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Jim
      Delamater, President & CEO
              Northeast
      Bank, 500 Canal Street, Lewiston, ME 04240
              www.northeastbank.com
            1-800-284-5989
      ext. 3569
              jdelamater@northeastbank.com








Northeast
Bancorp Announces Fourth Quarter and Year-end Earnings; Assets Approach $600
million Mark





Lewiston,
MAINE (August 08, 2008) – Northeast Bancorp (NASDAQ:  NBN), the parent company for
Northeast Bank (www.northeastbank.com),
announced that earnings for the year ended June 30, 2008 were $1,931,289, or
$0.82 per diluted share, representing an increase of $44,612, or 2%, over
earnings for the prior fiscal year of $1,886,677, or $0.76 per diluted
share.  As of June 30, 2008, Northeast Bancorp had total assets of
approximately $598 million, representing a 7% increase over assets at the end of
the prior fiscal year, which was approximately $557 million.





For the fourth quarter ended June 30,
2008 earnings were $426,127, or $0.18 per diluted share, representing a decrease
of $63,559, or 13%, from earnings for the same period last year which were
$489,686, or $0.20 per diluted share.





“We are pleased with the results for
this fiscal year. With the deterioration of the credit markets and the
volatility of interest rates, we are confident that our business model to
diversify our revenue streams is beginning to pay off,” said Jim Delamater,
President and CEO. “We’re closing in on the $600 million mark in total assets
and entering 2009 in an excellent position,” he continued.




Noninterest income for the year ended
June 30, 2008 increased $2,858,397, to $10,803,224 from $7,944,827 for the same
period last year. Noninterest income now makes up close to 43% of the Company’s
revenue stream. For the fourth quarter ended June 30, 2008, noninterest income
was $2,776,134, representing an increase of $568,432, or 26%, over noninterest
income for the same period last year, which was $2,207,702.




“Our growth in noninterest income is
starting to attract national attention with our level of noninterest income as a
percentage of total revenue moving closer to that of our larger, regional
competitors. Revenue diversity is essential and we are pursuing this new
business model to reshape the way in which financial products are packaged,
priced and sold,” said Delamater.





For the year ended June 30, 2008, net
interest and dividend income decreased $1,238,688, to $14,346,669 as compared to
$15,585,357 the prior year. Comparing the quarter ended June 30, 2008 to the
same period in the prior year, net interest and dividend income increased
$108,273 to $3,781,857 as net interest spreads improved. To manage margin
compression, the Company has, over the past eight quarters, reduced the amount
of originated loans held in its portfolio, resulting in a decline in outstanding
loans of $16,377,449, to $409,193,969, compared to the amount at June 30,
2007.





Northeast’s deposit portfolio decreased
$1,180,006 over the level at the end of the prior fiscal year as the Company
continued to reduce its reliance on wholesale or brokered deposits to fund asset
growth. Brokered deposits were reduced by $10.0 million, as core deposits
increased $8.8 million, with this increase reflected in the growth in time
deposits and money market accounts.





Net interest spread for the quarter
ended June 30, 2008 was 2.52%, a seven basis point improvement as compared to
2.45% for the quarter ended June 30, 2007. This improvement was due to the
decrease in the overall cost of funds of 57 basis points, to 3.78%, for the
quarter ended June 30, 2008 compared to the same period one year ago. The cost
of funds has declined due to the repricing of certificates of deposit at
maturity to lower rates and the reduction in rates paid on interest-bearing,
non-maturing deposits.





“We’ve continued to step away from
aggressive loan growth in an effort to maintain the integrity of both our
balance sheet and the credit quality of our loan portfolio. We are seeing the
results of irrational lending and pricing practices across the country, as well
as the impact of creative financing tactics. The resulting reduction in our loan
portfolio has allowed us to reduce our reliance on higher cost wholesale
deposits, thus improving both our cost of funds and our liquidity position,”
Delamater noted.





Northeast Bank’s allowance for loan
losses was $5.7 million at June 30, 2008, $0.1 million lower than at June 30,
2007. As a percentage of outstanding loans, the allowance for loan losses was
1.38% at June 30, 2008 compared to 1.35% for the same period one year ago. The
allowance of loan losses as a percentage of nonperforming loans was 74% at June
30, 2008 compared to 113% at June 30, 2007.





The decrease of 39 percentage points
was due to an increase in nonperforming commercial and commercial real estate
loans compared to same period last year. The risk of loss associated with these
loans was incorporated in determining the adequacy of the allowance for loan
losses at June 30, 2008. Northeast has also experienced an increase in
delinquent loans of $2.2 million, to $12.5 million at June 30, 2008. Although
the delinquency ratio increased from 2.42% at June 30, 2007 to 3.06% at June 30,
2008, the trend has been declining over the six months ended June 30, 2008 when
compared to the 4.12% delinquency ratio at December 31, 2007.





“Our commitment to steer clear of
sub-prime products and pricing disparities resulted in a stronger credit
portfolio in the last year, with what we believe is an appropriate level of
delinquency given the current state of the economy. In addition, our approach
supports our brand position as a “trusted advisor,” always working with our
customers’ needs and best interests in mind,” said Delamater





Northeast Bancorp, headquartered at 500
Canal Street, Lewiston, ME 04240, is the holding company for the Maine-based
Northeast Bank, founded in 1872. Northeast Bank is a leader in delivering
one-stop shopping for financial services. Together with its wholly-owned
subsidiary, Northeast Bank Insurance Group, Inc., the Company operates retail
and insurance locations in Maine and now the Seacoast area of New Hampshire, and
derives its income from a combination of traditional banking services and
non-traditional financial products and services, including insurance and
investments.





Management encourages present and
prospective shareholders to contact President and CEO Jim Delamater directly to
discuss the Company, its products and services, and ongoing efforts to develop
shareholder value. He can be reached at jdelamater@northeastbank.com or toll
free at 1-800-284-5989. Management also suggests that any person wishing to
utilize the services of Northeast Bancorp or its subsidiaries or who are
interested in learning more about the Company to access its web site at www.northeastbank.com.











This
communication contains certain “forward-looking statements”. Although the
Company believes that these forward-looking statements are based on reasonable
estimates and assumptions, they are not guarantees of future performance and are
subject to known and unknown risks, uncertainties, and other factors. These
statements speak only as of the date of this report and we do not undertake any
obligation to update or revise any of these forward-looking statements to
reflect events or circumstances occurring after the date of this communication
or to reflect the occurrence of unanticipated events. For a more complete
discussion of certain risks and uncertainties affecting the Company, please see
"Item 1. Business-Forward-Looking Statements and Risk Factors" set forth in the
Company's Form 10-K for the year ended June 30, 2007.




Customer
access to securities is provided through Commonwealth Financial Network, Member
NASD/SIPC. Important information--Securities, annuities, and insurance products
are not deposit products, not FDIC insured, are subject to investment risk,
including the possible loss of principal, and are not an obligation of or
guaranteed by the Bank.





NORTHEAST
      BANCORP(Dollars
      in Thousands, Except Per Share and Shares Outstanding
Data)(Unaudited)Three
      Months Ended
              
              
              
              
              Twelve
      Months EndedJune
      30,
              
              %
              
              
              June
      30,
              
              
              %2008
              
              
              2007
              
              Change
              
              
              2008
              
              
              2007
              
              
              ChangeSelected
      financial informationIncome
      statement data:Interest
      income
              
              $
              8,572
              
              
              $
              8,802
              
              
              -3
              %
              
              $
              35,397
              
              
              $
              35,682
              
              
              -1
              %Interest
      expense
              
              
              4,790
              
              
              
              5,128
              
              
              -7
              %
              
              
              21,051
              
              
              
              20,097
              
              
              5
              %Net
      interest income
              
              
              3,782
              
              
              
              3,674
              
              
              3
              %
              
              
              14,346
              
              
              
              15,585
              
              
              -8
              %Provision
      for loan losses
              
              
              179
              
              
              
              113
              
              
              58
              %
              
              
              836
              
              
              
              989
              
              
              -15
              %Net
      interest income afterprovision for loan losses
              
              
              3,603
              
              
              
              3,561
              
              
              1
              %
              
              
              13,510
              
              
              
              14,596
              
              
              -7
              %Gain
      on sale of loans
              
              
              160
              
              
              
              210
              
              
              -24
              %
              
              
              556
              
              
              
              869
              
              
              -36
              %Gain
      on securities
              
              
              34
              
              
              
              12
              
              
              183
              %
              
              
              293
              
              
              
              42
              
              
              598
              %Investment
      brokerage income
              
              
              558
              
              
              
              712
              
              
              -22
              %
              
              
              2,223
              
              
              
              2,385
              
              
              -7
              %Insurance
      agency income
              
              
              1,411
              
              
              
              728
              
              
              94
              %
              
              
              5,364
              
              
              
              2,331
              
              
              130
              %Other
      noninterest income
              
              
              613
              
              
              
              546
              
              
              12
              %
              
              
              2,367
              
              
              
              2,318
              
              
              2
              %Noninterest
      Income
              
              
              2,776
              
              
              
              2,208
              
              
              26
              %
              
              
              10,803
              
              
              
              7,945
              
              
              36
              %Noninterest
      expense
              
              
              5,886
              
              
              
              5,176
              
              
              14
              %
              
              
              21,854
              
              
              
              20,075
              
              
              9
              %Operating
      income before income tax
              
              
              493
              
              
              
              593
              
              
              -17
              %
              
              
              2,459
              
              
              
              2,466
              
              
              0
              %Income
      tax expense
              
              
              67
              
              
              
              103
              
              
              -35
              %
              
              
              528
              
              
              
              579
              
              
              -9
              %Net
      income
              
              $
              426
              
              
              $
              490
              
              
              -13
              %
              
              $
              1,931
              
              
              $
              1,887
              
              
              2
              %Per
      share data:Basic
      earning per common share
              
              $
              0.18
              
              
              $
              0.20
              
              
              -10
              %
              
              $
              0.82
              
              
              $
              0.77
              
              
              6
              %Diluted
      earnings per common share
              
              $
              0.18
              
              
              $
              0.20
              
              
              -10
              %
              
              $
              0.82
              
              
              $
              0.76
              
              
              8
              %Weighted
      average shares outstanding:Basic
              
              
              2,315,182
              
              
              
              2,452,548
              
              
              -6
              %
              
              
              2,352,484
              
              
              
              2,451,610
              
              
              -4
              %Diluted
              
              
              2,322,869
              
              
              
              2,468,978
              
              
              -6
              %
              
              
              2,366,340
              
              
              
              2,470,670
              
              
              -4
              %Book
      value per share
              
              $
              17.40
              
              
              $
              16.68
              
              
              
              
              
              $
              17.40
              
              
              $
              16.68Tangible
      book value per share
              
              $
              11.85
              
              
              $
              13.83
              
              
              
              
              
              $
              11.85
              
              
              $
              13.83Net
      interest margin
              
              
              2.81
              %
              
              
              2.87
              %
              
              
              
              
              
              2.70
              %
              
              
              2.99
              %Net
      interest spread
              
              
              2.52
              %
              
              
              2.46
              %
              
              
              
              
              
              2.38
              %
              
              
              2.59
              %Return
      on average assets (annualized)
              
              
              0.29
              %
              
              
              0.36
              %
              
              
              
              
              
              0.33
              %
              
              
              0.34
              %Return
      on equity (annualized)
              
              
              4.01
              %
              
              
              4.70
              %
              
              
              
              
              
              4.63
              %
              
              
              4.59
              %Tier
      I leverage ratio (Bank)
              
              
              7.06
              %
              
              
              8.60
              %
              
              
              
              
              
              7.06
              %
              
              
              8.60
              %Tier
      I risk-based capital ratio (Bank)
              
              
              9.60
              %
              
              
              11.46
              %
              
              
              
              
              
              9.60
              %
              
              
              11.46
              %Total
      risk-based capital ratio (Bank)
              
              
              10.85
              %
              
              
              12.71
              %
              
              
              
              
              
              10.85
              %
              
              
              12.71
              %Efficiency
      ratio
              
              
              90
              %
              
              
              88
              %
              
              
              
              
              
              87
              %
              
              
              85
              %Nonperforming
      loans
              
              
              7,703
              
              
              
              5,090
              
              
              
              
              
              
              7,703
              
              
              
              5,090Total
      nonperforming assets
              
              
              8,381
              
              
              
              5,090
              
              
              
              
              
              
              8,381
              
              
              
              5,090Nonperforming
      loans as a % of total loans
              
              
              1.88
              %
              
              
              1.20
              %
              
              
              
              
              
              1.88
              %
              
              
              1.20
              %Nonperforming
      assets as a % of total assets
              
              
              1.40
              %
              
              
              0.91
              %
              
              
              
              
              
              1.40
              %
              
              
              0.91
              %June
      30,
              
              %2008
              
              
              2007
              
              ChangeBalance
      sheet highlights:Available-for-sale
      securities, at fair value
              
              $
              134,483
              
              
              $
              86,348
              
              
              56
              %Loans
      held for sale
              
              
              486
              
              
              
              1,636
              
              
              -70
              %Loans
              
              
              409,194
              
              
              
              425,571
              
              
              -4
              %Allowance
      for loan losses
              
              
              5,656
              
              
              
              5,756
              
              
              -2
              %Goodwill
      & intangibles
              
              
              12,835
              
              
              
              6,991
              
              
              84
              %Total
      assets
              
              
              598,274
              
              
              
              556,994
              
              
              7
              %Deposits:NOW
      and money market
              
              
              70,138
              
              
              
              61,459
              
              
              14
              %Savings
              
              
              19,906
              
              
              
              21,145
              
              
              -6
              %Certificates
      of deposits
              
              
              225,590
              
              
              
              223,071
              
              
              1
              %Brokered
      time deposits
              
              
              12,597
              
              
              
              22,546
              
              
              -44
              %Noninterest-bearing
      deposits
              
              
              35,143
              
              
              
              36,333
              
              
              -3
              %Total
      deposits
              
              
              363,374
              
              
              
              364,554
              
              
              0
              %Borrowings
              
              
              186,830
              
              
              
              147,564
              
              
              27
              %Shareholders'
      equity
              
              
              40,273
              
              
              
              40,850
              
              
              -1
              %Shares
      outstanding
              
              
              2,315,182
              
              
              
              2,448,832
              
              
              -5
              %