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NORTHEAST FEDERAL CORP. ANNOUNCES $973,000 NET INCOME FOR THIRD QUARTER

NORTHEAST FEDERAL CORP. ANNOUNCES $973,000 NET INCOME FOR THIRD QUARTER
 HARTFORD, Conn., Jan. 24 /PRNewswire/ -- Northeast Federal Corp. (NYSE: NSB), the holding company for Northeast Savings, F.A., (the Association) today reported net earnings of $973,000 for the third fiscal quarter ended Dec. 31, 1991, resulting in a primary and fully diluted net loss per common share of $.20 after preferred stock dividend requirements. For the same quarter last year, Northeast Federal's net income was $4.3 million, including $1.8 million in extraordinary gains, resulting in primary and fully diluted net income per common share of $.35 after preferred stock dividend requirements.
 "As a result of our basic strengths in originating residential real estate mortgages and gathering retail deposits, we have posted net earnings for the seventh consecutive quarter in spite of the poor economic environment in our primary market areas," said George P. Rutland, chairman. "However, as we anticipated, due to our reduction in interest-earning assets in order to meet the higher anticipated capital requirements, our earnings are down from the third quarter of last year and will continue to be lower for the remainder of this fiscal year," Rutland continued.
 Northeast Savings continues to exceed all current capital requirements and the proposed increase in the core capital requirement:
 NORTHEAST FEDERAL CORP.
 (Dollars In Thousands)
 December 31, 1991
 Regulatory Actual Regulatory Proposed Minimum
 Capital Regulatory Capital Regulatory Capital
 Requirement Capital Required Requirement
 (dollars in thousands)
 Tangible
 core capital $114,375 $ 54,854 $54,854
 Percent 3.13 1.50 1.50
 Core capital $169,691 $109,721 $146,295
 Percent 4.64 3.00 4.00
 Risk-based
 capital $186,643 $133,565 $133,565
 Percent 10.06 7.20 7.20
 As of Jan. 1, 1992, under the core capital and risk-based capital regulations, the amount of supervisory goodwill which the association was allowed to include in core capital was reduced from 1-1/2 percent to 1 percent of adjusted total assets, as mandated by the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA). As a result, the Association's capital position on Jan. 1, 1992 was as follows:
 NORTHEAST FEDERAL CORP.
 (Dollars In Thousands)
 Jan. 1, 1992
 Regulatory Actual Regulatory Proposed Minimum
 Capital Regulatory Capital Regulatory Capital
 Requirement Capital Required Requirement
 (dollars in thousands)
 Tangible
 core capital $114,375 $ 54,854 $54,854
 Percent 3.13 1.50 1.50
 Core capital $151,406 $109,721 $146,295
 Percent 4.14 3.00 4.00
 Risk-based
 capital $168,358 $132,249 $132,249
 Percent 9.17 7.20 7.20
 Total assets at Dec. 31, 1991 were $3.7 billion, down from $4.5 billion at March 31, 1991 and $4.9 billion at Dec. 31, 1990. Primarily as a result of the association's decreased asset size, net interest income for the current quarter was $1.9 million lower than for the same quarter last year. However, the negative impact of reduced asset size was partly offset by the company's improved interest rate spread which increased to 2.18 percent for the quarter ended Dec. 31, 1991 from 1.79 percent for the same quarter last year. For the same respective quarters, the company's interest rate margin was 2.17 percent and 1.82 percent.
 Non-interest income increased $860,000 from the same quarter in 1990, due primarily to net gains of $1.3 million on sales of securities this quarter, compared to a net loss of $1.4 million for the same quarter last year. Net gains in the current quarter resulted primarily from sales of fixed rate mortgage-backed securities, while the net loss for the third quarter of fiscal 1990 was due to realized losses on marketable equity securities and an increase to the valuation adjustment to securities carried at the lower of cost or market. However, non- interest income was negatively impacted by decreased fee income which resulted from reduced loan servicing fees and a decrease in fees received from customers as a result of the association's decisions in prior periods to close two insurance subsidiaries and to discontinue its participation in a securities brokerage service.
 The provision for loan losses for the current quarter was $1.5 million, compared to $2.0 million for the same quarter in 1990. In determining the adequacy for the allowance for loan losses, management considers prevailing and anticipated economic conditions, historical loan loss experience in relation to outstanding loans, the diversification and size of the loan portfolio, the results of the most recent regulatory examinations available to the association, and the quality of the overall loan portfolio.
 Non-accrual loans totaled $110.8 million at Dec. 31, 1991, compared to $114.3 at Sept. 30, 1991, $96.8 million at March 31, 1991 and $70.5 million at Dec. 31, 1990. The increase in non-accrual loans, compared with Dec. 31, 1990, is principally a result of the current recessionary environment in the association's primary market areas. At Dec. 31, 1991 approximately 95 percent of the association's non-accrual loans were collateralized by first mortgages on single family residential properties, virtually all of which are collateralized by properties with an original loan-to-value of 80 percent or less. In order to allow them time to work out their financial problems during this difficult economic period, Northeast Savings endeavors to set up temporary payment schedules with borrowers who are having trouble making their mortgage payments because of loss of personal income. Should borrowers fail to meet these temporary schedules, however, Northeast moves quickly to protect its interest through foreclosure.
 Expenses relating to real estate owned and other assets acquired in settlement of loans have increased by $1.4 million primarily as a result of expenses related to a foreclosed hotel in Connecticut, expenses incurred in connection with the association's acquisition of certain assets of a real estate brokerage business, and to increased foreclosures on residential real estate.
 General and administrative expenses remained relatively stable at $17.3 million for the quarter, compared to $17.1 million for the same quarter last year. The rise this quarter was due to several factors, including the Association's increased number of branches due to the ComFed acquisition, higher costs related to delinquent loans, and higher employee benefit costs. Although expenses increased as a result of the acquisition of additional branches, these expenses were more than offset by the lower interest expense produced by this new funding source.
 Single family residential loan originations were $78.3 million and $221.3 million for the quarters ended December 31, 1991 and 1990, respectively. The reduction is attributable primarily to the capital constraints imposed by FIRREA and the subsequent reduction in asset size of the association required to meet the proposed new core capital requirements, as well as to the current recessionary environment.
 The effective income tax rate has increased substantially this quarter from the same quarter last year due to the impact of the SEC's Staff Accounting Bulletin No. 91 (SAB 91). SAB 91 is intended to serve as interim guidance until a new standard on accounting for income taxes is adopted. The impact of SAB 91 in the current quarter was to increase income tax expense by $633,000.
 For the last eight quarters, the board of directors has suspended the quarterly dividend on both issues of Northeast Federal's preferred stock. The suspension of dividends was determined to be necessary and appropriate to conserve capital.
 Northeast Savings, F.A., a subsidiary of Northeast Federal Corp., is one of the largest thrift institutions based in New England, with 158 years of continuous service to its customers. Northeast Savings operates a total of 42 branch offices in New York, Connecticut, and Massachusetts, as well as mortgage lending offices in California through a subsidiary.
 NORTHEAST FEDERAL CORP. AND SUBSIDIARIES
 Consolidated Statement of Operations
 (In Thousands - Unaudited)
 Periods ended Three Months Nine Months
 Dec. 31 1991 1990 1991 1990
 Consolidated Operations: (unaudited)
 Total interest income $77,486 $115,475 $256,977 $339,989
 Total interest expense 58,230 94,291 194,840 280,323
 Net interest income 19,256 21,184 62,137 59,666
 Provision for loan losses 1,500 2,000 7,400 4,400
 Net interest income after
 provision for loan losses 17,756 19,184 54,737 55,266
 Gain (loss) on sale of
 securities, net 1,277 (1,423) 330 (1,057)
 Gain on sale of loans, net 327 1,099 1,937 1,573
 Other income 3,303 4,371 10,217 12,960
 General and administrative
 expenses 17,341 17,091 51,565 54,864
 Amortization of supervisory
 goodwill 1,281 1,324 3,886 3,971
 REO Operations 1,478 85 3,650 684
 Income before income taxes
 and extraordinary items 2,563 4,731 8,120 9,223
 Income tax expense 1,590 2,264 4,014 4,415
 Income before extraordinary
 items 973 2,467 4,106 4,808
 Extraordinary items 0 1,790 151 3,337
 Net income $973 $4,257 $4,257 $8,145
 Net income (loss) applicable
 to common stockholders $(1,140) $2,006 $(2,178) $1,512
 Income (loss) per common
 share before extraordinary items:
 Primary and fully diluted $(0.20) $0.04 $(0.41) $(0.32)
 Net income (loss) per common share:
 Primary and fully diluted (0.20) 0.35 (0.38) 0.26
 Average shares for the
 calculation of earnings
 per share:
 Primary 5,720,179 5,715,099 5,720,146 5,715,099
 Fully diluted 5,720,179 5,715,099 5,720,146 5,715,099
 Dec 31, March 31, Dec 31,
 1991 1991 1990
 Financial Condition (unaudited)
 Total assets $3,735,968 $4,546,223 $4,920,193
 Investments 308,528 318,390 398,038
 Mortgage-backed securities 757,943 1,370,667 1,374,407
 Loans 2,410,789 2,586,395 2,876,720
 Retail deposits 3,329,421 3,292,932 3,285,461
 Brokered deposits 25,135 113,540 110,098
 Borrowings 119,843 862,989 1,256,381
 Stockholders' equity 193,300 182,833 177,355
 -0- 1/24/92
 /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/
 (NSB) CO: Northeast Federal Corp. ST: Connecticut IN: FIN SU: ERN


KD-SM -- NE001 -- 3111 01/24/92 08:02 EST
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