Page 1



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM 10 Q

X  Quarterly report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

|For the quarter ended | September 30, 2002
|--------------------- | ------------------

Or

___ Transition report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

For the transition period for _______________ to _______________

|Commission File Number | 1-14588
|---------------------- | -------

Northeast Bancorp
__________________________________________________________________________________________
(Exact name of registrant as specified in its charter)

|Maine
___________________________________                           | 01-042506
____________________________________
|------------------------------------------------------------------- | ----------------------------------------------
|(State or other jurisdiction of incorporation or organization)      | (I.R.S. Employer Identification No.)          
|158 Court Street, Auburn, Maine
___________________________________ | 04210
____________________________________    
|(Address of Principal executive
 offices)                           | (Zip Code)                                    

(207) 777-6411
___________________________________________________________________________
Registrant's telephone number, including area code

Not Applicable
___________________________________________________________________________
Former name, former address and former fiscal year, if changed since last
report.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subjected to such filing requirements for the past 90 days.  Yes X  No ___

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.  As
of November 08, 2002, the registrant had outstanding 2,647,466
shares of common stock, $1.00 par value per share.

Page 2

|Part I.  | Financial Information
|-------- | ---------------------
|         | Item 1.              
|         |                      
|         |                      
|         |                      
|         |                      
|         |                      
|         | Item 2.              
|         | Item 3.              
|         | Item 4.              
|Part II. | Other Information    
|         | Item 1.              
|         | Item 2.              
|         | Item 3.              
|         | Item 4.              
|         | Item 5.              
|         | Item 6.              



|                                                                                |                  | Page 3          
|------------------------------------------------------------------------------- | ---------------- | ----------------
|                                                                                |                  |                 
|PART 1 - FINANCIAL INFORMATION                                                 
|                                                                                |                  |                 
|Item 1. Financial Statements                                                    |                  |                 
|                                                                                |                  |                 
|NORTHEAST BANCORP AND SUBSIDIARIES                                             
|Consolidated Balance Sheets                                                    
|(Unaudited)                                                                    
|                                                                                |                  |                 
|                                                                                | September 30,    | June 30,        
|                                                                                | 2002             | 2002            
|                                                                                | ________________ | ________________
|Assets                                                                          |                  |                 
|Cash and due from banks                                                         | $      9,563,120 | $     14,343,009
|Interest bearing deposits                                                       | 620,136          | 674,083         
|Federal Home Loan Bank overnight deposits                                       | 15,946,000       | 3,732,000       
|Available for sale securities                                                   | 19,541,947       | 32,440,386      
|Loans held for sale                                                             | 1,382,650        | 611,210         
|                                                                                |                  |                 
|Loans                                                                           | 384,327,484      | 374,634,119     
|Less allowance for loan losses                                                  | 3,650,000        | 3,496,000       
|                                                                                | _______________  | _______________ 
|Net loans                                                                       | 380,677,484      | 371,138,119     
|                                                                                |                  |                 
|Premises and equipment, net                                                     | 4,099,552        | 4,150,197       
|Federal Home Loan Bank stock                                                    | 6,644,500        | 6,644,500       
|Aquired assets - net                                                            | 444,061          | 586,642         
|Goodwill                                                                        | 407,897          | 407,897         
|Intangible assets, net of accumulated
      amortization of $1,421,479 at       |                  |                 
|09/30/02 and $1,355,010 at 6/30/02                                              | 783,250          | 849,718         
|Other assets                                                                    | 15,872,856       | 6,638,156       
|                                                                                | _______________  | _______________ 
|Total Assets                                                                    | $    455,983,453 | $    442,215,917
|                                                                                | ===============  | =============== 
|                                                                                |                  |                 
|Liabilities and Shareholders' Equity                                            |                  |                 
|                                                                                |                  |                 
|Liabilities:                                                                    |                  |                 
|Deposits                                                                        | $    314,848,335 | $ 303,197,646   
|Securities Sold Under Repurchase Agreements                                     | 10,376,032       | 8,871,642       
|Advances from the Federal Home Loan Bank                                        | 85,205,572       | 85,956,608      
|Other Liabilities                                                               | 2,807,617        | 2,286,232       
|                                                                                | _______________  | _______________ 
|Total Liabilities                                                               | 413,237,556      | 400,312,128     
|                                                                                |                  |                 
|Guaranteed Preferred Beneficial Interest in
      the                           |                  |                 
|Company's Junior Subordinated Debentures                                        | 7,172,998        | 7,172,998       
|                                                                                |                  |                 
|Shareholders' Equity:                                                           |                  |                 
|Preferred stock, cumulative, $1.00 par
      value, 1,000,000 shares authorized |                  |                 
|and none issued and outstanding                                                 | -                | -               
|Common stock, $1.00 par value, 15,000,000
      shares authorized; 2,786,095    |                  |                 
|shares issued and 2,649,212 and 2,647,712
      shares outstanding              |                  |                 
|at 09/30/02 and 06/30/02, respectively                                          | 2,786,095        | 2,786,095       
|Additional paid in capital                                                      | 10,376,842       | 10,374,285      
|Retained earnings                                                               | 23,443,882       | 22,748,760      
|Accumulated other comprehensive income                                          | 310,148          | 178,162         
|                                                                                | _______________  | _______________ 
|                                                                                | 36,916,967       | 36,087,302      
|                                                                                | _______________  | _______________ 
|Treasury Stock at cost, 136,883 and 138,383
      shares at 09/30/02 and        |                  |                 
|6/30/02, respectively.                                                          | (1,344,068)      | (1,356,511)     
|                                                                                | _______________  | _______________ 
|Total Shareholders' Equity                                                      | 35,572,899       | 34,730,791      
|                                                                                | _______________  | _______________ 
|Total Liabilities and Shareholder' Equity                                       | $    455,983,453 | $    442,215,917
|                                                                                | ===============  | =============== 



|                                                          |                        | Page 4                
|--------------------------------------------------------- | ---------------------- | ----------------------
|                                                          |                        |                       
|NORTHEAST BANCORP AND
      SUBSIDIARIES                 
|Consolidated Statements of Income                        
|(Unaudited)                                              
|                                                          |                        |                       
|                                                          | Three Months Ended    
|                                                          | September 30,         
|                                                          | 2002                   | 2001                  
|                                                          | ___________________    | ___________________   
|Interest and Dividend Income:                             |                        |                       
|Interest on FHLB overnight
      deposits                 | $     
      30,364    | $     
      68,073   
|Interest on Loans & Loans
      held for sale             | 7,014,612              | 7,999,536             
|Interest on available for sale
      securities           | 329,993                | 321,212               
|Dividends on Federal Home Loan
      Bank stock           | 62,804                 | 93,787                
|Other Interest Income                                     | 2,807                  | 4,402                 
|                                                          | _________________      | _________________     
|Total Interest and Dividend
      Income                  | 7,440,580              | 8,487,010             
|                                                          |                        |                       
|Interest Expense:                                         |                        |                       
|Deposits                                                  | 2,279,131              | 3,181,049             
|Repurchase agreements                                     | 26,134                 | 61,708                
|Trust preferred securities                                | 176,520                | 176,520               
|Other borrowings                                          | 1,210,089              | 1,443,299             
|                                                          | _________________      | _________________     
|Total Interest Expense                                    | 3,691,874              | 4,862,576             
|                                                          | _________________      | _________________     
|                                                          |                        |                       
|Net Interest Income                                       | 3,748,706              | 3,624,434             
|Provision for loan losses                                 | 225,476                | 210,323               
|                                                          | _________________      | _________________     
|Net interest income after
      Provision for Loan Losses | 3,523,230              | 3,414,111             
|                                                          |                        |                       
|Other Income:                                             |                        |                       
|Service charges                                           | 353,252                | 373,840               
|Net securities gains                                      | 182,850                | 11,036                
|Net gain on sale of loans                                 | 118,551                | 178,003               
|Investment/Insurance commissions                          | 297,090                | 273,066               
|Other                                                     | 82,330                 | 44,125                
|                                                          | _________________      | _________________     
|Total Other Income                                        | 1,034,073              | 880,070               
|                                                          |                        |                       
|Other Expenses:                                           |                        |                       
|Salaries and employee benefits                            | 1,785,327              | 1,504,306             
|Net occupancy expense                                     | 269,008                | 198,696               
|Equipment expense                                         | 212,062                | 180,462               
|Intangible assets amortization                            | 66,468                 | 43,071                
|Other                                                     | 843,019                | 921,748               
|                                                          | _________________      | _________________     
|Total Other Expenses                                      | 3,175,884              | 2,848,283             
|                                                          | _________________      | _________________     
|                                                          |                        |                       
|Income Before Income Taxes                                | 1,381,419              | 1,445,898             
|Income tax expense                                        | 474,480                | 503,537               
|                                                          | _________________      | _________________     
|Net Income                                                | $     906,939          | $     942,361         
|                                                          | =================      | =================     
|Earnings Per Common Share                                 |                        |                       
|Basic                                                     | $           
      .34 | $          
      0.37
|Diluted                                                   | $           
      .34 | $          
      0.36
|                                                          |                        |                       
|Net interest margin                                       | 3.57%                  | 3.49%                 
|Net interest spread                                       | 3.12%                  | 2.91%                 
|Return on average assets
      (annualized)               | 0.83%                  | 0.87%                 
|Return on average equity
      (annualized)               | 10.23%                 | 12.04%                
|Efficiency ratio                                          | 66%                    | 63%                   



|Page 5                                                                                                                                                 
|-------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTHEAST BANCORP AND SUBSIDIARIES
      Consolidated Statements of Changes in Shareholders' Equity
      Three Months Ended September 30, 2002 and 2001
|                                                                                                                                                       
|Balance at June 30, 2001                                                                                                                               
|Net income for the three months ended 9/30/01                                                                                                          
|Adjustment of net unrealized loss/gain for Securities available for
      sale                                                                         
|Total Comprehensive income                                                                                                                             
|                                                                                                                                                       
|Treasury stock purchased                                                                                                                               
|Dividends on common stock at $0.06 per share                                                                                                           
|Common stock issued in connection with employee benefit and stock
      option plans                                                                   
|Balance at September 30, 2001                                                                                                                          
|                                                                                                                                                       
|Balance at June 30, 2002                                                                                                                               
|Net income for the three months ended 9/30/02                                                                                                          
|Adjustment of net unrealized loss/gain for Securities available for
      sale                                                                         
|Total Comprehensive income                                                                                                                             
|                                                                                                                                                       
|Dividends on common stock at $0.08per share                                                                                                            
|                                                                                                                                                       
|Common stock issued in connection with employee benefit and stock
      option plans                                                                   
|Balance at September 30, 2002                                                                                                                          
|                                                                                                                                                       
|                                                                                                                                                       



|                                                                     |                     | Page 6             
|-------------------------------------------------------------------- | ------------------- | -------------------
|                                                                     |                     |                    
|NORTHEAST BANCORP AND SUBSIDIARIES                                  
|Consolidated Statements of Cash Flows                               
|(Unaudited)                                                         
|                                                                     |                     |                    
|                                                                     | Three Months Ended 
|                                                                     | September 30,      
|                                                                     | 2002                | 2001               
|                                                                     | ___________________ | ___________________
|Cash provided by operating activities                                | $       777,206     | $     1,119,298    
|                                                                     |                     |                    
|Cash flows from investing activities:                                |                     |                    
|Available for sale securities purchased                              | (152,089)           | (436,747)          
|Available for sale securities matured                                | 1,125,807           | 1,623,007          
|Available for sale securities sold                                   | 10,198,300          | 22,287             
|Net change in loans                                                  | (9,936,624)         | 3,161,400          
|Net capital expenditures                                             | (86,173)            | (11,592)           
|Proceeds from sale of acquired assets                                | 390,510             | 275,024            
|Real estate held for investment sold                                 | -                   | 45,893             
|Bank ownd life insurance purchased                                   | (7,143,999)         | -                  
|                                                                     | ________________    | ________________   
|Net cash (used) provided by investing
      activities               | (5,604,268)         | 4,679,272          
|                                                                     |                     |                    
|Cash flows from financing activities:                                |                     |                    
|Net change in deposits                                               | 11,650,689          | 13,758,791         
|Net change in repurchase agreements                                  | 1,504,390           | 1,184,740          
|Dividends paid                                                       | (211,817)           | (160,903)          
|Proceeds from stock issuance                                         | 15,000              | 51,781             
|Net decrease in advances from Federal Home
      Loan Bank of Boston | (751,036)           | (18,832,400)       
|                                                                     | ________________    | ________________   
|Net cash provided (used in) in financing
      activities            | 12,207,226          | (3,997,991)        
|                                                                     | ________________    | ________________   
|                                                                     |                     |                    
|Net increase in cash and cash equivalents                            | 7,380,164           | 1,800,579          
|                                                                     |                     |                    
|Cash and cash equivalents, beginning of
      period                 | 18,749,092          | 14,188,265         
|                                                                     | ________________    | ________________   
|Cash and cash equivalents, end of period                             | $       26,129,256  | $     15,988,844   
|                                                                     | ================    | ================   
|                                                                     |                     |                    
|Cash and cash equivalents include cash on
      hand, amounts due    |                     |                    
|from banks and interest bearing deposits.                            |                     |                    
|                                                                     |                     |                    
|Supplemental schedule of noncash activities:                         |                     |                    
|Net change in valuation for unrealized
      gains, net of tax, on   |                     |                    
|available for sale securities                                        | 131,986             | 320,762            
|Net transfer from loans to acquired assets                           | 253,929             | 214,780            
|                                                                     |                     |                    
|Supplemental disclosure of cash paid during
      the period for:    |                     |                    
|Income taxes paid, net of refunds                                    | -                   | -                  
|Interest paid                                                        | 3,682,709           | 4,905,242          



Page 7



1.  Basis of Presentation

The accompanying unaudited condensed and consolidated financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States of America for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by accounting
principles generally accepted in the United States of America for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-month period ended September 30,
2002 are not necessarily indicative of the results that may be expected for the
fiscal year ending June 30, 2003. For further information, refer to the audited
consolidated financial statements and footnotes thereto for the fiscal year
ended June 30, 2002 included in the company's Annual Report on Form 10-K.

2.  Guaranteed Preferred Beneficial Interests in the Company's
Junior Subordinated Debentures

NBN Capital Trust ("NBNCT") a Delaware statutory trust, was created
in October of 1999. The NBNCT exists for the exclusive purpose of (i) issuing
and selling Common Securities and Preferred Securities to the public (together
the "Trust Securities"), (ii) using the proceeds of the sale of Trust
Securities to acquire 9.60% Junior Subordinated Deferrable Interest Debentures
("Junior Subordinated Debentures") issued by the Company, and (iii)
engaging only in those other activities necessary, convenient, or incidental
thereto (such as registering the transfer of the Trust Securities). Accordingly
the Junior Subordinated Debentures are the sole assets of the NBNCT. The
Preferred Securities accrue and pay distributions quarterly at an annual rate of
9.60% of the stated liquidation amount of $7.00 per Preferred Security. The
Company has fully and unconditionally guaranteed all of the obligations of NBNCT.
The guaranty covers the quarterly distributions and payments on liquidation or
redemption of the Preferred Securities, but only to the extent of funds held by
NBNCT. NBNCT had sold $7,172,998 of its trust preferred securities to the public
and $221,851 of its Common Securities to the Company. The Preferred Securities
are mandatorily redeemable upon the maturity of the Junior Subordinated
Debentures on March 31, 2029 or upon earlier redemption as provided in the
Indenture. The Company has the right to redeem the Junior Subordinated
Debentures, in whole or in part on or after March 31, 2004 at redemption price
specified in the Indenture plus any accrued but unpaid interest to the
redemption date. The Company owns all of the Common Securities of NBNCT, the
only voting security, and as a result it is a subsidiary of the Company.

3.  Loans

The following is a summary of the composition of loans at:



|                        | September 30, 2002                  | June 30, 2002                      
|----------------------- | ----------------------------------- | -----------------------------------
|Residential real estate | 160,130,838                         | $   159,566,886                    
|Commercial real estate  | 81,283,681                          | 80,423,303                         
|Construction            | 9,365,193                           | 8,958,052                          
|Commercial              | 53,675,103                          | 48,535,162                         
|Consumer & Other        | 76,979,043  
      ______________   | 74,267,760  
      ______________  
|Total                   | 381,433,858                         | 371,751,163                        
|Net Deferred Costs      | 2,893,626  
      ______________    | 2,882,956  
      ______________   
|Net Loans               | $  384,327,484  
      ============ | $  374,634,119  
      ============



Page 8

4.  Allowance for Loan Losses

The following is an analysis of transactions in the allowance for loan
losses:



|                                          | Three Months Ended
      September 30,
|----------------------------------------- | --------------------------------------
|                                          | 2002        
      _______________    
|Balance at beginning of year              | $     3,496,000                       
|Add provision charged to operations       | 225,476                               
|Recoveries on loans previously charge off | 114,833  
      _______________       
|                                          | 3,836,309                             
|Less loans charged off                    | 186,309  
      _______________       
|Balance at end of period                  | $     3,650,000  
      ============= 

5.  Securities

Securities available for sale at cost and approximate market values and
maturities are summarized below:



|                                                                                                                  | September 30, 2002
      _________________________ | June 30, 2002
      _________________________
|----------------------------------------------------------------------------------------------------------------- | -------------------------------------------------- | ---------------------------------------------
|                                                                                                                  | Cost
      ___________                             | Market
      Value
      ___________         
|Debt securities issued by the
      U.S. treasury and other U.S.
      Government corporations and
      agencies | $       
             --                           | $     
               --                     
|Corporate bonds                                                                                                   | 149,951                                            | 149,274                                      
|Mortgage-backed securities                                                                                        | 17,322,669                                         | 18,140,559                                   
|Equity securities                                                                                                 | 1,599,405  
      ___________                      | 1,252,114  
      ___________                
|                                                                                                                  | $  19,072,025  
      ===========                  | $  19,541,947  
      ==========             

|                                                                                                                                                                 | Cost
      ___________           | Market
      Value
      ___________ | Cost
      ___________           | Market
      Value
      ___________
|---------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------- | ------------------------------------ | -------------------------------- | ------------------------------------
|Due in one year or less                                                                                                                                          | $    
               --          | $      
             --              | $  5,082,410                     | $   5,113,281                       
|Due after one year through
      five years                                                                                                                      | 149,951                          | 149,274                              | 7,156,126                        | 7,217,719                           
|Mortgage-backed securities
      (including securities with interest
      rates ranging from 5.5% to 9.0%
      maturing September 2003 to
      November 2029) | 17,322,669                       | 18,140,559                           | 18,448,558                       | 18,912,078                          
|Equity securities                                                                                                                                                | 1,599,405  
      ___________    | 1,252,114  
      ___________        | 1,483,350  
      ___________    | 1,197,308  
      ___________       
|                                                                                                                                                                 | $  19,072,025  
      ========== | $  19,541,947  
      ==========     | $  32,170,444  
      ========== | $  32,440,386  
      ==========    

Page 9

6.  Deposits.

The following is a summary of the composition of deposits at:



|                        | September 30, 2002                  | June 30,
      2002                
|----------------------- | ----------------------------------- | -----------------------------------
|Demand                  | $   30,076,783                      | $   28,252,757                     
|NOW                     | 80,196,054                          | 62,468,856                         
|Money Market            | 15,769,633                          | 15,879,962                         
|Regular Savings         | 22,296,420                          | 23,021,132                         
|Brokered Deposits       | 20,843,316                          | 24,463,179                         
|Certificates of Deposit | 145,666,129  
       _____________  | 149,111,760  
      _____________  
|Total Deposits          | $  314,848,335  
      ============ | $  303,197,646  
      ============



7.  Advances from the Federal Home Loan Bank

A summary of borrowings from the Federal Home Loan Bank is as follows:



|September 30, 2002
      ________________________________________________________________________
|-------------------------------------------------------------------------------------------------
|Principal
      Amounts
      ___________________                                                
|$     6,463,976                                                                                  
|28,900,155                                                                                       
|30,841,441                                                                                       
|1,000,000                                                                                        
|3,000,000                                                                                        
|8,000,000                                                                                        
|7,000,000  
      ___________________                                                            
|$   85,205,572  
      =================                                                         



|June 30, 2002
      _______________________________________________________________________
|-------------------------------------------------------------------------------------------
|Principal
      Amounts
      ___________________                                          
|$     9,478,495                                                                            
|17,478,113                                                                                 
|17,000,000                                                                                 
|27,000,000                                                                                 
|8,000,000                                                                                  
|7,000,000  
      ___________________                                                      
|$   85,956,608  
      =================                                                   



Page 10

Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition

Description of Operations

Northeast Bancorp (the "Company") is a Maine corporation and a
registered unitary savings and loan holding company with the Office of Thrift
Supervision ("OTS") its primary regulator. We conduct business from
our headquarters in Auburn, Maine and, as of September 30, 2002, from 13 banking
offices all located in Western and South-central Maine. At September 30, 2002,
we had consolidated assets of $456 million and consolidated shareholders' equity
of $35.6 million.

Northeast Bancorp's principal asset is its wholly-owned banking subsidiary,
Northeast Bank, FSB (the "Bank"), a federally chartered savings and
loan association. Accordingly, the Company's results of operations are primarily
dependent on the results of operations of the Bank. The Bank has branches
located in Auburn, Augusta, Bethel, Brunswick, Buckfield, Harrison, Lewiston,
Lisbon Falls, Mechanic Falls, Richmond, and South Paris, Maine. The Bank's
wholly owned subsidiary Northeast Financial Services, Inc. recently relocated
its principal offices from Fundy Road to US Route 1 in Falmouth, Maine. From
this location, loan applications are accepted and investment, insurance and
financial planning products and services are offered. Kendall Insurance, an
insurance agency which is a division of Northeast Financial Services, Inc.,
offers property and casualty insurance products from a facility in Bethel,
Maine. On November 4, 2002 the Bank opened a new branch in Portland, Maine, its
14th banking office, which is a commercial banking center.

The Bank continues to expand its commercial loan business, increase its line
of financial products and services, and expand its market area. This strategy
will increase core earnings in the long term by providing stronger interest
margins, additional non-interest income, and increased loan volume.
Substantially all of the Bank's current income and services are derived from
banking products and services in Maine.

This Management's Discussion and Analysis of Results of Operations and
Financial Condition presents a review of the results of operations for the three
months ended September 30, 2002 and 2001 and the financial condition at June 30,
2002 and September 30, 2002 . This discussion and analysis is intended to assist
in understanding the results of operations and financial condition of the
Company and the Bank. Accordingly, this section should be read in conjunction
with the consolidated financial statements and the related notes and other
statistical information contained herein. See Form 10-K dated as of June 30,
2002 for discussion of the critical accounting policies of the Company.

Certain statements contained herein are not based on historical facts and are
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, such as statements relating to
financial condition and future prospects, loan loss reserve adequacy, simulation
of changes in interest rates, prospective results of operations, capital
spending and financing sources, and revenue sources. These statements relate to
expectations concerning matters that are not historical facts. Forward-looking
statements, which are based on various assumptions (some of which are beyond the
Company's control), may be identified by reference to a future period or
periods, or by the use of forward-looking terminology such as
"believe", "expect", "estimate",
"anticipate", "continue", "plan",
"approximately", "intend", or other similar terms or
variations on those terms, or the future or conditional verbs such as
"will", "may", "should", "could", and
"would". Such forward-looking statements reflect the current view of
management and are based on information currently available to them, and upon
current expectations, estimates, and projections regarding the Company and its
industry, management's belief with respect there to, and certain assumptions
made by management. These forward-looking statements are not guarantees of
future performance and are subject to risks, uncertainties, and other factors.
Accordingly, actual results could differ materially from those set forth in
forward-looking statements due to a variety of factors, including, but not
limited to, those related to the economic environment, particularly in the
market areas in which the Company operates, competitive products and pricing,
fiscal and monetary policies of the U.S. Government, changes in government
regulations affecting financial institutions, including regulatory fees and
capital requirements, changes in prevailing interest rates, acquisitions and the
integration of acquired businesses, credit risk management, asset/liability
management, changes in technology, changes in the securities markets, and the
availability of and the costs associated with sources of liquidity. A more
detailed description of potential risks, uncertainties, and other factors which
could cause the Company's financial performance or results of operations to
differ materially from current expectations or such forward-looking statements
is set forth in Part 1, Item 1 of the Company's Form 10-K for the fiscal year
ended June 30, 2002 under the heading "Forward Looking Statements" and
is incorporated herein by reference.

Results of Operations

The Company reported net income of $906,939, or $0.34 per diluted share for
the quarter ended September 30, 2002 compared with $942,361, or $0.36 per
diluted share for the quarter ended September 30, 2001, a decrease of $35,422 or
3.8%. Non-interest expense increased $327,601, or 11.5%. This increase in
non-interest expense was partially offset by a $124,272 increase in net interest
income, $154,003 increase in non-interest income and $29,057 decrease in income
tax expense. The provision for loan loss increased $15,153. Salaries and
employee benefits had the most significant impact on non-interest expense
primarily due to an increase of 17 full-time equivalent employees compared to
the quarter ended September 30, 2001. The additional employees were for the new
Commercial Loan Origination division, Kendall Insurance, and staff to support
the increased levels of originations of commercial, mortgage and consumer loans.

Page 11

Net interest income is the difference between interest income on earning
assets such as loans and securities, and interest expense incurred on
liabilities such as deposits, securities sold under repurchase agreements, and
borrowings. It continues to be our largest revenue source. Net interest income
is affected by the level of interest rates, changes in interest rates and by
changes in the amount and composition of interest-earning assets and
interest-bearing liabilities.

Net interest income for the three months ended September 30, 2002 increased
$124,272 compared to the same period in 2001 while the net interest margin
increased to 3.57% from 3.49% for the respective periods. Average earning assets
increased $3,964,000 for the three months ended September 30, 2002 compared to
September 30, 2001. The increase in net interest income was due to the
decreasing rates incurred on interest-bearing liabilities, lower volume of funds
borrowed, and an increase in average investments. Interest rate declines on
interest-earning assets partially offset the overall lower cost of deposits and
borrowings. The rate decreases reflect the interest rate cuts by the Open Market
Committee of the Federal Reserve during 2001. Average loans as a percentage of
average earning assets was 90.7% and 91.7% for the quarters ended September 30,
2002 and 2001, respectively. Average loans declined slightly compared to
September 30, 2001 due to continuing sales of new residential real estate loan
originations. The changes in net interest income are presented in the schedule
below.



|                                                                                                                                                                | Difference Due to                |                                  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------- | ---------------------------------
|                                                                                                                                                                | Volume
      _____________       | Rate
      _____________         
|Investments                                                                                                                                                     | $      49,255                    | $     (71,457)                   
|Loans, net                                                                                                                                                      | (7,189)                          | (977,735)                        
|FHLB & Other Deposits                                                                                                                                           | 1,617
      _____________        | (40,921)
      _____________     
|Total Interest-earnings Assets                                                                                                                                  | 43,683                           | (1,090,113)                      
|                                                                                                                                                                |                                  |                                  
|Deposits                                                                                                                                                        | (127,835)                        | (774,083)                        
|Repurchases Agreements                                                                                                                                          | 148                              | (35,722)                         
|Borrowings                                                                                                                                                      | (209,144)
      _____________    | (24,066)
      _____________     
|Total Interest-bearing Liabilities                                                                                                                              | (336,831)
      _____________    | (833,871)
      _____________    
|Net Interest Income                                                                                                                                             | $    380,514 
      ============ | $    (256,242)
      ============
|Rate/Volume amounts spread proportionately between volume and rate.
      Borrowings in the table include trust preferred securities and FHLB
      borrowings.

The Company's business primarily consists of the savings and loan activities
of the Bank. The success of the Company is largely dependent on its ability to
manage interest rate risk. This is the sensitivity of income to changes in
interest rates. Changes in interest rates, as well as fluctuations in the level
of assets and liabilities, affect net interest income. This risk arises from our
core banking activities, lending and deposit gathering. In addition to directly
impacting net interest income, changes in interest rates can also affect the
amount of loans originated and sold by the Bank, the ability of borrowers to
repay adjustable or variable rate loans, the average maturity of loans, the rate
of amortization of premiums paid on securities, the amount of unrealized gains
and losses on securities available for sale and the fair value of our saleable
assets and the resultant ability to realize gains. The Bank has shifted to a
slightly asset sensitive position based on its own internal analysis which
categorizes its core deposits as long term liabilities which are then matched to
long term assets. As a result, the Bank will generally experience an improvement
in its net interest margins during a period of increasing rates.

Page 12

Approximately 45% of the Bank's loan portfolio is comprised of floating rate
loans based on a prime rate index or short-term rate indices such as the
one-year Treasury bill. Interest income on these existing loans will increase as
short-term interest rates increase. An increase in short-term interest rates
will also increase deposit and FHLB advance rates, increasing the Company's
interest expense. Although the Bank has experienced some net interest margin
expansion, the impact on net interest income will depend on, among other things,
actual rates charged on the Bank's loan portfolio, deposit and advance rates
paid by the Bank and loan volume.

The provision for loan losses for the quarter ended September 30, 2002 was
$225,476, an increase of $15,153 from $210,323 for the quarter ended September
30, 2001. Net charge-offs amounted to $71,476 for the three months ended
September 30, 2002 compared to $170,923 for the same period in 2001. The Bank
experienced continued loan growth in the commercial real estate and commercial
loans during the quarter ended September 30, 2002. Increases in the provision
reflect loan mix shift to loans with a higher risk profile, the economic
slowdown and an uncertain economic climate. This provision increased the
allowance as a percentage of outstanding loans to 0.95% compared to 0.94% at
June 30, 2002.



Total other income was $1,034,073 for the three months ended September 30,
2002, an increase of $154,003 from the three months ended September 30, 2001.
This increase was due to $171,814 higher net securities gains, $24,024 higher
investment and insurance commissions, and $38,205 higher trust and other income
partially offset by $20,588 lower service charges and $59,452 lower net gain on
the sale of loans. The higher net securities gains were realized from the sale
of government agency securities. Kendall Insurance division operations for the three months
ended September 30, 2002 accounted for the higher investments and insurance
commissions. Higher trust revenue from increased volume of assets accounts for
the higher other income. Lower service charges were primarily from lower loan
related fees and charges. In the three months ended September 30, 2001, the Bank
sold auto loans. No such sales occurred in the quarter ended September 30, 2002
accounting for the decrease in the net gain on the sale of loans from 2001 to
2002.

Other expense for the three months ended September 30, 2002 was $3,175,884 an
increase of $327,601 from $2,848,283 for the three months ended September 30,
2001. This increase was primarily due to increased salaries and employee
benefits of $281,021. The  reason for the increase in this expense was
due to the addition of 17 full-time equivalents for the new staff of the
Commercial Loan Originators and Kendall Insurance divisions added in early
calendar 2002 as well as hiring staff generally to support increased commercial,
mortgage and deposit volume. Higher investment commissions and group medical
expense also contributed to the increased salary and employee benefit expense.
Net occupancy expense increased $70,312 for the quarter ended September 30, 2002
as compared to the prior year. This increase was attributable to additional
leased space for new divisions and staff, repairs and maintenance expenses to
office and branch facilities owned by the Bank, and annual common charges.
Equipment expense increased $31,600 for the three months ended September 30,
2002 as compared to the prior year. This increase was due to higher software and
computer equipment depreciation and maintenance contract expenses. Intangible
asset amortization increased $23,397 for the three months ended September 30,
2002 as compared to the prior year. The amortization of non-compete and customer
list intangibles acquired in the purchase of Kendall Insurance accounts for this
increased expense. Other expense decreased $78,729 for the three months ended
September 30, 2002 as compared to the prior year. This decrease was due to lower
other-than-temporary write downs on equity securities in 2002.

The efficiency ratio was 66% and 63% for the three months ended September 30,
2002 and 2001, respectively.

The Company's income tax expense decreased by $29,057 for the three months
ended September 30, 2002 when compared to the three months ended September 30,
2001. The decrease in income tax expense was due to lower earnings before tax.

Financial Condition

Our consolidated assets amounted to $455,983,453 and $442,215,917 as of
September 30, 2002 and June 30, 2002, respectively, an increase of $13,767,536,
or 3%. This increase in assets was due primarily to an increase in FHLB
overnight deposits funded with short-term increases in NOW account balances of
approximately $18 million, which occurred during the last three business days of
September 2002. On September 30, 2002, these excess funds were partially offset
by the purchase of approximately $7 million in Bank-owned life insurance ("BOLI")
on the lives of certain employees of the Bank and its wholly owned subsidiary
Northeast Financial Services, Inc. Total average assets were $438,678,000 for
the three months ended September 30, 2002. Total shareholders' equity was
$35,572,899 and $34,730,791 at September 30, 2002 and June 30, 2002,
respectively.

The investment portfolio was $19,541,947 as of September 30, 2002, a decrease
of $12,898,439, or 40%, from $32,440,386 as of June 30, 2002. The decrease was
due to the liquidation of government agency securities primarily to fund the
growth in loans during the three months ended September 30, 2002, and the BOLI
purchase on September 30, 2002. The investment portfolio consists of
mortgage-backed securities, corporate bonds, and equity securities. Funds
retained by the Bank as a result of increases in deposits or decreases in loans,
which are not immediately used by the Bank, are invested in securities held in
its investment portfolio. The investment portfolio is used as a source of
liquidity for the Bank. The investment portfolio is structured so that it
provides for an ongoing source of funds for meeting loan and deposit demands and
for reinvestment opportunities to take advantage of changes in the interest rate
environment. The investment portfolio averaged $23,816,000
for the quarter ended September 30, 2002 as compared to $19,698,000 for the
quarter ended September 30, 2001, an increase of $4,118,000 or 21%. The average
investment portfolio increase of $4,118,000 as of September 30, 2002 was due to
the purchase of short-term government agency securities using the funds
generated by the Express Gold NOW deposit account in excess of new
loans and payoff of FHLB borrowings at maturity.

Page 13

The Company's investment portfolio is classified as available for sale at
September 30, 2002 and June 30, 2002. Debt and equity securities, which may be
sold prior to maturity, are classified as available for sale and are carried at
market value. Changes in market value, net of applicable income taxes, are
reported as a separate component of shareholders' equity. Gains and losses on
the sale of securities are recognized at the time of the sale using the specific
identification method. The amortized cost and market value of available for sale
securities at September 30, 2002 was $19,072,025 and $19,541,947, respectively.
The difference between the carrying value and the cost of the securities of
$469,922 was primarily attributable to the increase in the market value of
mortgage-backed securities due to decreasing interest rates. The net unrealized
gain on mortgage-backed securities was $817,213 and the net unrealized loss on
equity securities was $347,291 at September 30, 2002. Substantially all of the
mortgage-backed securities are high-grade, federal agency securities. Management
believes that the yields currently received on this portfolio are satisfactory
and intends to hold these securities for the foreseeable future. Management
reviews the portfolio of investments on an ongoing basis to determine if there
has been any other than temporary declines in value. Some of the considerations
management makes in the determination are market valuations of particular
securities and economic analysis of the securities' sustainable market values
based on the underlying company's profitability. Based on management's
assessment of the securities portfolio, there have been other than temporary
declines in values of individual equity securities in the amount of $36,034. A
substantial portion of this write-down was attributable to three securities for
which the recent financial performance had deteriorated. Such securities have
been written down and are included in other expenses in the statement of income
for the three months ended September 30, 2002. Management also plans to hold the
equity securities for the foreseeable future because we believe that the decline
in equity values is due to overall downturn in market conditions, but the
underlying companies are viable and well managed.

Total loans of $384,327,484 as of September 30, 2002 increased $9,693,365, or
3%, from $374,634,119 as of June 30, 2002. Compared to June 30, 2002, all loan
portfolios increased, but the significant changes were a $5,139,941, or 11%,
increase in commercial loans and a $2,711,283, or 4%, increase in consumer
loans. The increase in commercial loans was due to new opportunities with small
businesses within our market areas. The increase in consumer loans was due to
indirect recreational vehicle, indirect auto loans, and personal loans. These
loan portfolios contain elements of credit and interest rate risk. The
residential real estate loan portfolio, which is comprised of purchased loans,
residential real estate loans originated for portfolio, and commercial real
estate 1 to 4 family loans, increased slightly, $563,952, over June 30, 2002.
Residential real estate loans originated for portfolio and commercial 1 to 4
family loans more than offset the continuing high prepayments experienced on the
purchased loans attributable to high levels of refinancing in a low interest
rate environment. The total loan portfolio averaged $380,758,431 for the quarter
ended September 30, 2002, a decrease of $342,774, or less than 1%, from the
quarter ended September 30, 2001.

The Bank primarily lends within its local market areas, which management
believes helps them to better evaluate credit risk. The Bank's loan portfolio
mix as of September 30, 2002 has changed slightly with increases in commercial
real estate and commercial loans when compared to June 30, 2002. The Bank's
local market, as well as the secondary market, continues to be very competitive
for loan volume. The local competitive environment and customer response to
favorable secondary market rates will have an adverse affect on the Bank's
ability to increase the loan portfolio. In an effort to increase loan volume,
the Bank's interest rates for its loan products have been reduced to compete in
the various markets.

Residential real estate loans consisting of owner-occupied residential loans
as a percentage of total loans were 43%, 44% and 49% as of September 30, 2002,
June 30, 2002, and September 30, 2001, respectively. The variable rate product
as a percentage of total residential real estate loans was 37%, 35% and 33% for
the same periods, respectively. Variable rate residential loans have increased
when compared to the prior year due to the prepayment and sale of fixed rate
loans. Management will continue to pursue its strategy of increasing the
percentage of variable rate loans as a percentage of the total loan portfolio to
help manage interest rate risk. We continue to sell all 30-year, fixed-rate
residential real estate loans into the secondary market. All new 15 year
fixed-rate and adjustable loans are originated for our portfolio. Average
residential real estate mortgages (including residential real estate loans held
for sale) of $163,987,402 for the three months ended September 30, 2002
decreased $23,018,175, or 12%, from the three months ended September 30, 2001.
The decrease was due to increased refinancing activity and prepayment in a low
interest rate environment combined with our policy to sell 30 year fixed rate
residential real estate loans into the secondary market

Commercial real estate loans as a percentage of total loans were 23%, 23% and
19% as of September 30, 2002, June 30, 2002 and September 30, 2001,
respectively. Commercial real estate loans have minimal interest rate risk
because the portfolio consists primarily of variable rate products. The variable
rate products as a percentage of total commercial real estate loans were 92%,
93% and 91% for the same periods respectively. The Bank tries to mitigate credit
risk by lending in its market area as well as maintaining a well-collateralized
position in real estate. Average commercial real estate loans of $87,612,301 for
the three months ended September 30, 2002 increased $15,557,261, or 22%, from
the same period in 2001. The increase in commercial real estate loans was due to
market share increases in its existing business markets.

Page 14

Commercial loans as a percentage of total loans were 14%, 13%, and 12% as of
September 30, 2002, June 30, 2002 and September 30, 2001, respectively. The
variable rate products as a percentage of total commercial loans was 55%, 53%,
and 53% for the same periods respectively. The repayment ability of commercial
loans customers is highly dependent on the cash flow of the customer's business.
The Bank mitigates losses by strictly adhering to the Company's underwriting and
credit policies. Average commercial loans of $51,228,663 for the three months
ended September 30, 2002 increased $5,327,856, or 12%, from the same period in
2001.

Consumer and other loans as a percentage of total loans were 20% for the
periods ended September 30, 2002, June 30, 2002, and September 30, 2001.
Indirect recreational vehicle and mobile home loans comprise approximately 65%
of the total consumer loans. Indirect auto loans account for 22% of total
consumer loans. Since these loans are primarily fixed rate products, they have
interest rate risk when market rates increase. These loans also have credit
risk. The consumer loan department underwrites all the indirect automobile and
recreational vehicle loans and mobile home loans to mitigate credit risk. The
Bank typically pays a nominal one-time origination fee on indirect loans. The
fees are deferred and amortized over the life of the loans as a yield
adjustment. Management attempts to mitigate credit and interest rate risk by
keeping the products offered short-term, receiving a rate of return commensurate
with the risk, and lending to individuals in the Bank's market areas. Average
consumer and other loans were $77,930,065 and $76,139,781 for the three months
ended September 30, 2002 and 2001, respectively. The $1,790,284, or 2%, increase
was due to increased indirect recreational vehicle lending.

The Bank's allowance for loan losses was $3,650,000 as of September 30, 2002
as compared to $3,496,000 as of June 30, 2002, representing 0.95% and 0.94% of
total loans, respectively. The Bank had non-performing loans totaling $1,551,000
and $1,171,000 at September 30, 2002 and June 30, 2002, respectively, or 0.40%
and 0.31% of total loans, respectively. The Bank's allowance for loan losses was
equal to 235% and 299% of the total non-performing loans at September 30, 2002
and June 30, 2002, respectively.

The following table represents the Bank's non-performing loans as of
September 30, 2002 and June 30, 2002, respectively:



|Description             | September 30, 2002              | June 30,2002                   
|----------------------- | ------------------------------- | -------------------------------
|Residential Real Estate | $     463,000                   | $     486,000                  
|Commercial Real Estate  | 453,000                         | 330,000                        
|Commercial Loans        | 287,000                         | 183,000                        
|Consumer and Other      | 348,000
      ____________      | 172,000
      ____________     
|Total non-performing    | $   1,551,000
      =========== | $   1,171,000
      ===========



At September 30, 2002, the Bank had $100,000 in loans classified substandard
that management believes could potentially become non-performing due to
delinquencies or marginal cash flows. These substandard loans increased by
$100,000 when compared to the $0 at June 30, 2002. The Bank's delinquent loans,
as a percentage of total loans, decreased during the September 30, 2002 quarter.

The following table reflects the quarterly trend of total delinquencies 30
days or more past due, including non-performing loans, for the Bank as a
percentage of total loans:



|09-30-02 | 06-30-02 | 03-31-02 | 12-31-01
|-------- | -------- | -------- | --------
|0.92%    | 1.03%    | 0.88%    | 1.51%   

At September 30, 2002, loans classified as non-performing included
approximately $204,000 of loan balances that are current and paying as agreed.
The Bank maintains the loans as non-performing until the borrower has
demonstrated a sustainable period of performance. Excluding these loans, the
Bank's total delinquencies 30 days or more past due, as a percentage of total
loans, would be 0.86% as of September 30, 2002.

The level of the allowance for loan losses, as a percentage of total loans,
increased slightly to 0.95% at September 30, 2002 compared to 0.94% at June 30,
2002. Management has increased the provision reflecting the change in the loan
portfolio mix to loans with more credit risk.

Management actively monitors the Bank's asset quality to evaluate the
adequacy of the allowance for loan losses and, when appropriate, to charge-off
loans against the allowance for loan losses, provide specific loss allowances
when necessary, and change the level of loan loss allowance. The process of
evaluating the allowance involves a high degree of management judgment. The
methods employed to evaluate the allowance for loan losses are quantitative in
nature and consider such factors as the loan mix, the level of non-performing
loans, delinquency trends, past charge-off history, loan reviews and
classifications, collateral, and the current economic climate.

Page 15

Management believes that the allowance for loan losses is adequate
considering the increasing mix of commercial and consumer loans, the slight
increase in non-performing loans, the decrease in loan delinquency, the decline
in net charge offs and the
upward trend in the ratio of the allowance for loan losses to total loans. While
management believes that it uses the best information available to make its
determinations with respect to the allowance, there can be no assurance that the
Company will not have to increase its provision for loan losses in the future as
a result of changing economic conditions, adverse markets for real estate or
other factors. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the Bank's allowance for loan
losses. Such agencies may require the Bank to recognize additions to the
allowance for loan losses based on their judgments about information available
to them at the time of their examination. The Bank's most recent examination by
the Office of Thrift Supervision was in June, 2002. At the time of the exam the
regulators proposed no adjustments to the allowance for loan losses.

At September 30, 2002, the Company had acquired assets of $444,061, a
decrease of $142,581 compared to June 30, 2002. The decrease is net of additions
of $253,929, dispositions of $390,510 and provision to the allowance for losses
of $6,000. Management periodically receives independent appraisals to assist in
its valuation of acquired assets. As a result of its review of the independent
appraisals and the acquired assets portfolio, the Company believes the allowance
for losses of $17,157 is adequate to state the portfolio at lower of cost, or
fair value less estimated selling expenses.

Other assets increased by $9,234,700 from June 30, 2002 to September 30,
2002. The increase was primarily due to the BOLI purchase of $7,143,999 and
funds due from broker for an agency security that traded, but did not settle, on
September 30, 2002. The BOLI was invested in the general account of two quality
insurance companies. Standard and Poor's rated these companies AA+ or better at
September 30, 2002. It provides a means to finance increasing employee benefits.
The increases in cash surrender value will be recognized in non-interest income
and are not subject to income taxes. Borrowing or surrendering the policy will
subject the Bank to income tax expense and income tax penalties on the increase
in cash surrender value. For these reasons, management considers BOLI an
illiquid asset.

Capital Resources and Liquidity

The Bank continues to attract new local deposit relationships. As alternative
sources of funds, the Bank utilizes brokered certificates of deposit
("CD's") and FHLB advances when their respective interest rates are
less than the interest rates on local market deposits. Brokered CD's carry the
same risk as local deposit CD's, in that both are interest rate sensitive with
respect to the Bank's ability to retain the funds. Brokered CD's are used to
supplement the growth in earning assets. FHLB advances are also used to fund
short-term liquidity demands.

Total deposits of $314,848,335 as of September 30, 2002 were an increase of
$11,650,689, or 4%, from $303,197,646 as of June 30, 2002. Demand deposits and
NOW accounts increased $1,824,026 and $17,727,198, respectively, for the
quarter. Brokered and regular certificates of deposits decreased during the same
period by $7,065,494. Money market and regular savings accounts decreased
respectively by $110,329 and $724,712. The increase in NOW accounts was due
primarily to approximately $18 million in deposits during the last three
business days of September. NOW account balances decreased to normalized levels
by October 3, 2002. The decrease in brokered and regular certificates of deposit
reflects continuing competitive pressure from other financial institutions and
customers seeking the best rates offered. Management changed its pricing
strategy in June 2002 moving offered certificate of deposit rates to the middle
of the market from near the top. For the three months ended September 30, 2002,
total average deposits decreased $8,296,407, or 6%, to $299,055,712 from
$307,352,199 for the three months ended June 30, 2002.

Total average deposits of $299,055,712 for the three months ended September
30, 2002 increased $17,436,733 from the average for the three months ended
September 30, 2001. The increase in total average deposits compared to September
30, 2001 is net of a $43,930,583, or 50%, increase in demand deposit, NOW, money
market and regular savings accounts partially offset by a $7,768,715, or 26%,
decrease in brokered certificates of deposit and an $18,725,135 or 11%, decrease
in regular certificates of deposit. The increase in transaction accounts
resulted from the bank's promotion of Express Gold, a NOW account with tiered
interest rates, to attract core deposits, accounting for $31,495,406 of the
transaction account increase. This promotion also encouraged the shift from
certificates of deposit to transaction accounts. The Express Gold tiered rates
are at market levels. Money market account balances increased transaction
accounts by $9,091,271 due to the introduction of the Maximum Return Sweep to
commercial customers in the spring of 2002. The decrease in bank certificates of
deposit is attributable to a declining interest rate environment that
significantly lowered certificate of deposit rates offered to customers. At September 30, 2002, brokered certificates of
deposit were $20,843,316, decreased by $3,619,863, or 15%, compared to the
$24,463,179 balance as of June 30, 2002. Cross selling strategies are employed
by the Bank to enhance deposit growth. Even though deposit interest rates have
remained competitive, the rates of return are potentially higher with other
financial instruments such as mutual funds and annuities. Like other companies
in the banking industry, the Bank will be challenged to maintain or increase its
core deposits.

Securities sold under repurchase agreements were $10,376,032, an increase of
$1,504,390, or 17%, from $8,871,642 as of June 30, 2002. The increase was
attributable to new accounts opened during the quarter. Average securities sold
under repurchase agreements were $9,902,772 for the three months ended September
30, 2002, a modest increase of $23,746, or less than 1%, compared to the average
for the three months ended September 30, 2001. Repurchase agreements enhance the
Bank's ability to attain additional municipal and commercial deposits, improving
its overall liquidity position in a cost-effective manner.

Page 16

Advances from the Federal Home Loan Bank (FHLB) were $85,205,572, a decrease
of $751,036, or 1%, from $85,956,608 as of June 30, 2002. The cash received from
the growth in deposits and securities sold under repurchase agreements allowed
the Bank to decrease the amount owed to the FHLB by repayment of advances at
maturity. The Bank's current advance availability, our unused borrowing capacity
subject to the satisfaction of certain conditions, is approximately $32,304,000
over and above the September 30, 2002 advances. Residential and certain
commercial real estate loans, certain investment securities, and certain FHLB
deposits free of liens, pledges and encumbrances are required to be pledged to
secure FHLB advances. Management believes that the Company's available liquidity
resources are sufficient to support the Company's needs. In addition to the
traditional retail products, the Bank has the ability to access funds from
maturing securities and loans, the sale of securities and loans, borrowing
capacity at the Federal Home Loan Bank, repurchase agreements and brokered
deposits. Average advances from the FHLB were $84,583,299 for the three months
ended September 30, 2002, a decrease of $13,817,911, or 14%, compared to
$98,401,210 average for the same period last year.

In December 1999, the Board of Directors of the Company approved a plan to
repurchase up to $2,000,000 of its common stock and in May 2001, the Board of
Directors authorized the repurchase of an additional $2,000,000 of common stock.
Under the common stock repurchase plan, the Company may purchase shares of its
common stock from time to time in the open market at prevailing prices.
Repurchased shares will be held in treasury and may be used in connection with
employee benefits and for other general corporate purposes. The Company does not
believe that the current market price for its common stock adequately reflects
full value and believes that the purchase of its common stock from time to time
in the market is a good investment and use of its funds. As of September 30,
2002, the Company had repurchased $1,344,068 of its common stock and management
believes that the purchase will not have a significant effect on the Company's
liquidity and earnings per share.

Total equity of the Company was $35,572,899 as of September 30, 2002 as
compared to $34,730,791 at June 30, 2002. The increase of $842,108, or 2%, was
primarily from net income increasing retained earnings. Book value per common
share was $13.43 as of September 30, 2002 as compared to $13.12 at June 30,
2002. The total equity to total assets ratio of the Company was 7.80% as of
September 30, 2002 and 7.85% at June 30, 2002.

The Company's net cash provided by operating activities was $777,206 during
the three months ended September 30, 2002, which was a $342,092 decrease
compared to the same period in 2001. Investing activities were a net use of cash
due to new loans, net of prepayments and charge-offs, and purchase of bank owned
life insurance exceeding the cash generated by the maturity and sale of
available for sale securities during the three months ended September 30, 2002
compared to the same period in 2001. Financing activities provided net cash from
the increase in core deposits and securities sold under repurchase agreements
compared the same period in 2001, net of pay down of advances from the Federal
Home Loan Bank of Boston. Overall, the Company's cash position increased by
$7,380,164 during the three months ended September 30, 2002.

The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"),
contains various provisions intended to capitalize the Bank Insurance Fund
("BIF") and also affects a number of regulatory reforms that impact
all insured depository institutions, regardless of the insurance fund in which
they participate. Among other things, FDICIA grants the OTS broader regulatory
authority to take prompt corrective action against insured institutions that do
not meet capital requirements, including placing undercapitalized institutions
into conservatorship or receivership. FDICIA also grants the OTS broader
regulatory authority to take corrective action against insured institutions that
are otherwise operating in an unsafe and unsound manner.

FDICIA defines specific capital categories based on an institution's capital
ratios. Regulations require a minimum Tier 1 core capital equal to 4.0% of
adjusted total assets, Tier 1 risk-based capital of 4.0% and a total risk-based
capital standard of 8.0%. The prompt corrective action regulations define
specific capital categories based on an institution's capital ratios. The
capital categories, in declining order are "well capitalized",
"adequately capitalized", "under capitalized",
"significantly undercapitalized", and "critically
undercapitalized". As of September 30, 2002, the most recent notification
from the OTS categorized the Bank as well capitalized. There are no conditions
or events since that notification that management believes has changed the
institution's category.

At September 30, 2002, the Bank's regulatory capital was in compliance with
regulatory capital requirements as follows:

|                                                       | Actual  | Required
      For Capital Adequacy Purposes | Required To Be "Well Capitalized" Under Prompt
      Corrective Action Provisions
|------------------------------------------------------ | ------- | -------------------------------------------- | ---------------------------------------------------------------------------------
|                                                       | Amount  | Ratio                                        | Amount                                                                           
|(Dollars in Thousands)
      As of September 30, 2002: |         |                                              |                                                                                  
|Tier 1 (Core) capital (to risk weighted assets)        | $39,125 | 11.47%                                       | $13,649                                                                          
|Tier 1 (Core) capital (to total assets)                | $39,125 | 8.63%                                        | $18,134                                                                          
|Total Capital (to risk weighted assets)                | $41,342 | 12.12%                                       | $27,298                                                                          

Management believes that there are adequate funding sources to meet its
future liquidity needs for the foreseeable future. Primary among these funding
sources are the repayment of principal and interest on loans, the renewal of
time deposits, and the growth in the deposit base. Management does not believe
that the terms and conditions that will be present at the renewal of these
funding sources will significantly impact the Company's operations, due to its
management of the maturities of its assets and liabilities.

Commitments outstanding as of September 30, 2002 for residential real estate,
commercial real estate, and commercial loans totaled $17,594,000. Unused lines
of credit from commercial, construction, and home equity lines of credit totaled
$34,846,000. The loan commitments and unused lines of credit for commercial and
construction loans expire or are subject to renewal in twelve months or less.

Impact of Inflation

The consolidated financial statements and related notes herein have been
presented in terms of historic dollars without considering changes in the
relative purchasing power of money over time due to inflation. Unlike industrial
companies, substantially all of the assets and virtually all of the liabilities
of the Company are monetary in nature. As a result, interest rates have a more
significant impact on the Company's performance than the general level of
inflation. Over short periods of time, interest rates may not necessarily move
in the same direction or in the same magnitude as inflation.

Item 3. Quantitative and Qualitative Disclosure about Market Risk

There have been no material changes in the Company's market risk from June
30, 2002. For information regarding the Company's market risk, refer to the
Company's Annual Report on Form 10-K dated as of June 30, 2002.

Item 4. Controls and Procedures

Under the supervision and with the participation of the Company's President
and Chief Executive Officer, and Chief Financial Officer (its principal
executive officer and principal financial officer), management has evaluated the
effectiveness of the design and operation of the Company's disclosure controls
and procedures within 90 days of the filing date of this quarterly report. Based
on that evaluation, the President and Chief Executive Officer, and Chief
Financial Officer have concluded that these disclosure controls and procedures
(as such term is defined in Rule 13a-14(c) promulgated under the Securities
Exchange Act of 1934) are effective to ensure the disclosure of material
information relating to the Company, including its consolidated subsidiaries,
that is required to be disclosed in reports the Company files and submits under
the Securities Exchange Act of 1934. There were no significant changes in our
internal controls or in other factors known to us that could significantly
affect these internal controls subsequent to the date of the evaluation.



Page 17

Part II - Other Information

|Item 1. | Legal ProceedingsNone.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item 2. | Changes in SecuritiesNone.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Item 3. | Defaults Upon Senior SecuritiesNone.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Item 4. | Submission of Matters to a Vote of Security HoldersNone.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Item 5. | Other InformationNone.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Item 6. | Exhibits and Reports on Form 8- K                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(a)     | List of Exhibits:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | Exhibits No.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 11                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(b)     | Reports on Form 8- K                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        | On September 27, 2002, the Company filed a Current Report on Form 8-K
      under Item 9 to disclose that the certificates required by 18 U.S.C. 1350,
      as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, were
      submitted to the Securities and Exchange Commission in connection and
      simultaneously with the filing of the Company's Form 10-K for the fiscal
      year ended June 30, 2002. The combined certificate of the Chief Executive
      Officer and Chief financial Officer was filed therewith as Exhibit 99.1.



Page 18

SIGNATURES

Pursuant to the requirements of the Securities Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

|Date: November 14, 2002 | NORTHEAST BANCORP                                                                                                                                                      
|----------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                        | By:     /s/ James D. Delamater
              _______________________
                     
      James D. Delamater
                    
       President and CEO      
|                        | By:     /s/ Robert S. Johnson
             ________________________
                     
       Robert S. Johnson
                      
      Chief Financial Officer

Page 19

CERTIFICATIONS



I, James D. Delamater, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Northeast Bancorp;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Dated: November 14, 2002

|By: | /s/ James D. Delamater             
|--- | -----------------------------------
|    | James D. Delamater                 
|    | President and CEO                  
|    | (Principal
      Executive Officer)



I, Robert S. Johnson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Northeast Bancorp;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 14, 2002

|By: | /s/ Robert S. Johnson        
|--- | -----------------------------
|    | Robert S. Johnson            
|    | Chief Financial Officer      
|    | (Principal Financial Officer)



Page 20

NORTHEAST BANCORP
Index to Exhibits

|EXHIBIT NUMBER | DESCRIPTION
|-------------- | -----------
|               | 11