U.S. SECURITIES AND EXCHANGE COMMISSION 
 
                           WASHINGTON, D.C. 20549 
 
                                Form 10 - QSB 
 
          [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF 
                THE SECURITIES EXCHANGE ACT OF 1934 
 
                For quarterly period ended June 30, 1997 
 
          [   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF 
                THE SECURITIES EXCHANGE ACT OF 1934 
 
                For the transition period from           to
                                               ---------    ----------
 
                         Commission File No. 0-11184 
 
                        NORTH EAST INSURANCE COMPANY 
         (Name of small business issuer as specified in its charter) 
 
             Maine                                 01-0278387 
(State or other Jurisdiction of                 (I.R.S. employer 
incorporation or organization)               identification number) 
 
                  482 Payne Road, Scarborough, Maine 04074 
                 ( Address of principal executive offices ) 
 
                               (207) 883-2232 
                         (Issuer's telephone number) 
 
Check whether the issuer (1) filed all reports required to be filed by 
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for 
such shorter period that the issuer was required to file such reports), and 
(2) has been subject to such filing requirements for the past 90 days.
          Yes [ X ]   No [  ] 
 
As of August 13, 1997 there were 3,046,842 outstanding shares of Common 
Stock, $1.00 par value, the only authorized class of the issuer. 
 
Transitional Small Business Disclosure Format: Yes [  ]  No [ X ] 
 
                        NORTH EAST INSURANCE COMPANY 
                              AND SUBSIDIARIES 
 
                                    INDEX 
 
Part I -  Financial Information 
 
          Item 1 -    Financial Statements 

                      Consolidated Balance Sheet June 30, 1997             3 

                      Consolidated Statements of Operations 
                       Six Months Ended June 30, 1997 and 1996             4 
 
                      Consolidated Statements of Operations 
                       Three Months Ended June 30, 1997 and 1996           5 
 
                      Consolidated Statements of Cash Flows for the 
                       Six Months Ended June 30, 1997 and 1996             6 
 
                      Notes to Consolidated Financial Statements           8 
 
          Item 2 -    Management's Discussion and Analysis of the 
                       Financial Condition and Results of Operations       9 
 
Part II - Other Information 
 
          Item 5 -    Other Information                                   11 
 
          Item 6 -    Exhibits and Reports on Form 8-K                    12 
 
                North East Insurance Company and Subsidiaries 
 
Item 1. FINANCIAL INFORMATION
----------------------------- 
 
                         Consolidated Balance Sheet 
                             as of June 30, 1997 
<TABLE>
<CAPTION>

ASSETS                                                            1997
                                                                  ---- 
<S>                                                           <C>
  Investments: 
    Fixed maturities available for sale, at 
     fair value (amortized cost $14,979,571)                  $14,871,356 
    Investment property, at cost less 
     accumulated depreciation of $47,666                           62,334 
    Equity securities available for sale,  
     at fair value (cost $154,970)                                 90,168 
    Short-term investments                                      1,586,837
                                                              ----------- 
      Total investments                                        16,610,695 
  Reinsurance (loss and loss adjustment expense 
   reserves and paid recoverables)                              5,884,556 
  Premium balances receivable                                   4,397,443
Deferred policy acquisition costs                                 775,821 
  Cash                                                             21,502 
  Prepaid reinsurance premiums (ceded unearned premium)           736,412 
  Investment income due and accrued                               246,437 
  Property and equipment, net of accumulated depreciation         450,332 
  Deferred tax asset                                            2,036,126 
  Prepaid federal income tax                                        9,242 
  Other assets                                                    259,803
                                                              -----------
      Total Assets                                            $31,428,369
                                                              =========== 

LIABILITIES 
  Losses and loss adjustment expenses                         $14,232,995
  Unearned premiums                                             6,277,989 
  Ceded reinsurance balances payable                              847,760 
  Reserve for unpaid expenses                                     547,330 
  Book overdraft                                                   34,930 
  Other liabilities                                                46,221
                                                              ----------- 
      Total Liabilities                                        21,987,225
 
SHAREHOLDERS' EQUITY 
  Common stock $1.00 par value, 
   authorized 6,000,000 shares, issued 
   and outstanding 3,046,842 shares                             3,046,842 
  Additional paid-in capital                                    6,403,621 
  Unrealized depreciation of investment                          (173,017) 
  Accumulated retained earnings                                   163,698
                                                              ----------- 
      Total Shareholders' Equity                                9,441,144
                                                              ----------- 
      Total Liabilities and Shareholders' Equity              $31,428,369
                                                              =========== 

</TABLE>

The accompanying notes are an integral part of the consolidated financial 
statements. 
 
                North East Insurance Company and Subsidiaries 
                    Consolidated Statements of Operations 
                      for the Six Months ended June 30

<TABLE>
<CAPTION>
 
                                                    1997          1996
                                                 ------------------------
<S>                                              <C>           <C>
Revenues: 
  Premiums earned                                $5,668,596    $5,678,757
  Premiums ceded                                  1,840,812     2,221,089
                                                 ------------------------ 
    Net premiums earned                           3,827,784     3,457,668 
  Net investment income                             381,534       518,260 
  Realized capital gains                             79,312        70,730
                                                 ------------------------ 

    Total revenues                                4,288,630     4,046,658 
Expenses: 
  Losses and loss adjustment expenses             3,994,508     3,676,300 
  Reinsurance recoveries                           (980,741)   (1,219,094)
                                                 ------------------------ 
    Net losses and loss adjustment expenses       3,013,767     2,457,206
  Underwriting expenses incurred                  1,182,921     1,255,299
                                                 ------------------------
    Total expenses                                4,196,688     3,712,505
                                                 ------------------------ 
Income before provision for income taxes             91,942       334,153 
 
Provision for income taxes, net of $106,929 
 tax benefit from loss carryforward for 1996         14,268         6,683
                                                 ------------------------ 
 
Net income                                       $   77,674    $  327,470
                                                 ======================== 
 
Earnings per common share: 
  Net income                                     $     0.03    $     0.11
                                                 ======================== 
</TABLE>

 
The accompanying notes are an integral part of the consolidated financial
statements. 
 
 
                North East Insurance Company and Subsidiaries 
                    Consolidated Statements of Operations 
                     for the Three Months ended June 30

<TABLE>
<CAPTION>

                                                    1997          1996
                                                 ------------------------ 
<S>                                              <C>           <C>
Revenues: 
  Premiums earned                                $2,911,799    $2,880,649
  Premiums ceded                                  1,175,365     1,328,360 
                                                 ------------------------
    Net premiums earned                           1,736,434     1,552,289
  Net investment income                             243,346       237,054 
  Realized capital losses                            (3,112)       (8,410)
                                                 ------------------------ 
    Total revenues                                1,976,668     1,780,933 
Expenses: 
  Losses and loss adjustment expenses             1,878,410     1,411,339 
  Reinsurance recoveries                           (615,795)     (607,538)
                                                 ------------------------ 
    Net losses and loss adjustment expenses       1,262,615       803,801
  Underwriting expenses incurred                    344,526       661,251
                                                 ------------------------ 
    Total expenses                                1,607,141     1,465,052
                                                 ------------------------ 
Income before provision for income taxes            369,527       315,881 
 
Provision for income taxes, net of $101,082 
 tax benefit from loss carryforward for 1996         71,721         6,318
                                                 ------------------------ 
 
Net income                                       $  297,808    $  309,563
                                                 ======================== 
 
Earnings per common share: 
  Net income                                     $     0.10    $     0.10
                                                 ========================
</TABLE>

The accompanying notes are an integral part of the consolidated financial 
statements. 
 
 
                North East Insurance Company And Subsidiaries 
                    Consolidated Statements of Cash Flows 
                      for the Six Months ended June 30

<TABLE>
<CAPTION>

                                                       1997            1996
                                                    --------------------------
 
<S>                                                 <C>             <C>
Cash flow from operating activities: 
  Insurance premium received                        $5,379,126      $3,214,068 
  Loss and loss adjustment expenses paid            (4,962,879)     (4,082,423) 
  Operating expenses paid                           (2,032,904)     (1,300,518) 
  Investment income received                           419,448         590,698
                                                    --------------------------
    Net cash used in operating activities           (1,197,209)     (1,578,175)
                                                    --------------------------
 
Cash flows from investing activities: 
  Fixed maturities available for sale, sold          1,731,194      3,829,782 
  Fixed maturities available for sale, purchased    (1,850,675)    (2,339,671) 
  Proceeds from mortgage note                                0        459,139 
  Proceeds from issuance of common stock               100,049         16,944 
  Purchase of furniture, fixtures and 
   equipment, net                                      (71,760)       (50,592)
                                                    -------------------------
    Net cash provided (used) 
     in investing activities                           (91,192)     1,915,602
                                                    -------------------------
 
  Net increase (decrease) in cash, book 
   overdraft and short-term investments             (1,288,401)       337,427 
Cash, book overdraft and short-term 
 investments at beginning of year                    2,861,810      1,722,100
                                                    -------------------------
Cash, book overdraft and short-term 
 investments at end of period                       $1,573,409     $2,059,527
                                                    =========================
</TABLE>

The accompanying notes are an integral part of the consolidated financial 
statements. 
 
 
                North East Insurance Company And Subsidiaries 
                 Consolidated Reconciliation of Cash Used In 
                     Operating Activities to Net Income 
                      for the Six Months ended June 30

<TABLE>
<CAPTION>

 
                                               1997           1996
                                           -------------------------- 
 
<S>                                        <C>            <C> 
Net income                                 $    77,674    $   327,470 
 
Decrease (increase) in net premium 
 and ceded reinsurance balances             (1,799,689)       590,145 
Increase (decrease) in unearned 
 premium reserve                             2,374,507        (60,006) 
Decrease in loss and loss adjustment 
 expense reserve                              (972,588)    (2,398,956) 
Decrease in investment income 
 due and accrued                                37,914         72,438 
Decrease (increase) in deferred policy 
 acquisition costs                            (377,226)        66,660 
Decrease in deferred tax asset                  14,268              0 
Decrease in federal income tax payable               0         (7,817) 
Decrease in expense accruals                  (609,910)      (241,292) 
Amortization of bond premium, net               40,337         39,080 
Depreciation and amortization expense           97,183        104,833 
Loss (gain) on investment activities           (79,679)         8,409 
Write down of mortgage note in default               0        (79,139)
                                           -------------------------- 
Net cash used in operating activities      $(1,197,209)   $(1,578,175)
                                           ========================== 
</TABLE>

The accompanying notes are an integral part of the consolidated financial 
statements. 
 
 
                North East Insurance Company and Subsidiaries 
                 Notes to Consolidated Financial Statements 
 
JUNE 30, 1997 
 
1. The condensed financial statements included herein have been prepared by 
the Registrant, without audit, pursuant to the rules and regulations of the 
Commission. Certain information and footnote disclosure normally included in 
financial statements prepared in accordance with generally accepted 
accounting principles have been condensed or omitted pursuant to such rules 
and regulations, although the Registrant believes that the disclosures which 
are made are adequate to make the information presented not misleading, 
particularly when read in conjunction with the financial statements and the 
notes thereto included in the Registrant's latest annual report on Form 10-
KSB. In Management's opinion, the attached interim financial statements 
reflect all adjustments which are necessary for a fair statement of the 
results for the periods presented. 
 
2. In June 1996 the Financial Accounting Standards Board ("FASB") issued 
Statement of Financial Accounting Standards ("FAS") No. 125 ("Accounting for 
Transfers and Servicing of Financial Assets and Extinguishments of 
Liabilities") which provides standards whereby an entity recognizes the 
financial and servicing assets it controls and the liabilities it has 
incurred, de-recognizes financial assets when control has been surrendered, 
and de-recognizes liabilities when extinguished. The Statement is effective 
for transfers and servicing of financial assets and extinguishments of 
liabilities occurring after December 31, 1996. The effect of adopting the 
provisions of FAS No. 125 did not have a material effect on the Company's 
consolidated results of operations or financial position. 
 
In March 1997 the FASB issued FAS No. 128 ("Earnings Per Share") which 
provides for a "basic" earnings per share computation based upon the 
weighted-average shares outstanding. The new standard requires a dual 
presentation of basic and diluted earnings per share. The effect of adopting 
the provisions of FAS No. 128 did not have a material effect on the 
Company's per share earnings. 
 
In March 1997 the FASB also issued FAS No. 129 ("Disclosures of Information 
About Capital Structure"). The effect of adopting the provision of FAS No. 
129 did not result in significant disclosure due in part to the simplified 
nature of the Company's capital structure. 
 
3. North East Insurance Company owns 100% of American Colonial Insurance 
Company and North Atlantic Underwriters, Inc. whose results are consolidated 
herein. 
 
4. Earnings per share are computed using the weighted average method. 
 
         Item 2 - Management's Discussion and Analysis of Financial 
                  Condition and Results of Operations 
 
Six Months Ended June 30, 1997
------------------------------ 
 
Net premiums written amounted to $6,202,291 for the six months ended June 
30, 1997 compared with $3,397,662 for the six months ended June 30, 1996. 
Net premiums earned for the six months ended June 30, 1997 and 1996 amounted 
to $3,827,784 and $3,457,668, respectively. The increase in net premiums 
written reflects the decision to cancel the 35% quota share treaty effective 
January 1, 1997 on a runoff basis. 
 
Loss and loss adjustment expenses represented 78.7% and 71.1% of net 
premium earned for the six months ended June 30, 1997 and 1996, 
respectively. The loss ratios reflect very favorable loss experience in the 
second quarter of 1996 compared with normal results experienced in 1997. 
 
Underwriting expenses incurred represented 19.1% and 36.9% of net premiums 
written for the six months ended June 30, 1997 and 1996, respectively. The 
improvement in 1997 is directly attributable to favorable loss experience of 
the quota share reinsurance program, now in runoff. Expense sharing for this 
treaty is experience rated with favorable development providing increased 
expense sharing on the ceded earned premium. 
 
Total return from investment activities amounted to $460,846 for the six 
months ended June 30, 1997 compared with $588,990 for the six months ended 
June 30, 1996. The return on invested assets, based on amortized cost, net 
of allocated expenses was 5.4% for the six months ended June 30, 1997 
compared with 5.9% for the six months ended June 30, 1996. 
 
Net income for the six months ended June 30, 1997 amounted to $77,674 or 
$0.03 per share compared with $327,470 or $0.11 per share for the six months 
ended June 30, 1996. 
 
Shareholders' equity at June 30, 1997 amounted to $9,441,144 or $3.10 per 
share compared with $9,324,961 or $3.11 per share at December 31, 1996. The 
decline in market value of the Company's fixed maturities available for sale 
resulted in a charge to surplus of $55,498 or $0.02 per share for the six 
months ended June 30, 1997. 
 
Three Months Ended June 30, 1997
-------------------------------- 
 
Net premiums written amounted to $3,212,607 for the three months ended June 
30, 1997 compared with $1,966,684 for the three months ended June 30, 1996. 
Net premiums earned for the three months ended June 30, 1997 and 1996 
amounted to $1,736,434 and $1,552,289, respectively. 
 
Loss and loss adjustment expenses represented 72.7% and 51.8% of net 
premium earned for the three months ended June 30, 1997 and 1996, 
respectively. As previously stated, the loss ratios are the result of very 
favorable loss experience in the second quarter of 1996 compared with normal 
experience in 1997.  
 
Underwriting expenses incurred amounted to $344,526 for the three months 
ended June 30, 1997 compared with $661,251 for the three months ended June 
30, 1996. Expenses for 1997 benefited from the increased expense recovery 
from the quota share reinsurance, previously discussed. 
 
Net income for the three months ended June 30, 1997 amounted to $297,808 or 
$0.10 per share compared with $309,563 or $0.10 per share for the three 
months ended June 30, 1996. 
 
Shareholders' equity at June 30, 1997 amounted to $9,441,144 or $3.10 per 
share compared with $8,787,657 or $2.93 per share at March 31, 1997.  
 
Liquidity and Capital Resources
------------------------------- 
 
Cash used in operating activities amounted to $1,197,209 for the six months 
ended June 30, 1997 compared with $1,578,175 for the six months ended June 
30, 1996. The decrease in cash used in operating activities is the result of 
the cancellation of the quota share reinsurance arrangement on a runoff 
basis effective January 1, 1997. Cash used by investing activities amounted 
to $91,192 for the six months ended June 30, 1997 compared with cash 
provided of $1,915,602 for the six months ended June 30, 1996. 
 
The fair value of the Company's fixed maturities available for sale was 
$108,215 less than the amortized cost at June 30, 1997 compared with $52,717 
less than amortized cost at December 31, 1996. 
 
The Company maintains short term investments to provide a cash resource 
should the demands from operations exceed incoming cash flow. Short term 
investments amounted to $1,586,837 at June 30, 1997 compared with $2,868,875 
at December 31, 1996. The Company believes that this level is sufficient to 
meet any unanticipated cash demands.  
 
Part II: OTHER INFORMATION 

         Item 4.- Submission of Matters to a Vote of Security Holders 

         The Annual Meeting of Shareholders was held on June 10, 1997. The 
         following matters were voted on by shareholders, and received the 
         votes indicated. 
 
         To consider a proposed amendment to the Articles of Incorporation 
         which provides for a staggered Board of Directors.

<TABLE>
<CAPTION>
                                                    Broker 
                      For      Against   Abstain   Non-Votes
                    ---------------------------------------- 
            <S>     <C>       <C>         <C>       <C>
            TOTAL   182,970   1,169,100   11,350    514,029 

</TABLE>

To Elect Directors. 

<TABLE>
<CAPTION>

                         For      Against  Abstain   Non-Votes
                      ----------------------------------------
<S>                   <C>          <C>        <C>        <C>
Edward B. Batal       1,870,749    6,700      0          0 
Wilson G. Hess        1,872,949    4,500      0          0 
Robert G. Schatz      1,873,449    4,000      0          0 
Robert A. Hancock     1,873,449    4,000      0          0 
Deborah L. Harmon     1,873,449    4,000      0          0 
Bruce H. Suter        1,873,949    4,500      0          0 
Terence P. Cummings   1,872,949    4,500      0          0 
Joseph M. Hochadel    1,872,949    4,500      0          0 
Jonathan S. Kern      1,872,449    4,000      0          0 

</TABLE>

         3. To ratify the appointment of Coopers & Lybrand L.L.P. as 
            independent accountants to the Company for the year ending 
            December 31, 1997.

<TABLE>
<CAPTION>

                                                    Broker 
                       For     Against   Abstain   Non-Votes
                    ---------------------------------------- 
            <S>     <C>         <C>      <C>           <C>
            TOTAL   1,855,049   11,500   10,900        0 

</TABLE>
 
         4. To consider approval of a Stock Option Plan.
 
<TABLE>
<CAPTION>
                                                  Broker 
                      For    Against   Abstain   Non-Votes
                    --------------------------------------
            <S>     <C>      <C>       <C>        <C>
            TOTAL   755,070  121,075   20,150     981,154 

</TABLE>

         Item 5. Other Information 
         On July 29, 1997, 215,000 shares of the Company's common stock held 
         of record by First National Life and Casualty were sold at public
         auction, held pursuant to an order entered in the Superior Court,
         Cumberland County, Maine, to satisfy, in part, liens in favor of
         Official Committee of Unsecured Creditors of American Motor Club, Inc.
         These shares represent approximately 7.2% of the outstanding common
         stock of the Company. According to its Schedule 13D filed on August 6,
         1997, the purchaser, The Foothold Fund, L.P. ("Foothold"), is a New 
         York limited partnership with its principal business and principal 
         office located at 408 Route 22, Unit 2, North Salem, NY 10560. The 
         sole general partner of Foothold is The Foothold Management Corp. 
         ("Foothold Management"), a New York corporation with its principal 
         business and principal office located at 408 Route 22, Unit 2, 
         North Salem, NY 10560. Foothold has indicated that it and Foothold 
         Management are principally engaged in investing in various publicly 
         traded companies. The President, sole director, and sole 
         shareholder of Foothold Management is Mr. Peter A. Russ, whose 
         principal employment is as a securities analyst with Shelby Cullom 
         Davis & Co., L.P., a securities brokerage firm with an address at 
         609 Fifth Avenue, New York, NY 10017. According to its Schedule 
         13D, Foothold is acquiring the common stock of the Company for 
         investment purposes and not for the purpose of acquiring control of 
         the Company. 
 
         Item 6. Exhibits and Reports on Form 8-K 
 
         a) Exhibits pursuant to Item 601 of Regulation S-B 
 
            27 Financial Data Schedules 
 
         b) Reports on Form 8-K 
         On May 5, 1997, the Company filed a report on Form 8-K reporting 
         the Company's April 30, 1997, announcement that A. M. Best Company 
         upgraded North East Insurance Company to a "B-" rating. Prior to 
         the upgrade, the Company had previously announced its intention to 
         seek an improved rating on the basis of a significant improvement 
         in its financial condition and resolution of uncertainties 
         surrounding the sale of a large block of the Company's common stock 
         formerly held in a non-voting trust. 
 
                North East Insurance Company and Subsidiaries 
                                 Form 10-QSB 
                                Exhibit Index 
<TABLE>
<CAPTION>
 
Exhibit 
Number       Description                   Page
----------------------------------------------- 
  <S>        <C>                            <C>
  27         Financial Data Schedules       15 

</TABLE>

                North East Insurance Company and Subsidiaries 
 
                                 SIGNATURES 
 
In accordance with the requirements of the Exchange Act, the Registrant 
caused this report to be signed on its behalf by the undersigned, thereunto 
duly authorized. 
 
                                       North East Insurance Company 
 
Date:   August 13, 1997                By   /S/Robert G. Schatz
                                            ----------------------------
                                            Robert G. Schatz 
                                       President and Chief Executive Officer 
 
Date:   August 13, 1997                By   /S/Graham S. Payne
                                            ---------------------------- 
                                            Graham S. Payne 
                                       Treasurer and Chief Financial Officer