in and Disagreements with Accountants on
            Accounting and Financial Disclosure ..........................   12

                                PART III

ITEM 10   Directors and Executive Officers of the Registrant..............   12

ITEM 11   Executive Compensation..........................................   12

ITEM 12   Security Ownership of Certain Beneficial Owners and
            Management ...................................................   12

ITEM 13   Certain Relationships and Related Transactions..................   12

                                 PART IV

ITEM 14   Exhibits, Financial Statement Schedules and Reports
            on Form 8-K ..................................................   13

              Signatures..................................................   14
<PAGE>

FORWARD-LOOKING STATEMENTS

   Certain statements in this report are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements may include, but are not limited to, projections of
revenue, income or loss, plans for future operations and acquisitions, and plans
related to products or services of the Company and its subsidiaries. Such
forward-looking statements are subject to known and unknown risks, uncertainties
and contingencies, many of which are beyond the control of the Company. To the
extent any such risks, uncertainties and contingencies are realized, the
Company's actual results, performance or achievements could differ materially
from anticipated results, performance or achievements. Factors that might affect
such forward-looking statements include, among other factors, the factors
described under the caption "Risk Factors" in Item 1 of this report, overall
economic and business conditions, economic and business conditions in the
Company's market areas, interest rate fluctuations, the demand for the Company's
products and services, competitive factors in the industries in which the
Company competes, changes in government regulations, and the timing, impact and
other uncertainties of future acquisitions.

   In addition to the factors described above, the following are some additional
factors that could cause our financial performance to differ from any
forward-looking statement contained herein: i) the current economic downturn
nationwide and regionally, as well as the deterioration of local business
conditions including variations in the level of operations of a major employer
in the primary market area of The Berlin City Bank; ii) changes in interest
rates over the past year and the relative relationship between the various
interest rate indices that the Company uses; iii) a change in product mix
attributable to changing interest rates, customer preferences or competition;
iv) a change in product mix attributable to changing interest rates, customer
preferences or competition; v) a significant portion of the Company's loan
customers are in the hospitality business and therefore could be affected by a
slower economy, adverse weather conditions and/or rising gasoline prices; and
vi) the effectiveness of advertising, marketing and promotional programs.

   The words "believe," "expect," "anticipate," "intend," "estimate," "project"
or the negative of such terms and other similar expressions which are
predications 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 or unknown
risks, uncertainties or other factors, which may cause the actual results,
performance or achievements of the Company to differ materially from anticipated
future results, performance or achievements expressed or implied by such
forward-looking statements. The Company undertakes no obligation to publicly
update or revise any forward-looking statement, whether as a result of new
information, future events or otherwise.

   Though the Company has attempted to list comprehensively the factors which
might affect forward-looking statements, the Company wishes to caution you that
other factors may in the future prove to be important in affecting the Company's
results of operations. New factors emerge from time to time and it is not
possible for management to anticipate all of such factors, nor can it assess the
impact of each such factor, or combination of factors, which may cause actual
results to differ materially from forward-looking statements.

                                     PART 1

ITEM 1.  BUSINESS

Description of Business

   Northway Financial, Inc. (the "Company") was incorporated on March 7, 1997,
under the laws of the State of New Hampshire, for the purpose of becoming the
holding company of The Berlin City Bank, a New Hampshire chartered bank
headquartered in Berlin, New Hampshire ("BCB"), pursuant to a reorganization
transaction (the "BCB Reorganization") by and among the Company, BCB, and a
subsidiary of BCB, and, thereafter, effecting the merger (the "Merger") by and
among the Company, BCB, Pemi Bancorp, Inc. ("PEMI"), and PEMI's wholly owned
subsidiary, Pemigewasset National Bank, a national bank headquartered in
Plymouth, New Hampshire ("PNB"). The BCB Reorganization and the Merger became
effective on September 30, 1997. As of such date, BCB and PNB (collectively the
"Banks"), became wholly owned subsidiaries of the Company. Unless the context
otherwise requires, references herein to the "Company" include Northway
Financial, Inc. and its consolidated subsidiaries.

   The Company and its bank subsidiaries derive substantially all of their
revenue and income from the furnishing of bank and bank-related services,
principally to individuals and small and medium sized companies in New
Hampshire. The Banks operate as typical community banking institutions and do
not engage in any specialized finance or capital market activities. The Company
functions primarily as the holder of stock of its subsidiaries and assists the
management of its subsidiaries as appropriate.

   The Company is subject to regulation by the New Hampshire Bank Commissioner,
the Federal Deposit Insurance Corporation, the Comptroller of the Currency of
the United States, and the Board of Governors of the Federal Reserve System. See
"Supervision and Regulation."

   BCB, which was first organized in 1891, and PNB, which was first organized in
1881, are engaged in a general commercial banking business and offer commercial
and construction loans, real estate mortgages, consumer loans, including
personal secured and unsecured loans, and lines of credit. During 1998, the
Company, through the BCB subsidiary, established an indirect lending business
unit in Concord, New Hampshire. The unit has substantially increased the volume
of secured consumer installment loans originated for the Banks and for sale to
third parties. The Banks accept savings, time, demand, NOW and money market
deposit accounts, and offer a variety of banking services including travelers
checks, safe deposit boxes, credit card accounts, overdraft lines of credit and
wire transfer services. The Banks have 18 automatic teller machines to allow
customers limited banking services on a 24 hour basis.

   The Company is a legal entity separate and distinct from its subsidiaries.
The right of the Company to participate in any distribution of assets or
earnings of any subsidiary is subject to the prior claims of creditors of the
subsidiary, except to the extent that claims, if any, of the Company itself as a
creditor may be recognized. See "Supervision and Regulation".

   The following information concerning the Company's investment activities,
lending activities, asset quality and allowance for loan losses should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," appearing under Item 7 of this report and the
Company's Consolidated Financial Statements and Notes thereto.

Investment Activities

   The following table presents the carrying amount of the Company's securities
available-for-sale and held-to-maturity as of December 31, 2001, 2000 and 1999
(dollars in thousands):

                                              2001           2000          1999
                                            --------      ---------    --------
Available-for-sale:
  US Treasury and other
     US government agency securities         $10,977      $28,780       $26,449
  Mortgage-backed securities(1)               21,097       14,652        18,813
  Marketable equity securities                 3,255        2,409         2,780
  Non-marketable equity securities             4,712        5,199         4,456
  Corporate bonds                             14,230        1,003            --
  State and political subdivision bonds
     and notes                                 6,005        3,444         3,500
                                             -------      -------       -------
                                              60,276       55,487        55,998
                                             -------      -------       -------
Held-to-maturity
  Mortgage-backed securities(1)              $     -     $  2,252      $  3,601
  State and political subdivision bonds
     and notes                                     -          500         1,550
                                             -------      -------       -------
                                                   -        2,752         5,151
                                             -------      -------       -------
Total securities                             $60,276      $58,239       $61,149
                                             =======      =======       =======

(1) Includes Collateralized Mortgage Obligations.

   The following table sets forth the amortized cost of the Company's debt
obligations maturing within stated periods and their related weighted average
yields, reported on a tax equivalent basis, as of December 31, 2001 (dollars in
thousands):

<TABLE>
<CAPTION>
                                                                  Maturities
                                               ---------------------------------------------
                                                            One to       Five to       Over
                                                Within       five          ten          ten          Total
                                               One year      years        years        years          Cost
                                               --------      -----        -----        -----          ----
<S>                                            <C>         <C>           <C>           <C>         <C>
Available-for-sale:
US Treasury and other
  US government agency securities              $   --      $ 6,983       $ 3,986       $   --      $10,969
Mortgage-backed securities (1)                    105        7,229         7,633        6,160       21,127
Corporate bonds                                    --       14,167            --           --       14,167
State and political subdivision bonds
   and notes                                    1,010          311         2,930        1,656        5,907
                                               ------      -------       -------       ------      -------
                                               $1,115      $28,690       $14,549       $7,816      $52,170
                                               ======      =======       =======       ======      =======
Market value                                   $1,118      $28,651       $14,724       $7,816      $52,309
                                               ======      =======       =======       ======      =======

Weighted average yield                           5.80%        5.50%         5.31%        5.88%        5.51%

(1) Includes Collateralized Mortgage Obligations

Lending Activities

   The following table sets forth information with respect to the composition of the Company's loan portfolio,
excluding loans held for sale, as of December 31, 2001, 2000, 1999, 1998 and 1997 (dollars in thousands):

<CAPTION>
                                                                          December 31,
                                                      ----------------------------------------------------
                                                         2001       2000      1999       1998       1997
                                                         ----       ----      ----       ----       ----
<S>                                                    <C>        <C>       <C>        <C>        <C>
Real estate:
  Residential                                          $109,261   $129,805  $139,389   $146,603   $152,041
  Commercial                                            111,642    100,608    93,061     77,680     61,873
  Construction                                            1,581      5,752     4,360      4,118      5,664
Commercial                                               22,727     22,270    28,833     25,874     21,460
Installment                                              28,210     28,177    24,147     25,070     23,476
Indirect installment                                    120,761     98,919    75,781         18          -
Other                                                     6,303      7,881     7,369      4,795      2,769
                                                       --------   --------  --------   --------   --------
  Total loans                                           400,485    393,412   372,940    284,158    267,283
Less:
  Unearned income                                           169        154       174        332        526
  Allowance for loan losses                               4,642      4,354     4,887      4,404      4,156
                                                       --------   --------  --------   --------   --------
                                                          4,811      4,508     5,061     4 ,736      4,682
                                                       --------   --------  --------   --------   --------
Net loans                                              $395,674   $388,904  $367,879   $279,422   $262,601
                                                       ========   ========  ========   ========   ========
</TABLE>

   The following table presents the maturity distribution of the Company's real
estate construction and commercial loans at December 31, 2001 (dollars in
thousands):

                                                          Percent of
                                             Amount          Total
                                             ------          -----
   Within one year                          $ 5,920          24.35%
   One to five years                         11,332          46.62
   Over five years                            7,056          29.03
                                            -------         ------
                                            $24,308         100.00%
                                            =======         ======

   The Company's real estate construction and commercial loans due after one
year at December 31, 2001 were comprised of the following (dollars in
thousands):
                                                 Amount
   Fixed interest rate                          $ 7,573
   Adjustable interest rate                      10,815
                                                -------
                                                $18,388

Analysis of the Allowance for Loan Losses

   The following table reflects activity in the Company's allowance for loan
losses for the years ended December 31, 2001, 2000, 1999, 1998 and 1997 (dollars
in thousands):

                                           Years ended December 31,
                              -------------------------------------------------
                               2001      2000       1999       1998      1997
                               ----      ----       ----       ----      ----

Balance at the beginning of
  period                       $4,354    $4,887     $4,404     $4,156    $3,941
Charge-offs:
   Real estate                    110       213        159        383       452
   Commercial                      95     1,006         25         67       105
   Installment loans to
     individuals                  529       424        120         74        48
   Credit card                      -         -          -          -         1
    Other                           -         -          -          -         6
                               ------    ------     ------     ------    ------
   Total                          734     1,643        304        524       612
                               ------    ------     ------     ------    ------
Recoveries:
   Real estate                     35        32        213        115       212
   Commercial                       -        --         21         98        55
   Installment loans to
     individuals                   87        96         12         17        19
   Credit card                      -         2          1          2         4
    Other                           -         -          -          -         2
                               ------    ------     ------     ------    ------
      Total                       122       130        247        232       292
                               ------    ------     ------     ------    ------
Net charge-offs                   612     1,513         57        292       320
Provision charged to expense      900       980        540        540       535
                               ------    ------     ------     ------    ------
Balance at the end of period   $4,642    $4,354     $4,887     $4,404    $4,156
                               ======    ======     ======     ======    ======

Ratio of net charge-offs to
  average loans                  0.15%     0.39%      0.02%      0.11%     0.12%

Allocation of the Allowance for Loan Losses

   The following table sets forth the breakdown of the Company's allowance for
loan losses in the Company's portfolio by category of loan and the percentage of
loans in each category to total loans in the respective portfolios at the dates
indicated (dollars in thousands):
<TABLE>
<CAPTION>

                                                                   December 31,
                   -----------------------------------------------------------------------------------------------------------------
                        2001                    2000                   1999                   1998                   1997
                        ----                    ----                   ----                   ----                   ----
                           Percent of              Percent of             Percent of             Percent of             Percent of
                           loans in each          loans in each          loans in each          loans in each          loans in each
                            category to            category to            category to            category to            category to
                   Amount   total loans   Amount   total loans   Amount   total loans   Amount   total loans   Amount   total loans
                   --------------------------------------------------------------------  -------------------   -----------
<S>                <C>         <C>        <C>         <C>        <C>          <C>       <C>          <C>       <C>          <C>
Commercial         $  208      7.7%       $  719      5.7%       $  530       7.7%      $  651       9.1%      $  613       8.0%
Real estate:
   Commercial &
   Construction     1,621     26.1         1,009     27.0         1,773      26.1        1,325      28.8        1,251      25.3
   Residential        585     37.4         1,160     32.9           503      37.3        1,478      51.6        1,395      56.5
Installment         1,719     26.8         1,440     32.4         1,125      26.9          210       8.8          198       8.8
Other                  17      2.0            26      2.0            60       2.0           58       1.7           55       1.0
Unallocated           492      N/A          --        N/A           896       N/A          682       N/A          644       N/A
                   ------     -----       ------     -----       ------      -----      ------      -----      ------      -----
                   $4,642     100.0%      $4,354     100.0%      $4,887      100.0%     $4,404      100.0%     $4,156      100.0%
                   ======     ====        ======     ====        ======      ====       ======      ====       ======      ====
</TABLE>

Deposits

   The information set forth on page 29 of the Company's 2001 Annual Report to
Stockholders is incorporated herein by reference.

Supervision and Regulation

   General. In addition to state and federal laws generally applicable to
businesses and employers, the Company, PNB and BCB are further regulated by
federal and state laws and regulations applicable to financial institutions and
their parent companies. State and federal banking laws have as their principal
objective either the maintenance of safety and soundness of financial
institutions and the federal deposit insurance system or the protection of
consumers or classes of consumers, rather than the protection of stockholders of
a bank or its parent company. To the extent the following discussion describes
statutory or regulatory provisions, it is qualified in its entirety by reference
to the particular statute or regulation.

   The Company. As a bank holding company registered under the Bank Holding
Company Act of 1956, as amended (the "BHC Act"), the Company is subject to
substantial regulation and supervision by the Board of Governors of the Federal
Reserve Board (the "Federal Reserve Board") and is required to file periodic
reports and such additional information as the Federal Reserve Board may
require. The Federal Reserve Board also makes periodic inspections of the
Company and its subsidiaries. The Federal Reserve Board has the authority to
issue orders to bank holding companies to cease and desist from unsound banking
practices and violations of conditions imposed by, or violations of agreements
with, the Federal Reserve Board. The Federal Reserve Board is also empowered to
assess civil money penalties against companies or individuals who violate the
BHC Act, or orders or regulations thereunder, to order termination of
non-banking activities of non-banking subsidiaries of bank holding companies,
and to order termination of ownership and control of a non-banking subsidiary by
a bank holding company.

    Under the BHC Act, the Company is prohibited, with certain exceptions, from
acquiring direct or indirect ownership or control of more than 5 percent of the
voting shares of any company which is not a bank and from engaging in any
business other than that of banking, managing or controlling banks or furnishing
services to, or acquiring premises for, its affiliated banks, except that the
Company may engage in and own voting shares of companies engaging in certain
activities determined by the Federal Reserve Board, by order or by regulation,
to be so closely related to banking or to managing or controlling banks "as to
be a proper incident thereto."

   The Gramm-Leach-Bliley Act (the "GLB Act") established a comprehensive
framework to permit affiliations among banks, securities firms, insurance firms
and other financial companies by substantially modifying the BHC Act to
authorize bank holding companies that qualify and elect to become "financial
holding companies" to engage in securities, insurance and other activities that
are financial in nature or incidental to a financial activity and allowing
subsidiaries of banks to engage in a broad range of financial activities that
are not permitted for banks themselves. To qualify, all of a bank holding
company's subsidiary banks must be well-capitalized and well-managed, as
measured by regulatory guidelines. In addition, to engage in the new activities,
each of the bank holding company's banks must have been rated `satisfactory' or
better in its most recent federal Community Reinvestment Act (`CRA') evaluation.
The activities of bank holding companies would continue to be limited to
activities authorized currently under the BHC Act. The Company is qualified but
has not elected to become a "financial holding company" at this time and is
therefore subject to the restrictions of the BHC Act as outlined above.

   The Federal Reserve Board has adopted capital adequacy guidelines pursuant to
which it assesses the adequacy of capital in examining and supervising a bank
holding company and in analyzing applications to it under the BHC Act. These
capital adequacy guidelines generally require bank holding companies to maintain
total capital equal to 8.0% of total risk-adjusted assets and off-balance sheet
items (the "Total Risk-Based Capital Ratio"), with at least one-half of that
amount consisting of Tier I, or core capital, and the remaining amount
consisting of Tier II, or supplementary capital. Tier I capital for bank holding
companies generally consists of the sum of common stockholders' equity and
perpetual preferred stock (subject in the case of the latter to limitations on
the kind and amount of such stocks which may be included as Tier I capital),
less goodwill and other non-qualifying intangible assets. Tier II capital
generally consists of hybrid capital instruments; perpetual preferred stock,
which is not eligible to be included in Tier I capital; term subordinated debt
and intermediate-term preferred stock; and, subject to limitations, general
allowances for loan losses. Assets are adjusted under the risk-based guidelines
to take into account different risk characteristics.

   In addition to the risk-based capital requirements, the Federal Reserve Board
requires bank holding companies to maintain a minimum leverage capital ratio of
Tier I capital (defined by reference to the risk-based capital guidelines) to
total assets (the "Leverage Ratio") of 3.0%. Total assets for this purposes does
not include goodwill and any other intangible assets and investments that the
Federal Reserve Board determines should be deducted from Tier I capital. The
Federal Reserve Board has announced that the 3.0% Leverage Ratio requirement is
the minimum for the top-rated bank holding companies without any supervisory,
financial or operational weaknesses or deficiencies or those, which are not
experiencing or anticipating significant growth. The Company, however, expects
to be subjected to required ratios of 4.0% to 5.0% or more.

   The Company is currently in compliance with both the Risk-Based Capital Ratio
and the Leverage Ratio requirements. At December 31, 2001, it had a Tier I
Risk-Based Capital Ratio and a Total Risk-Based Capital Ratio equal to 9.08% and
10.28%, respectively, and a Leverage Ratio equal to 6.95%. U.S. bank regulatory
authorities and international bank supervisory organizations, principally the
Basel Committee on Banking Supervision, currently are considering changes to the
risk-based capital adequacy framework which ultimately could affect the
appropriate capital guidelines.

   The Federal Change in Bank Control Act prohibits a person or group of persons
from acquiring `control' of a bank holding company unless the Federal Reserve
Board has been given at least 60 days to review the proposal. Under a rebuttable
presumption established by the Federal Reserve Board, the acquisition of 10% or
more of a class of voting stock of a bank holding company, such as the Company,
with a class of securities registered under Section 12 of the Securities
Exchange Act of 1934, as amended (the `Exchange Act') would, under the
circumstances set forth in the presumption, constitute the acquisition of
control.

   In addition, any company, as that term is broadly defined in the statute,
would be required to obtain the approval of the Federal Reserve Board under the
BHC Act before acquiring 25% (5% in the case of an acquirer that is a bank
holding company) or more, or such lesser percentage of our outstanding common
stock as the Federal Reserve Board deems to constitute control over the Company.

   PNB. PNB is a national banking association, organized under the National Bank
Act. As such, its primary regulatory authority is the Comptroller of the
Currency of the United States (the "Comptroller"). The Comptroller regularly
examines national banks and their operations. In addition, operations of
national banks are subject to federal statutes and regulations. Such statutes
and regulations relate to required capital and reserves, investments, loans,
mergers, payment of dividends, issuance of securities and many other aspects of
operations. Capital requirements applicable to PNB are substantially similar to
those adopted by the Federal Reserve Board regarding bank holding companies as
described above.

   The Comptroller's approval is required for a national bank to pay dividends
if the total dividends declared by a national bank in any year will exceed the
total of its net profits for that year combined with its retained net profits
for the preceding two years, less any required transfer to surplus. The
Comptroller also has authority to approve or disapprove mergers, consolidations,
the establishment of branches and similar corporate actions. The Comptroller
also has the power to prevent a national bank from engaging in unsafe or unsound
practices or violating applicable laws in conducting its business.

   PNB is also subject to applicable provisions of New Hampshire law insofar as
they do not conflict with or are not otherwise preempted by federal banking law.

   BCB. BCB is organized under New Hampshire law and is subject to the
regulations of the New Hampshire Bank Commissioner, the Federal Deposit
Insurance Corporation (the "FDIC"), and the Federal Reserve Board. BCB's
operations are subject to various requirements and restrictions under the laws
of the United States and the State of New Hampshire, including those related to
the maintenance of adequate levels of capital, the payment of dividends,
investments, the nature and amount of loans which can be originated and the rate
of interest that can be charged thereon, and other activities. Capital
requirements applicable to BCB are substantially similar to those adopted by the
Federal Reserve Board regarding bank holding companies as described above.

   Community Reinvestment Act. Both BCB and PNB are subject to the provisions of
the Community Reinvestment Act ("CRA"). Under the terms of the CRA, the
appropriate federal bank regulatory agency is required, in connection with its
examination of a subsidiary institution, to assess such institution's record in
meeting the credit needs of the communities served by the institution, including
those of low and moderate income neighborhoods. The regulatory agency's
assessment of the institution's record is made available to the public.

   An institution's CRA rating is taken into account by its regulators in
considering various types of applications. In addition, an institution receiving
a rating of substantial noncompliance is subject to civil money penalties or a
cease and desist order under Section 8 of the Federal Deposit Insurance Act
("FDIA"). CRA remains a critical component of the regulatory examination
process. CRA examination results and related concerns have been cited as a
reason to reject and or modify branching and merger applications by various
federal and state banking agencies. Formation of a "financial holding company"
under the GLB Act is also dependent of the maintenance of a "satisfactory" CRA
rating.

   Customer Information Security. The Federal Reserve Board, the FDIC and other
bank regulatory agencies have adopted final guidelines (the `Guidelines') for
safeguarding confidential customer information. The Guidelines require each
financial institution, under the supervision and ongoing oversight of its Board
of Directors, to create a comprehensive written information security program
designed to ensure the security and confidentiality of customer information,
protect against any anticipated threats or hazards to the security or integrity
of such information; and protect against unauthorized access to or use of such
information that could result in substantial harm or inconvenience to any
customer.

   Privacy. The GLB Act requires financial institutions to implement policies
and procedures regarding the disclosure of nonpublic personal information about
consumers to nonaffiliated third parties. In general, the statute requires us to
explain to consumers our policies and procedures regarding the disclosure of
such nonpublic personal information, and, except as otherwise required by law,
we are prohibited from disclosing such information except as provided in our
policies and procedures.

   USA Patriot Act. The USA Patriot Act of 2001 (the `Patriot Act'), designed to
deny terrorists and others the ability to obtain anonymous access to the United
States financial system, has significant implications for depository
institutions, brokers, dealers and other businesses involved in the transfer of
money. The Patriot Act mandates or will require financial institutions to
implement additional policies and procedures with respect to, or additional
measures designed to address, any or all of the following matters, among others:
money laundering; suspicious activities and currency transaction reporting; and
currency crimes.

   Government Monetary Policy. The Company's banking subsidiaries are affected
by the credit policies of monetary authorities, including the Federal Reserve
Board. An important function of the Federal Reserve Board is to regulate the
national supply of bank credit. Among the instruments of monetary policy used by
the Federal Reserve Board are open market operations in U. S. Government
securities, changes in the discount and fed funds rates, reserve requirements on
member bank deposits, and funds availability regulations. The monetary policies
of the Federal Reserve Board have in the past had a significant effect on the
operations of financial institutions, including the Company and its
subsidiaries, and will continue to do so in the future. Changing conditions in
the national economy and money markets, as well as the impact of actions by
monetary and fiscal authorities, make it difficult to predict the effect of
future changes in interest rates, deposit levels or loan demand on the business
and income of the Company and its subsidiaries.

Competition

   The banking industry in the United States, which includes commercial banks,
savings and loan associations, mutual savings banks, capital stock savings
banks, credit unions, and bank and savings and loan holding companies, is part
of the broader financial services industry which includes insurance companies,
mutual funds, and the brokerage industry, among others. In recent years, intense
market demands and economic pressures have eroded once clearly defined industry
classifications and have forced financial services institutions to diversify
their services, increase returns on deposits, and become more cost effective as
a result of competition with one another and with new types of financial
services companies, including non-bank competitors.

   The Company's banking subsidiaries face significant competition in their
respective market from commercial banks, savings banks, credit unions, consumer
finance companies, insurance companies, "non-bank banks," mutual funds,
government agencies, investment management companies, investment advisors,
brokers and investment bankers. In addition, increasing consolidation within the
banking and financial services industry, as well as increased competition from
larger regional and out-of-state banking organizations and non-bank providers of
various financial services, may adversely affect the Company's ability to
achieve its financial goals. Federal banking laws permit adequately capitalized
bank holding companies to venture across state lines to offer banking services
through bank subsidiaries to a wider geographic market. Consequently, it is
possible for large organizations to enter many new markets including the markets
served by the Company. Certain of these competitors, by virtue of their size and
resources, may enjoy certain efficiencies and competitive advantages over the
Company in pricing, delivery, and marketing of their products and services. The
Company's long-term success depends on the ability of the Company's banking
subsidiaries to compete successfully with other financial institutions in their
service areas. It is not possible to assess what impact these changes in the
regulatory environment will have on the Company. Many of these large competitors
have significantly more financial resources, larger market share and greater
name recognition in the market areas served by the Company and its banking
subsidiaries.

   BCB and PNB compete in this environment by providing a broad range of
financial services, competitive interest rates and a personal level of service
that, combined, tend to retain the loyalty of its customers in its market areas
against competitors with far larger resources. To a lesser extent, convenience
of branch locations and hours of operations are also considered competitive
advantages of the Banks.

Risk Factors

   The discussions set forth below contains certain statements that may be
considered "forward-looking statements." Forward-looking statements involve
unknown risks, uncertainties and other factors that may cause the Company's
actual results to materially differ from those projected in the forward-looking
statements. For further information regarding forward-looking statements, you
should review he discussion under the caption "FORWARD-LOOKING STATEMENTS" on
page 1 of this report.

   The Company could be adversely impacted by changes in applicable regulations.
The Company is subject to extensive federal and state laws and regulations and
is subject to supervision, regulation and examination by various federal and
state bank regulatory agencies. The restrictions imposed by such laws and
regulations limit the manner in which the Company and its bank subsidiaries may
conduct business and obtain financing. There can be no assurance that any
modification of these laws and regulations, or new legislation that may be
enacted, in the future will not make compliance more difficult or expensive,
restrict the Company's ability to originate, broker or sell loans or otherwise
adversely affect the operations of the Company. See "Supervision and
Regulation."

   The Company's business is largely dependent upon the hospitality industry. A
number of the Company's loan customers are in the hospitality industry. The
hospitality industry is dependent on personal discretionary spending levels.
Consequently, the hospitality industry tends to be adversely impacted during
general economic downturns and recessions. Unforeseen events, such as political
instability, increases in fuel prices, travel-related accidents and unusual
weather patterns also may adversely affect the hospitality industry. As a
result, the Company's business also is likely to be affected by those events.

   Interest rate volatility may adversely impact the Company's results of
operations. The principal components of the Company's income stream are net
interest and dividend income. Net interest and dividend income is the difference
between interest and fee income on earning assets, such as loans and
investments, and the interest expense paid on interest bearing liabilities, such
as deposits and borrowed funds. The Company's net interest and dividend income
may be significantly affected by changes in market interest rates. A decrease in
interest rates could reduce the Company's net interest and dividend income as
the difference between interest and fee income and interest expense decreases.
An increase in interest rates could also negatively impact the Company's results
of operations by reducing borrowers' ability to repay their current loan
obligations, resulting in increased loan defaults, foreclosures and write-offs
and may necessitate increases to the Company's allowance for loan losses. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Item 7 of this report.

   The Company's allowance for loan losses may not be adequate to cover actual
losses. The Company makes various assumptions and judgments about the
collectibility of its loan portfolio and provides an allowance for potential
loan losses based on several factors. If the Company's assumptions are wrong,
its allowance for loan losses may be insufficient to cover its actual losses,
which would have an adverse effect on the Company's results of operations, and
may cause the Company to increase the allowance in the future. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
Item 7 of this report.

Employees
   As of December 31, 2001, the Company and its subsidiaries had approximately
250 full-time equivalent employees. The Company considers its employee relations
to be good.

ITEM 2.  PROPERTIES

   The Company operates 18 branch offices and two loan origination facilities in
the central and northern New Hampshire towns of Berlin, Conway (4), Gorham (2),
Groveton, Littleton, West Ossipee, West Plymouth, Plymouth, Campton, Ashland,
North Woodstock, Tilton (2), Franklin and Concord. Thirteen of these offices,
including its main offices in Berlin, New Hampshire and Plymouth, New Hampshire,
are located on properties the Company owns. The Company leases five of its
branches and the two loan origination facilities under five-year leases expiring
between September 30, 2001 and November 20, 2004. Thirteen of the Company's
branches have drive-up facilities and all are equipped with automated teller
machines.

ITEM 3.  LEGAL PROCEEDINGS

   The Company is not a party to, nor are any of its subsidiaries the subject
of, any material pending legal proceedings, other than ordinary routine
litigation incidental to the business.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

   No matters were submitted to a vote of security holders during the quarter
ended December 31, 2001.

                                     PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
         MATTERS

   The Company's common stock is traded on The NASDAQ Stock Market, Inc.'s
National Market under the symbol "NWFI." The following table sets forth, for the
periods indicated, the high and low closing sale prices for the common stock, as
reported by the NASDAQ National Market, and the dividends paid on the common
stock:

                                     Price Per Share
                                  ----------------------
                                    Low           High       Dividends Per Share
                                  -------        -------     -------------------

     2001       4th Quarter       $27.25          $29.75             $0.17
                3rd Quarter       $25.75          $30.95             $0.17
                2nd Quarter       $23.50          $30.00             $0.17
                1st Quarter       $22.88          $24.19             $0.17

     2000       4th Quarter       $21.50          $24.13             $0.15
                3rd Quarter       $22.13          $24.75             $0.15
                2nd Quarter       $20.00          $23.50             $0.15
                1st Quarter       $20.00          $26.38             $0.15

   On March 15, 2002, the closing sales price of the common stock on the NASDAQ
National Market was $28.90 per share. As of such date, there were approximately
1,350 holders of record of the Company common stock.

   The Company intends to continue to pay dividends on a quarterly basis subject
to, among other things, the financial condition and earnings of the Company,
capital requirements, and other factors, including applicable governmental
regulations. No dividends will be payable unless declared by the Board of
Directors and then only to the extent funds are legally available for the
payment of such dividends.

ITEM 6.  SELECTED FINANCIAL DATA

   The following table sets forth the selected consolidated financial
information of the Company for the five years in the period ended December 31,
2001. This selected consolidated financial information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" appearing under Item 7 of this report and the
Company's Consolidated Financial Statements and Notes thereto. As a result of
the Merger described under Item 1 of this report, the selected consolidated
financial data for 1997 reflects the combined results of operations and
financial position of the Company and PEMI restated for such periods pursuant to
the pooling of interests method of accounting.
<PAGE>
<TABLE>
<CAPTION>

At or for the years ended December 31,             2001         2000         1999         1998          1997
--------------------------------------------------------------------------------------------------------------
<S>                                               <C>          <C>          <C>          <C>          <C>
(Dollars in thousands, except per share data)

Balance Sheet Data:
Total assets                                      $513,939     $485,144     $462,552     $403,972     $377,866
Investment securities available-for-sale            60,276       55,487       55,848       50,567       57,141
Investment securities held-to-maturity                   -        2,752        5,151        6,509       11,312
Loans, net of unearned income                      400,316      393,258      372,766      283,826      266,757
Allowance for loan losses                            4,642        4,354        4,887        4,404        4,156
Other real estate owned                                 22           25          115          158          222
Deposit assumption premium                           8,080        5,098        1,271          860        1,161
Deposits (1)                                       412,840      391,772      343,029      350,921      322,063
Securities sold under agreements to repurchase       8,155        9,390        7,468        6,791        6,146
Stockholders' equity                                43,339       41,562       39,286       40,956       37,526
Income Statement Data:
Net interest and dividend income                  $ 20,721     $ 21,253     $ 19,342     $ 17,536     $ 17,027
Provision for loan losses                              900          980          540          540          535
Noninterest income                                   2,909        2,692        2,718        2,063        1,693
Noninterest expense                                 17,149       16,699       15,794       12,955       11,872
Net income                                           3,873        4,159        3,764        4,068        4,039
Per Common Share Data:
Net income - basic                                $   2.55     $   2.61     $   2.25     $   2.35     $   2.33
Net income - assuming dilution                        2.54         2.61         2.25         2.35         2.33
Cash dividends declared                               0.68         0.60         0.56         0.42         0.55
Book value                                           28.68        26.74        24.32        23.67        21.67
Tangible book value                                  23.32        23.41        23.54        23.18        21.00
Selected Ratios:
Return on average assets                              0.78%        0.86%        0.90%        1.06%        1.07%
Return on average equity                              9.14        10.29         9.37        10.25        11.14
Dividend payout                                      26.54        22.96        25.03        17.90        23.69
Average equity to average assets                      8.58         8.31         9.62        10.35         9.60

(1) 1998 includes a short-term money market deposit of $14,500.
</TABLE>
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

     The information set forth on pages 8 through 18 of the Company's 2001
Annual Report to Stockholders is incorporated herein by reference.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Information regarding quantitative and qualitative disclosures about market
risk is included in "Management's Discussion and Analysis of Financial Condition
and Results of Operations" appearing under Item 7 of this report and is hereby
incorporated by reference in this Item 7A.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY MATERIAL

     The information set forth on pages 19 through 42 of the Company's 2001
Annual Report to Stockholders is incorporated herein by reference.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

     None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information required by this item is incorporated by reference to the
information set forth under the captions "Information Concerning Directors and
Nominees," "Executive Officers" and "Section 16(a) Beneficial Ownership
Reporting Compliance" in the Company's definitive proxy statement to be
delivered in connection with its 2002 Annual Meeting of Stockholders.

ITEM 11. EXECUTIVE COMPENSATION

     The information required by this item is incorporated by reference to the
information set forth under the caption "Executive Compensation" in the
Company's definitive proxy statement to be delivered in connection with its 2002
Annual Meeting of Stockholders, provided however, that the "Report of the Human
Resources and Compensation Committee on Executive Compensation" and the "Stock
Price Performance Graph" contained in such proxy statement are not incorporated
by reference herein.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by this item is incorporated by reference to the
information set forth under the caption "Security Ownership of Management" in
the Company's definitive proxy statement to be delivered in connection with its
2002 Annual Meeting of Stockholders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by this item is incorporated by reference to the
information set forth under the caption "Certain Relationships and Related
Transactions" in the Company's definitive proxy statement to be delivered in
connection with its 2002 Annual Meeting of Stockholders.
<PAGE>

                                     PART IV

ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

     (a) The following documents are filed as part of this Annual Report on Form
10-K:

         (1) Financial Statements:

             Auditor's Independent Report set forth on Page 42 of the Company's
             2001 Annual Report to Stockholders

             Consolidated Statements of Financial Condition as of December 31,
             2001 and 2000 set forth on Page 20 of the Company's 2001 Annual
             Report to Stockholders

             Consolidated Statements of Income for the years ended December 31,
             2001, 2000 and 1999 set forth on Page 19 of the Company's 2001
             Annual Report to Stockholders

             Consolidated Statements of Changes in Stockholders Equity for the
             years ended December 31, 2001, 2000 and 1999 set forth on Page 21
             of the Company's 2001 Annual Report to Stockholders

             Consolidated Statements of Comprehensive Income for the years ended
             December 31, 2001, 2000 and 1999 set forth on Page 21 of the
             Company's 2001 Annual Report to Stockholders

             Consolidated Statements of Cash Flows for the years ended December
             31, 2001, 2000 and 1999 set forth on Page 22 of the Company's 2001
             Annual Report to Stockholders

             Notes to Consolidated Financial Statements set forth on Pages 23
             through 39 of the Company's 2001 Annual Report to Stockholders

         (2) Financial Statement Schedules:

               None

         (3) The Exhibits which are filed with this report or which are
             incorporated herein by reference are set forth in the Exhibit
             Index. The Exhibit Index is incorporated herein by reference.

     (b) The Company filed no Reports on Form 8-K during the quarter ended
December 31, 2001.

     (c) See Item 14(a)(3) above

     (d) See Item 8 of this Annual Report on Form 10-K
<PAGE>

                                   SIGNATURES

     Pursuant to requirements of Section 13 or 15(d) 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.

     March 27, 2002                     BY:/S/ William J. Woodward
                                           ------------------------------------
                                        William J. Woodward
                                        Chairman of the Board, President & Chief
                                        Executive Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

       Signature                           Title                       Date
       ---------                           -----                       ----

                                   Chairman of the Board,         March 27, 2002
                                   President and CEO (Principal
/S/ William J. Woodward            Executive Officer)
---------------------------
William J. Woodward

                                   Vice President, Corporate      March 26, 2002
                                   Controller and Treasurer
                                   (Principal Financial and
/S/ Richard P. Orsillo             Accounting Officer)
---------------------------
Richard P. Orsillo



/S/ John D. Morris                 Director                       March 27, 2002
---------------------------
John D. Morris



/S/ John H. Noyes                  Director                       March 27, 2002
---------------------------
John H. Noyes



/S/ Barry J. Kelley                Director                       March 27, 2002
---------------------------
Barry J. Kelley



/S/ Randall G. Labnon              Director                       March 27, 2002
---------------------------
Randall G. Labnon



/S/ Stephen G. Boucher             Director                       March 27, 2002
---------------------------
Stephen G. Boucher



/S/ Peter H. Bornstein             Director                       March 27, 2002
---------------------------
Peter H. Bornstein


/S/ Charles H. Clifford, Jr.       Director                       March 27, 2002
---------------------------
Charles H. Clifford, Jr.


/S/ Arnold P. Hanson, Jr.          Director                       March 27, 2002
---------------------------
Arnold P. Hanson, Jr.
<PAGE>

                                INDEX OF EXHIBITS

Exhibit Number   Description of Exhibit

     2.1         Agreement and Plan of Merger, dated as of March 14, 1997, by
                 and among Northway Financial, Inc., The Berlin City Bank, Pemi
                 Bancorp, Inc. and Pemigewasset National Bank (the "Merger
                 Agreement") (incorporated by reference to Exhibit 2.1 to
                 Registration Statement No. 333-33033).

     3.1         Amended and Restated Articles of Incorporation of Northway
                 Financial, Inc. (incorporated by reference to Exhibit 3.1 to
                 Registration Statement No. 333-33033).

     3.2         By-laws of Northway Financial, Inc (incorporated by reference
                 to Exhibit 3.2 to the Company's Annual Report on Form 10-K for
                 the year ended December 31, 1997).

     4           Form of Certificate representing the Company Common Stock
                 (reference is also made to Exhibits 3.1 and 3.2) (incorporated
                 by reference to Exhibit 4 to Registration Statement No.
                 333-33033).

     10.1        Employment Agreement for William J. Woodward (incorporated by
                 reference to Exhibit 10.1 to the Company's Annual Report on
                 Form 10-K for the year ended December 31, 1997).

     10.2        Employment Agreement for Fletcher W. Adams (incorporated by
                 reference to Exhibit 10.2 to the Company's Annual Report on
                 Form 10-K for the year ended December 31, 1997).

     10.3        Amendment to the Employment Agreement for William J. Woodward.
                 (incorporated by reference to Exhibit 10.3 to the Company's
                 Annual Report on Form 10-K for the year ended December 31,
                 1998).(2)

     10.4        Amendment to the Employment Agreement for Fletcher W. Adams.
                 (incorporated by reference to Exhibit 10.4 to the Company's
                 Annual Report on Form 10-K for the year ended December 31,
                 1998). (2)

     10.5        Northway Financial, Inc. 1999 Stock Option and Grant Plan
                 (incorporated by reference to Exhibit 4.1 to Registration
                 Statement No. 333-83571 dated July 23,1999). (2)

     10.6        Employment Agreement for George L. Fredette (incorporated by
                 reference to Exhibit 10.7 to the Company's Annual Report on
                 Form 10-K for the year ended 1999). (2)

     10.7        Form of Key Employee Agreement (incorporated by reference to

                 Exhibit 10.8 to the Company's Annual Report on Form 10-K for
                 the year ended 1999). (2)

     10.8        Form of Collateral Assignment Split Dollar Agreement
                 (incorporated by reference to Exhibit 10.7 to the Company's
                 Annual Report on Form 10-K for the year ended 2000).(2)

     13          Northway Financial, Inc. Annual Report to Stockholders(1)

     21          List of Subsidiaries(1)

     23          Consent of Shatswell, MacLeod & Company, P.C. (1)

(1)  Filed herewith
(2)  Management contract or compensatory plan required to be filed as an exhibit
     to this form pursuant to Item 14(c) of this report