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NORTHEAST FEDERAL CORP. ANNOUNCES NET EARNINGS FOR NINTH CONSECUTIVE QUARTER

 NORTHEAST FEDERAL CORP. ANNOUNCES NET EARNINGS
 FOR NINTH CONSECUTIVE QUARTER
 HARTFORD, Conn., July 24 /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 earnings of $158,000, as expected, for the quarter ended June 30, 1992, resulting in a primary and fully diluted net loss per common share of 21 cents after preferred stock dividend requirements. For the same quarter last year, Northeast's net income was $3.6 million, including the $1.0 million effect of the Company's early adoption of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," and resulting in primary and fully diluted net income per common share of 24 cents after preferred stock dividend requirements.
 "This quarter's earnings, while positive, are down $3.4 million from the first quarter of last year, as expected. The planned reduction in average interest-earning assets, from $4.4 billion to $3.9 billion, in order to meet the higher capital requirements has reduced our ability to generate net interest income, which decreased by $2.9 million from the first quarter of 1991 to the first quarter of 1992. Further contributing to this reduction in income is an increase in expenses on real estate and other assets acquired in settlement of loans," said George P. Rutland, Chairman. "However, as a result of our basic strengths in originating residential real estate mortgages and gathering retail deposits, we have posted net earnings for the ninth consecutive quarter in spite of the poor economic environment in our primary market areas," Rutland continued.
 Northeast Savings continues to exceed all current capital requirements at June 30:
 June 30, 1992
 Regulatory Regulatory 1992 1991
 Capital Capital Regulatory Regulatory
 Requirement Required Capital Capital
 ($ in thousands)
 Tangible core
 capital $58,519 $157,319 $115,237
 Percent 1.50 pct. 4.03 pct. .89 pct.
 Core capital $156,086 $197,224 174,952
 Percent 4.00 pct. 5.05 pct.(a) 4.39 pct.(a)
 Risk-based
 capital $148,643 $214,820 $190,846
 Percent 7.20 pct. 10.41 pct.(a) 9.54 pct.(a)


Note (a): The core capital and risk-based capital ratios include $39.0 million and $59.7 million of supervisory goodwill at June 30, 1992 and 1991, respectively. Such supervisory goodwill is required to be phased out of capital with all goodwill completely excluded from capital after December 31, 1994.
 During the current quarter, the Association acquired approximately $315 million of assets from four failed Rhode Island credit unions and issued approximately $315 million in insured deposit accounts to the depositors of the institutions. The following transactions were also completed in conjunction with the acquisition of the assets of the credit unions.
 -- The Company issued approximately $35.2 million of a new class
 of preferred stock, the $8.50 Cumulative Preferred Stock,
 Series B, to the Rhode Island Depositors Economic Protection
 Corporation (DEPCO), as well as warrants to purchase 800,000
 shares of the Company's common stock.
 -- The Company issued approximately $29.0 million of debentures
 to the receivers for the institutions. These debentures have
 been transferred from the receivers to certain depositors in
 the institutions in partial settlement of their deposit claim
 against the receivership estates.
 -- The Company repurchased its adjustable rate stock, with a face
 amount of approximately $60.1 million, plus accumulated
 dividends of $11.2 million from the FSLIC Resolution Fund
 administered by the FDIC for $28.0 million in cash and $7.0
 million in debentures having the same terms as those
 transferred to certain depositors in the Rhode Island
 institutions.
 Total assets at June 30, 1992 were $4.0 billion, up from $3.8 billion at March 31, 1992 and approximately the same as the $4.0 billion reported at June 30, 1991. Primarily as a result of the Association's decreased average asset size, $3.9 billion and $4.4 billion for the quarters ended June 30, 1992 and 1991, respectively, and the Association's increase in non-accrual loans and real estate and other assets acquired in settlement of loans, net interest income for the current quarter was $2.9 million lower than for the same quarter last year. Although net interest income declined, the interest rate spread has remained stable, averaging 2.15 percent for the quarters ended June 30, 1992 and 1991. For the same respective quarters, the Association's interest rate margin was 2.13 percent and 2.17 percent.
 The provision for loan losses for the current quarter was $2.5 million, compared to $3.7 million for the same quarter in 1991. 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 overall loan portfolio quality.
 Non-accrual loans, excluding those acquired in the Rhode Island acquisition, totaled $109.4 million at June 30, 1992, compared to $112.1 million at March 31, 1992 and $101.2 million at June 30, 1991. The increase in non-accrual loans from June 30, 1991 is principally a result of general economic conditions, particularly the recession in New England and a depressed real estate market in California. At June 30, 1992 approximately 91.8 percent of these 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.
 At June 30, 1992, non-accrual loans related to the Rhode Island acquisitions totaled $32.1 million. These loans are segregated from the remaining Northeast Savings' non-accrual loans since, in accordance with the Association's valuation agreement with the receivers of the credit unions, DEPCO, and the State of Rhode Island, the Association is protected against losses on these loans. To the extent that the fair value of the assets does not equal or exceed the amount of deposits issued by Northeast Savings plus the amount of other liabilities assumed, a balancing consideration will be paid to Northeast Savings by DEPCO or the receivers. If the fair value of the assets is determined to be greater than the deposits plus other liabilities assumed, Northeast Savings would pay the difference to DEPCO or the receivers. The valuation of the acquired assets will be performed by independent valuators and must be completed no later than six months from the closing date of May 8, 1992. As security for the obligations of DEPCO to pay the balancing consideration, to repurchase certain loans, and to indemnify the Association for certain matters, DEPCO has placed $59 million in treasury securities in escrow and granted to the Association a first priority security interest in such funds. In addition, DEPCO has covenanted that, for one year, it will maintain at least $60 million in a combination of unencumbered assets and 60 percent of the value of the collateral pledged by DEPCO in excess of the amount of the obligations secured by such pledges as additional security for their obligations.
 Non-interest income decreased $299,000 from the same quarter in 1991, due primarily to a reduction in loan servicing fees. Loan servicing fees decreased as a result of increased amortization of the Association's purchased mortgage servicing rights and deferred excess servicing, which resulted from higher prepayments on underlying mortgage loans.
 Expenses relating to real estate owned and other assets acquired in settlement of loans have increased by $1.4 million, to $2.3 million from $902,000 for the quarters ended June 30, 1992 and 1991, respectively, primarily as a result of increased foreclosures on residential real estate.
 General and administrative expenses were $16.5 million, compared to $15.0 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, FarWest, and Rhode Island acquisitions, higher costs related to delinquent loans, and higher employee benefit costs. Although expenses resulting from the acquisition of additional branches increased, these expenses were more than offset by lower interest expense on the Association's new funding sources.
 Single family residential loan originations, the Association's ongoing principal use of capital resources, were $149.1 million and $153.3 million for the quarters ended June 30, 1992 and 1991, respectively.
 For the last 10 quarters, the board of directors has suspended the quarterly dividend on Northeast Federal's $2.25 Cumulative Convertible Preferred Stock, Series A. In addition, the Board has not declared dividends on its new issue of $8.50 Cumulative Preferred Stock, Series B. These actions are believed necessary and appropriate to conserve capital.
 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 has retail branches in New York, Connecticut, Massachusetts, California, and Rhode Island.
 NORTHEAST FEDERAL CORP. AND SUBSIDIARIES
 Consolidated Statement of Operations
 (In thousands except per share amounts)
 (Unaudited)
 Three Months Ended
 June 30
 1992 1991
 Consolidated operations:
 Total interest income $67,827 $94,229
 Total interest expense 48,109 71,653
 Net interest income 19,718 22,576
 Provision for loan losses 2,500 3,700
 Net interest income after provision
 for loan losses 17,218 18,876
 Gain on sale of securities, net 1,470 1,451
 Gain on sale of loans, net 352 375
 Other income 3,205 3,500
 General and administrative expenses 16,479 15,038
 Amortization of supervisory goodwill 993 992
 SAIF insurance fund and OTS assessments 2,037 2,081
 REO operations 2,341 902
 Income before income taxes,
 extraordinary items and cumulative
 effect of change in accounting principle 395 5,189
 Income tax expense 237 2,711
 Income before extraordinary item and
 cumulative effect of change
 in accounting principle 158 2,478
 Extraordinary items, net of tax --- 64
 Income before cumulative effect of change
 in accounting principle 158 2,542
 Cumulative effect of change in accounting
 for income taxes --- 1,022
 Net income $158 $3,564
 Preferred stock dividend requirement $1,346 $2,146
 Income (loss) before extraordinary items
 and cumulative effect of change in
 accounting principle applic to
 common s/h ($1,188) $332
 Income (loss) per common share before
 cumulative effect of change in accounting
 principle applicable to common s/h ($1,188) $396
 Net income (loss) applicable to common
 stockholders ($1,188) $1,418
 Income (loss) per common share before
 extraordinary items and cumulative
 effect of change in accounting principle:
 Primary and fully diluted (21 cents) 6 cents
 Income (loss) per common share
 before cumulative effect of
 change in accounting principle:
 Primary and fully diluted (21 cents) 7 cents
 Net income (loss) per common share:
 Primary and fully diluted (21 cents) 24 cents
 Average shares for the calculation of
 earnings per share:(a)
 Primary 5,722,078 5,804,109
 Fully diluted 5,722,078 5,859,836
 Note(a): Warrants issued to DEPCO are not exercisable until 90 days after the closing date of May 8, 1992. Accordingly, at June 30, 1992, the effect of the warrants are not included in the calculation of earnings per share.
 6/30/92 3/31/92 6/30/91
 (in thousands)
 FINANCIAL CONDITION: (unaudited)
 Total assets $3,971,630 $3,821,342 $4,042,259
 Investments 484,206 511,361 261,696
 Mortgage-backed securities 702,367 680,752 934,143
 Loans 2,469,613 2,364,443 2,583,579
 Retail deposits 3,528,708 3,462,339 3,296,006
 Brokered deposits 25,135 25,708 25,135
 Borrowings 147,529 56,546 423,453
 Stockholders' equity 194,238 191,024 187,873
 -0- 7/24/92
 /CONTACT: George P. Rutland, chairman of the board and CEO, 203-280-1100; or Kirk W. Walters, president COO and CFO, 203-280-1183/
 (NSB) CO: Northeast Federal Corporation ST: Connecticut IN: FIN SU: ERN


PB-TM -- NE001 -- 2889 07/24/92 08:05 EDT
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