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NORTHEAST FEDERAL REPORTS SECOND QUARTER RESULTS, A PLANNED RIGHTS OFFERING AND THE FILING OF PROXY MATERIAL

 Hartford, Conn., July 12 /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 second quarter loss of $9.4 million, or a primary and fully diluted net loss per common share of $1.08 after preferred stock dividend requirements. This compares to net income of $158,000 or a primary and fully diluted net loss per common share of $0.21 after preferred stock dividend requirements for the same period in 1992. The loss for the quarter was due to a $12 million provision for loan losses and a $6 million provision for loss on real estate acquired in settlement of loans (REO). The provision for loss on REO was made in anticipation of an accelerated disposition of a portion of the residential REO portfolio through a single transaction sale. The anticipated sale is consistent with the Company's major focus of reducing the overall level of non-performing assets in order to return to profitability.
 In addition, the Company intends to file today a registration statement with the Securities and Exchange Commission (SEC) for the sale of additional shares of its common stock through a rights offering to existing shareholders. The Company expects to raise approximately $60 million through the offering. The Company also intends to file today a proxy statement with the SEC relating to a special meeting of common stockholders which will be called to consider a proposal for an increase in the number of authorized shares of common stock from 25,000,000 to 50,000,000.
 George Rutland, Chairman and Chief Executive Officer said, "Our goal has been to build a stable base, including a solid capital position, that would generate long term operating earnings and ultimately greater stockholder value. The accelerated disposition of non-earning assets and a capital infusion through the rights offering should dramatically speed up the return to profitability and thus increase shareholder value." Rutland continued on to say that "Raising the additional equity through a rights offering gives our current shareholders the first opportunity to benefit from these improvements to the Company."
 The proceeds of the offering are expected to enable the Company first to increase the Association's capital from its current level, which is deemed 'adequately capitalized', to a 'well capitalized' level; second to enable an increase in the Association's earning assets which should improve its profitability; and third to have greater flexibility to pursue prospective in-market acquisitions. Keefe, Bruyette & Woods, Inc. and First Albany Corporation are the financial advisors to the Company in connection with the rights offering.
 The securities to be offered pursuant to the rights offering may not be sold nor may offers to buy be accepted prior to the time the registration statement filed with the SEC becomes effective. This announcement does not constitute an offer to sell securities in any state or other jurisdiction in which such offer, solicitation, or sale would be unlawful prior to the registration or qualification under the securities laws of any such state or other jurisdiction.
 Although the loss for the quarter resulted in a decline in the Association's capital ratios during the quarter, the Association continued to exceed all fully phased-in regulatory capital requirements:
 Fully Phased-In
 Regulatory Regulatory June 30, 1993 June 30, 1992
 Capital Capital Regulatory Regulatory
 Requirement Required Capital Capital
 Tangible Core Capital $161,731 $157,319
 Percent 1.50pct 4.03pct 4.03pct
 Core Capital $162,387 $197,224
 Percent 4.00pct 4.05pct 5.05pct (a)
 Risk-Based Capital $190,766 $214,820
 Percent 8.00pct 10.53pct 10.41pct (a)
 ----
 NOTE: (a) The core capital and risk-based capital ratios at June 30, 1992 included $39 million of supervisory goodwill. Such supervisory goodwill is required to be phased out of capital with all supervisory goodwill completely excluded from capital after December 31, 1994. The Association had no supervisory goodwill at June 30, 1993.
 Total assets at June 30, 1993 totaled $4.01 billion versus total assets of $3.97 billion at June 30, 1992. Total stockholders' equity decreased to $127.5 million at June 30, 1993 from $194.2 million at June 30, 1992. The decrease in stockholders' equity was primarily due to the valuation adjustment to supervisory goodwill of $56.6 million in September 1992. Single-family loan originations, the Association's ongoing principal use of capital resources, were $207.0 million and $149.1 million for the quarters ended June 30, 1993 and 1992, respectively.
 Net interest income for the current quarter was $19.5 million, $266,000 lower than in the comparable quarter in 1992. This decline was due to a reduction in the net interest spread from 2.15% to 2.09%. The combination of unusually low interest rates and higher than normal loan prepayments caused the yield on earning assets to decline more rapidly than the Company's cost of funds.
 The provision for loan losses for the quarter ended June 30, 1993 was $12.0 million, compared to $2.5 million for the same quarter in 1992. The allowance for loan losses was $28.0 million at June 30, 1993, compared to $18.1 million at June 30, 1992. Factors considered in determining the adequacy of the allowance for loan losses in the Association's loan portfolio are management's judgment regarding prevailing and anticipated economic conditions, the level of charge-offs associated with transfers to REO, 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.
 Total non-performing assets decreased to $178.3 million at June 30, 1993 from $196.0 million at March 31, 1993, and $184.9 million at June 30, 1992, as detailed in the table below.
 June 30, 1993 March 31, 1993 June 30, 1992
 Non-accrual loans:
 Single-family
 residential $ 78,185 $ 86,014 $100,403
 Consumer 1,508 1,686 1,704
 Income property 2,189 5,299 7,309
 Total non-accrual
 loans 81,882 92,999 109,416
 REO:
 Single-family
 residential 80,642 87,146 56,681
 Hotels 6,408 6,408 7,931
 Apartment building 4,490 4,390 4,258
 Office and industrial
 complexes, land 2,469 2,618 2,789
 Real estate brokerage
 operations 1,747 1,714 2,668
 Residential
 subdivisions 667 726 1,115
 Total REO 96,423 103,002 75,442
 Total non-performing
 assets $178,305 $196,001 $184,858
 Non-interest income totaled $3.3 million and $5.0 million for the quarters ended June 30, 1993 and 1992, respectively. For the same respective quarters, fee income totaled $2.3 million and $3.2 million. Fee income decreased primarily as a result of lower loan servicing fee income due to higher prepayments on loans being serviced. Net gains on sales of securities and loans were $966,000 for the quarter ended June 30, 1993 versus $1.8 million for the same quarter in 1992.
 Non-interest expense (excluding EO expense) decreased from $19.5 million for the quarter ended June 30, 1992 to $18.9 million for the quarter ended June 30, 1993, primarily due to a decrease in the Association's SAIF insurance premium and the elimination of the supervisory goodwill amortization.
 REO expense for the quarter ended June 30, 1993 increased to $9.0 million from $2.3 million for the quarter ended June 30, 1992. The increase was due primarily to the $6.0 million provision for losses on REO in anticipation of an accelerated disposition of a portion of the residential REO portfolio through a single transaction sale.
 Northeast Savings is one of the largest thrift institutions based in New England, with nearly 160 years of service to its customers. Northeast Savings operates 53 retail branches in New York, Connecticut, Massachusetts, Rhode Island, and Southern California, and has mortgage lending offices in San Diego, California; Greenwich, Connecticut; Denver, Colorado; and Portland, Oregon.
 NORTHEAST FEDERAL CORP. AND SUBSIDIARIES
 CONSOLIDATED STATEMENT OF OPERATIONS
 (Dollars In Thousands Except Per Share Amounts)
 Three Months Ended Six Months Ended
 June 30, June 30,
 1993 1992 1993 1992
 CONSOLIDATED OPERATIONS:
 (Unaudited)
 Total Interest Income $56,816 $67,827 $114,264 $137,796
 Total Interest Expense 37,364 48,109 75,059 97,414
 Net Interest Income 19,452 19,718 39,205 40,382
 Provision For Loan
 Losses 12,000 2,500 16,850 5,300
 Net Interest Income After
 Provision For Loan
 Losses 7,452 17,218 22,355 35,082
 Gain On Sale Of
 Securities 590 1,470 4,451 3,131
 Gain On Sale Of Loans,
 Net 376 352 698 947
 Other Income 2,321 3,205 5,173 4,582
 General and Administrative
 Expenses 17,106 16,479 34,378 32,517
 Amortization of Supervisory
 Goodwill -- 993 -- 1,986
 SAIF Insurance Fund and
 OTS Assessments 1,773 2,037 3,556 4,074
 REO Operations 9,008 2,341 11,635 4,393
 Income (Loss) Before Income Taxes
 and Extraordinary
 Items (17,148) 395 (16,892) 772
 Income Tax Expense
 (Benefit) (7,716) 237 (7,601) 435
 Net Income (Loss) Before
 Extraordinary Items (9,432) 158 (9,291) 337
 Extraordinary Items,
 Net of Tax -- -- -- 18
 Net Income (Loss) (9,432) 158 (9,291) 355
 Preferred Stock Dividend
 Requirement 1,190 1,346 2,843 3,417
 Net Loss Applicable To
 Common Stockholders (10,622) (1,188) (12,134) (3,062)
 Primary and Fully Diluted
 Net Loss Per
 Common Share (a) ($1.08) ($0.21) ($1.55) ($0.54)
 Average Shares For The
 Calculation of Earnings
 Per Share 9,847,146 5,722,078 7,810,480 5,721,129
 ----
 NOTE: (a) If the conversion of the Company's $2.25 Convertible Cumulative Preferred Stock, Series A, into common stock, which occurred on May 14, 1993, had taken place at the beginning of the period, primary and fully diluted net loss per common share for the quarter ended June 30, 1993 would have been $0.76.
 June 30, 1993 Dec. 31, 1993 June 30, 1992
 FINANCIAL CONDITION:
 (Unaudited, In Thousands
 Except Per Share Amounts)
 Total Assets $4,006,969 $3,910,104 $3,971,630
 Investments 199,765 275,120 484,206
 Mortgage-Backed
 Securities 1,098,262 885,246 702,367
 Loans 2,332,011 2,311,110 2,267,900
 Retail Deposits 3,048,623 3,205,654 3,528,708
 Brokered Deposits 25,135 25,135 25,135
 Borrowings 704,490 466,564 147,529
 Stockholders' Equity 127,528 137,573 194,238
 Book Value Per
 Common Share $6.60 $8.42 $18.84
 Tangible Book Value
 Per Common Share $6.60 $8.42 $8.61
 Book value per common share is calculated using stockholders' equity less preferred equity less dividends in arrears, while tangible book value per common share is calculated using stockholders' equity less preferred equity, less supervisory goodwill (when applicable) and less dividends in arrears (when applicable).
 -0- 7/12/93
 /CONTACT:CONTACT: George P. Rutland, chairman of the board and chief executive officer of Northeast Federal Corp., 203-280-1100; or Kirk W. Walters, president and chief operating officer and chief financial officer of Northeast Federal Corp., 203-280-1183/
 (NSB)


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

CM -- NE003 -- 0245 07/12/93 08:40 EDT
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