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NORTHEAST FEDERAL ANNOUNCES NET INCOME OF $398,000 FOR THE QUARTER ENDED DEC. 31, 1992

 HARTFORD, Conn., Jan. 22 /PRNewswire/ -- Northeast Federal Corp. (Northeast Federal or "the company") (NYSE: NSB), the holding company for Northeast Savings, F.A., (Northeast Savings or "the association") today reported net income of $398,000 for the quarter ended Dec. 31, 1992, resulting in a primary and fully diluted net loss per common share of 22 cents after preferred stock dividend requirements. This compares with net income of $1.4 million for the same quarter last year, and a primary and fully diluted net loss per common share of 13 cents.
 Primarily as a result of its supervisory goodwill write-off at Sept. 30, 1992, the company reported a net loss of $59.2 million, or a primary and fully diluted net loss per common share of $11.16, for the nine month period ended Dec. 31, 1992. The nine month results, reflecting the company's change in fiscal year end from March 31 to Dec. 31, compare with net income of $5.4 million, or a primary and fully diluted net loss per common share of 18 cents for the same period in 1991.
 The reduction in supervisory goodwill had no adverse effect on Northeast Savings' fully phased-in regulatory tangible, core and risk- based capital, and it will have a positive impact on future earnings by reducing the amortization expense related to the supervisory goodwill. Commenting on the company's capital position, George Rutland, chairman, stated that "Northeast Savings not only continues to exceed all fully phased-in regulatory capital requirements at Dec. 31, 1992, but also has continued to enhance its capital position over the nine month period."
 Regulatory Capital 12/31/92 Fully Phased-in 3/31/92
 Requirement Regulatory Regulatory Regulatory
 Capital Capital Required Capital
 (Dollars in 000s)
 Tangible core
 capital $170,394 $58,607 $120,592
 Percent 4.36 pct. 1.50 pct. 3.21 pct.
 Core capital $171,163 $156,317 $159,155
 Percent 4.38 pct. 4.00 pct. 4.24 pct.
 Risk-based
 capital $191,465 $153,208 $175,721
 Percent 10.00 pct. 8.00 pct. 9.40 pct.
 Net interest income for the quarter ended Dec. 31, 1992 was $21.9 million, $2.6 million higher than for the comparable quarter in 1991, due primarily to an increase in the company's interest rate spread, up to an average of 2.49 percent vs. 2.18 percent for the quarter ended Dec. 31, 1991. For the same respective periods, the company's interest rate margin was 2.43 percent and 2.17 percent.
 Total assets at Dec. 31, 1992 were $3.9 billion, up from $3.8 billion at March 31, 1992, and $3.7 billion at Dec. 31, 1991. Single-family residential loan originations, the association's ongoing principal use of capital resources, were $263.7 million and $78.3 million for the quarters ended Dec. 31, 1992 and 1991, respectively. For the nine months ended Dec. 31, 1992, single family residential loan originations were $592.6 million.
 The provision for loan losses for the quarter ended Dec. 31, 1992 was $7.5 million, up from $6.3 million for the Sept. 30, 1992 quarter, and $1.5 million for the Dec. 31, 1991 quarter. The increase was due principally to higher net charge-offs on single-family residential loans. The allowance for loan losses has also increased, totaling $21.0 million at Dec. 31,1992, compared to $19.9 million and $17.0 million at Sept. 30, 1992 and Dec. 31, 1991, respectively. These increases in both the net charge-offs and the allowance for loan losses reflect the continued impact of the recession in both New England and California.
 Non-accrual loans, excluding those acquired from the four financial institutions in Rhode Island, totaled $95.0 million at Dec. 31, 1992 or 2.43 percent of assets, compared to $95.1 million at Sept. 30, 1992 and $110.8 million at Dec. 31, 1991. At Dec. 31, 1992, approximately 92.5 percent of these non-accrual loans were collateralized by first mortgages on single family residential properties, virtually all of which have an original loan-to-value of 80 percent or less.
 In May, 1992, the association acquired four Rhode Island financial institutions. Non-accrual loans related to this transaction, including those entering delinquency or foreclosure after the acquisition, are segregated from other non-accrual loans because the association is protected against losses on them. The Rhode Island loans have delinquency rates which are generally higher than those experienced by the association. As of Dec. 31, 1992, non-accrual loans related to the Rhode Island acquisitions totaled $20.3 million or approximately 13.8 percent of the net Rhode Island loans.
 Real estate and other assets acquired in settlement of loans (REO) increased to $99.4 million at Dec. 31, 1992 from $96.9 million at Sept. 30, 1992 and $50.9 million at Dec. 31,1991. Expenses relating to these assets have increased to $4.8 million for the quarter ended Dec. 31, 1992, from $2.6 million for the Sept. 30, 1992 quarter and $1.5 million for the Dec. 31, 1991 quarter. The higher expenses have resulted primarily from increased foreclosures on residential real estate and the write-down of $2.8 million related to two commercial REO properties due to the company's efforts to accelerate their sale. Non-interest income totaled $5.5 million and $4.9 million for the quarters ended Dec. 31, 1992 and 1991, respectively. The increase is due to $1.6 million in higher gains on the sale of securities and loans, which were partially offset by a $1.0 million decrease in loan servicing fees resulting from higher prepayments on underlying mortgage loans due to the current overall low levels of interest rates, also symptomatic of the sluggish economy.
 General and administrative expenses were $16.9 million for the quarter ended Dec. 31, 1992, compared to $15.3 million for the same quarter in 1991. This increase is due to several factors, including the association's 17 branch increase resulting from its acquisition of branches from ComFed and FarWest, and four financial institutions in Rhode Island; higher costs related to delinquent loans; and additional costs related to the management and valuation of assets acquired in Rhode Island. The increase in and administrative expenses related to the additional branches has been more than offset by lower interest expense resulting from these new funding sources.
 During the quarter ended Sept. 30, 1992, the company reduced its supervisory goodwill by $56.6 million to $1 million, and then eliminated the remaining balance during the past quarter through the utilization of net operating losses. Northeast Savings' supervisory goodwill represented the franchise value of its Connecticut and Massachusetts branch networks, and resulted from its 1982 acquisition of three failing thrifts at the request of its regulators. Its write-off was precipitated by several factors that had diminished the value of these franchises. Most significant was the impact of Office of Thrift Supervision (OTS) regulations issued pursuant to the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) and the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA), and in particular the prompt corrective action regulation issued by the federal banking agencies on Sept. 29, 1992, which finalizes the 4 percent core capital requirement for institutions that are not rated MACRO 1. Another factor was the final rule issued by the OTS effective May 11, 1992, which permits federal savings associations to branch interstate to the full extent permitted by federal statute, thereby greatly increasing opportunities for out-of-state institutions to enter these states. Prompted by these changes, an independent valuation was conducted, which supports the company's reduction in supervisory goodwill.
 For the last 12 quarters, the board of directors has suspended the quarterly dividend on Northeast Federal's $2.25 Cumulative Convertible Preferred Stock, Series A, and it has not declared dividends on its new issue of $8.50 Cumulative Preferred Stock, Series B. The company's declaration of dividends in the foreseeable future will be limited by its ability to receive a dividend from the association, and by regulatory and financial restraints on the association.
 Northeast Savings, F.A. is one of the largest thrift institutions based in New England, with almost 160 years of continuous service to its customers. Northeast Savings operates 54 retail branches throughout New York, Connecticut Massachusetts, Rhode Island, and Southern California, and has mortgage lending offices in San Diego, Calif.; Fairfield, Conn.; Denver; and Portland, Ore.
 NORTHEAST FEDERAL CORP. AND SUBSIDIARIES
 Consolidated Statement of Operations
 (In Thousands Except Per Share Amounts)
 (Unaudited)
 Three Months Ended Nine Months Ended
 Dec. 31 Dec. 31
 1992 1991 1992 1991
 CONSOLIDATED OPERATIONS:
 Total interest income $62,293 $77,486 $196,601 $256,977
 Total interest expense 40,410 58,230 132,910 194,840
 Net interest income 21,883 19,256 63,691 62,137
 Provision for loan losses 7,500 1,500 16,300 7,400
 Net interest income after
 provision for loan losses 14,383 17,756 47,391 54,737
 Gain on sale of
 securities, net 1,978 1,277 4,100 330
 Gain on sale of loans, net 1,206 327 1,870 1,937
 Other income 2,271 3,303 7,071 10,217
 General and administrative
 expenses 16,885 15,342 50,311 45,471
 Amortization of supervisory
 goodwill 17 993 2,002 2,978
 Supervisory goodwill
 valuation adjustment --- --- 56,568 ---
 SAIF insurance fund and
 OTS assessments 2,092 1,999 6,222 6,094
 REO Operations 4,754 1,478 9,652 3,650
 Income (loss) before
 income taxes,
 extraordinary items, and
 cumulative effect of
 change in accounting
 principle (3,910) 2,851 (64,323) 9,028
 Income tax expense
 (benefit) (4,308) 1,489 (5,089) 4,717
 Income (loss) before
 extraordinary items and
 cumulative effect of
 change in accounting
 principle 398 1,362 (59,234) 4,311
 Extraordinary items,
 net of tax --- --- --- 77
 Income (loss) before
 cumulative effect of
 change in accounting
 principle 398 1,362 (59,234) 4,388
 Cumulative effect of
 change in accounting
 for income taxes --- --- --- 1,022
 Net income (loss) $398 $1,362 ($59,234) $5,410
 Preferred stock dividend
 requirement $1,653 $2,113 $4,652 $6,435
 Loss before extraordinary
 items and cumulative
 effect of change in
 accounting principle
 applic to common s/h ($1,255) ($751) ($63,886) ($2,124)
 Loss per common share
 before cumulative effect
 of change in accounting
 principle applicable to
 common s/h ($1,255) ($751) ($63,886) ($2,047)
 Net loss applicable to
 common stockholders ($1,255) ($751) ($63,886) ($2,025)
 Loss per common share
 before extraordinary
 items and cumulative
 effect of change in
 accounting principle:
 Primary and fully diluted ($0.22) ($0.13) ($11.16) ($0.37)
 Loss per common share
 before cumulative effect
 of change in accounting
 principle:
 Primary and fully diluted ($0.22) ($0.13) ($11.16) ($0.36)
 Net loss per common share:
 Primary and fully diluted ($0.22) ($0.13) ($11.16) ($0.18)
 Average shares for the
 calculation of earnings
 per share:
 Primary 5,727,053 5,720,179 5,725,103 5,720,146
 Fully diluted 5,727,053 5,720,179 5,725,103 5,720,146
 Dec. 31, March 31, Dec. 31,
 1992 1992 1991
 (In Thousands)
 (Unaudited)
 FINANCIAL CONDITION:
 Total assets $3,910,104 $3,821,342 $3,744,871
 Investments 275,120 511,361 308,528
 Mortgage-backed
 securities 885,246 680,752 757,943
 Real estate acquired
 in settlement of loans 99,376 61,208 50,946
 Loans 2,311,110 2,364,443 2,410,789
 Retail deposits 3,205,654 3,462,339 3,329,421
 Brokered deposits 25,135 25,708 25,135
 Borrowings 466,564 56,546 119,843
 Stockholders' equity 137,573 191,024 190,452
 -0- 1/22/93
 /CONTACT: George P. Rutland, chairman of the board and chief executive officer, 203-280-1100 or Kirk W. Walters, president, chief operating officer and chief financial officer, 203-280-1183, both of Northeast Federal Corp./
 (NSB)


CO: Northeast Federal Corporation ST: Connecticut IN: FIN SU: ERN

DD -- NE002 -- 7754 01/22/93 08:34 EST
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Date:Jan 22, 1993
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