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NORTHEAST FEDERAL REPORTS THIRD QUARTER RESULTS; COMPANY SHOWS REDUCTIONS IN NON-ACCRUAL LOANS AND NON-PERFORMING ASSETS

 HARTFORD, Conn., Oct. 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 a third quarter loss of $1.9 million, or a primary and fully diluted net loss per common share of $0.20 after preferred stock dividend requirements. This compares to a net loss of $59.8 million, or a primary and fully diluted net loss per common share of $10.73 after preferred stock dividend requirements for the same quarter in 1992. The net loss for the quarter ended September 30, 1992 included a $56.6 million valuation adjustment to supervisory goodwill.
 Reflecting the increase in the provision for loan losses for the second quarter to $12 million and a $6.8 million loss on the single transaction sale of a portion of residential real estate acquired in settlement of loans (REO), the company reported a net loss of $11.2 million for the nine month period ending Sept. 30, 1993, which resulted in a primary and fully diluted net loss per common share of $1.53 after preferred stock dividend requirements. For the same nine month period in 1992, the company reported a net loss of $59.4 million, which included the valuation adjustment to supervisory goodwill, or a primary and fully diluted net loss per common share of $11.27 after preferred stock dividend requirements.
 On May 14, 1993, all of the outstanding shares of Northeast Federal's $2.25 Cumulative Convertible Preferred Stock, Series A (the Convertible Preferred Stock) were converted into common stock at a ratio of 4.75 shares of common stock for each share of the Convertible Preferred Stock. This conversion, which simplified and strengthened the company's capital structure, was approved at a Special Meeting of Stockholders on May 7, 1993. In the conversion, $12.2 million of accumulated and unpaid dividends on the Convertible Preferred Stock were abolished, thereby eliminating any possible future need for the company to seek dividends from the Association for the purpose of paying those dividends on the Convertible Preferred Stock. Had the results of this reclassification been effective for the full nine month periods ended Sept. 30, 1993 and 1992, the loss per common share after preferred stock dividend requirements would have been reduced to $1.00 from $1.53, and to $4.62 from $11.27, respectively.
 The loss for the quarter ended Sept. 30, 1993 resulted primarily from a decrease in net interest income and an increase in REO expenses, both of which are symptomatic of the sluggish economic conditions in the Association's primary market areas of New England and California. The increased expenses on REO of $720,000 resulted principally from a loss incurred on the single transaction sale of $30.3 million of single-family residential REO that was held in the company's portfolio. This sale, which was anticipated during the quarter ended June 30, 1993 and completed on Aug. 27, 1993, is consistent with the company's major focus of reducing its overall level of non-performing assets in order to return to profitability.
 George P. Rutland, chairman and chief executive officer, stated that, "As predicted, the ongoing recession in New England and California continues to impact Northeast Federal's earnings capability. Nonetheless, the company has reduced its non-accrual loans by 23.6 percent from the same quarter in 1992. Additionally, the successful completion this quarter of a single transaction sale of $30.3 million in REO, coupled with the reduction in non-accrual loans, translates into a 24.9 percent reduction of the company's non-performing assets from Dec. 31, 1992."
 Northeast Savings continues to exceed all fully phased-in regulatory capital requirements as shown in the table below:
 Fully
 Regulatory Actual Phased-in Actual Regulatory
 Capital Regulatory Capital Regulatory Capital
 Requirement Capital Required Capital Required
 Tangible core
 capital $160,326 $59,230 $159,929 $58,221
 Percent 4.06 pct 1.50 pct 4.12 pct 1.50 pct
 Core capital $160,928 $157,970 $161,758 $155,289
 Percent 4.07 pct 4.00 pct 4.17 pct(a) 4.00 pct
 Risk-based
 capital $183,442 $143,651 $181,149 $149,106
 Percent 10.22 pct 8.00 pct 8.75 pct(a) 7.20 pct
 (a) The core and risk-based capital ratios for September 30, 1992 include $1.0 million of supervisory goodwill.
 The provision for loan losses for the quarter ended Sept. 30, 1993 was $3.5 million, compared to $6.3 million for the quarter ended Sept. 30, 1992. The continuing high levels of loan loss provisions reflect the effects of the ongoing recessions in New England and California. The allowances for loan losses at Sept. 30, 1993 and 1992 were $28.2 million and $19.9 million, respectively. Other factors considered in determining the adequacy of the allowance for loan losses were management's judgement regarding 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, the overall loan portfolio quality, and the level of loan charge-offs.
 Total non-performing assets have decreased to $145.9 million at Sept. 30, 1993 from $194.4 million at Dec. 31, 1992, and $190.4 million at Sept. 30, 1992. This decrease resulted from reductions in both non- accrual loans and REO, which comprise non-performing assets. The specifics of these reductions are detailed in the table below.
 Sept. 30, Dec. 31, Sept. 30,
 1993 1992 1992
 (Dollars in Thousands)
 Non-Accrual loans:
 Single-family residential
 real estate $69,159 $87,949 $86,377
 Consumer 1,381 1,741 1,614
 Income property 2,189 5,299 7,150
 Total non-accrual loans 72,729 94,989 95,141
 REO:
 Single-family residential 57,281 83,605 76,615
 Hotels 6,398 6,408 7,932
 Apartment building 4,468 4,464 4,353
 Office and industrial
 complexes, land 2,441 2,499 2,750
 Real estate brokerage
 operations 1,957 1,544 2,618
 Residential subdivisions 627 856 1,022
 Total REO 73,172 99,376 95,290
 Total non-performing assets $145,901 $194,365 $190,431
 Non-interest income totaled $3.7 million and $2.6 million for the quarters ended Sept. 30, 1993 and 1992, respectively. For the same respective quarters, fee income increased to $2.6 million from $1.6 million, due primarily to decreased valuation adjustments on excess servicing and purchased mortgage servicing rights. Also contributing to the increase in non-interest income was an increase of $554,000 in net gains on the sale of loans from the held-for-sale portfolio, which was partially offset by a $398,000 decrease in net gains on sales of securities.
 Non-interest expense was $22.5 million and $79.1 million for the quarters ended Sept. 30, 1993 and 1992, respectively. Included in non-interest expense for the quarter ended Sept. 30, 1992 was the $56.6 million valuation adjustment to supervisory goodwill. General and administrative expenses have remained relatively consistent, totaling $16.7 million and $16.9 million at Sept. 30, 1993 and 1992, respectively. The Association's ratio of general and administrative expenses to average total assets decreased to 1.67 pct. from 1.73 pct. for the same quarter in 1992. Non-interest expense also decreased due to the 1992 adjustments to supervisory goodwill, which eliminated the amortization expense associated with goodwill.
 During the quarter ending Sept. 30, 1993, expenses relating to REO increased to $3.3 million from $2.6 million for the same quarter in 1992 due to an adjustment of $777,000 on the single transaction sale of a portion of Northeast Federal's residential REO portfolio. In anticipation of this transaction, the company had recorded a $6.0 million loss provision during the quarter ended June 30, 1993.
 Net interest income for the quarter ended Sept. 30, 1993 was $17.7 million, a decrease of $4.3 million from the same quarter in 1992. Contributing to this reduction was the decreased interest rate spread, which averaged 1.95 pct. for the quarter ended Sept. 30, 1993, compared to 2.51 pct. for the same quarter in 1992. This decrease is due primarily to the current low interest rate environment, which has fueled higher than normal levels of mortgage refinances. As the higher rate loans held in the Association's mortgage portfolio are replaced by those refinanced at the current lower rates, the Association's yield on earning assets has decreased.
 Total assets at Sept. 30, 1993 were $3.9 billion, consistent with the company's asset size at Dec. 31 and Sept. 30, 1992. Single-family residential loan originations, the Association's principal use of capital resources, were $179.0 million and $179.7 million for the three months ended Sept. 30, 1993 and 1992, respectively. For the nine months ended Sept. 30, 1993 and 1992, total loan originations were $582.4 million and $488.0 million, respectively.
 Northeast Savings is one of the largest thrift institutions based in New England, with nearly 160 years of continuous service to its customers. Northeast Savings has 51 retail branches in New York, Connecticut, Massachusetts, Rhode Island, and Southern California, and operates mortgage lending offices in San Diego, Calif.; Greenwich, Conn.; and through a subsidiary in Colorado.
 NORTHEAST FEDERAL CORP. AND SUBSIDIARIES
 CONSOLIDATED STATEMENT OF OPERATIONS
 (In Thousands Except Per Share Amounts)
 Three Months Ended Nine Months Ended
 Sept. 30, Sept. 30,
 1993 1992 1993 1992
 CONSOLIDATED OPERATIONS:
 (Unaudited)
 Total interest income $55,016 $66,388 $169,014 $204,140
 Total interest expense 37,275 44,391 112,334 141,805
 Net interest income 17,741 21,997 56,680 62,335
 Provision for loan
 losses 3,450 6,300 20,300 11,600
 Net interest income
 after provision for
 loan losses 14,291 15,697 36,380 50,735
 Gain on sale of
 securities, net 254 652 4,705 3,783
 Gain on sale of
 loans, net 866 312 1,564 1,259
 Other income 2,612 1,595 7,785 6,177
 General and
 administrative expenses 16,748 16,854 50,877 49,327
 Amortization of
 supervisory goodwill --- 992 --- 2,978
 Supervisory goodwill
 valuation adjustment --- 56,568 --- 56,568
 SAIF insurance fund
 and OTS assessments 2,429 2,093 5,985 6,167
 REO Operations 3,276 2,557 14,894 6,950
 Loss before income taxes
 and extraordinary items (4,430) (60,808) (21,322) (60,036)
 Income tax benefit (2,526) (1,018) (10,127) (583)
 Loss before
 extraordinary items (1,904) (59,790) (11,195) (59,453)
 Extraordinary items,
 net of tax --- --- --- 18
 Net loss ($1,904) ($59,790) ($11,195) ($59,435)
 Preferred stock
 dividend requirement $820 $1,653 $3,663 $5,070
 Loss before extraordinary
 items applicable to
 common stockholders ($2,724) ($61,443) ($14,858) ($64,523)
 Net loss applicable to
 common stockholders ($2,724) ($61,443) ($14,858) ($64,505)
 Loss per common share
 before extraordinary
 items:
 Primary and fully
 diluted ($0.20) ($10.73) ($1.53) ($11.27)
 Net loss per common
 share:
 Primary and fully
 diluted ($0.20) ($10.73) ($1.53) ($11.27)
 Average shares for the
 calculation of earnings
 per share:
 Primary 13,481,012 5,726,179 9,700,657 5,722,812
 Fully diluted 13,481,012 5,726,179 9,700,657 5,722,812
 Sept 30, Dec. 31, Sept. 30,
 1993 1992 1992
 (in thousands)
 FINANCIAL CONDITION:
 (Unaudited)
 Total assets $3,942,721 $3,910,104 $3,891,389
 Investments 208,302 275,120 383,445
 Mortgage-backed securities 1,069,088 885,246 792,520
 Real estate acquired in
 settlement of loans 73,172 99,376 95,290
 Loans 2,316,350 2,311,110 2,279,342
 Retail deposits 2,988,457 3,205,654 3,350,524
 Brokered deposits 25,714 25,135 25,714
 Borrowings 719,484 466,564 302,216
 Stockholders' equity 125,791 137,573 138,095
 Book Value $6.40 $8.42 $8.75
 Tangible book value $6.40 $8.42 $8.58
 Book value per share is calculated using stockholders' equity less preferred equity less dividends in arrears, while tangible book value per share is calculated using stockholders' equity less preferred equity less supervisory goodwill, when applicable, less dividends in arrears.
 -0- 10/22/93
 /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/
 (NSB)


CO: Northeast Federal Corp. ST: Connecticut IN: FIN SU: ERN

DJ -- NE002 -- 2199 10/22/93 07:42 EDT
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Date:Oct 22, 1993
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