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









Northeast
Bancorp Announces 1st Quarter
Earnings and


Approves
2009 Dividend Plan




Lewiston,
MAINE (October 20, 2008)
- Northeast Bancorp (NASDAQ: NBN), the parent company of Northeast Bank
(www.northeastbank.com), reported earnings for the quarter ended September 30,
2008 of $69,116, or $0.03 per diluted share, as compared to earnings for the
same period last year of $430,565, or $0.18 per diluted share. The decline in
earnings was the result of a higher provision for loan losses and one-time
charges related to the realized losses and impairment expense of various common
and preferred stock investments of $391,000 that were negatively affected by
recent market events. Excluding the impact of common and preferred stock
realized losses and impairment expenses, earnings were $324,500, or $0.14 per
diluted share, a 25% decline over the same quarter last year.





James
Delamater, Northeast Bancorp President and CEO, commented: “As part of our
ongoing comprehensive risk management program, we have scrubbed our portfolio
and believe that we have properly identified any problem investments. After
putting this one-time charge behind us, we intend to continue to develop our
business plan of pursuing a high level of product and income
diversity.”




For the
first quarter 2009, total net interest income and noninterest income increased
by 18%, to $6,601,854, up from $5,582,221. Noninterest income levels increased
to $2,560,647 for the quarter ended September 30, 2008 as compared to $1,989,374
for the same period in 2007, an increase of 29%, with insurance and investment
revenues increasing by 75% and 6%, respectively. Net interest income increased
12% to $4,401,207 primarily due to a 17 basis point increase in net interest
margin to 2.92% as compared to the same period one year ago.




Mr.
Delamater commented further; “Our strategy, calling for the full diversification
of our revenue streams, continues to serve us well. Revenues from the operations
of the Company’s insurance and investment divisions exceeded our expectations
this past quarter. We are encouraged as we continue to grow, improve our margins
and focus on the right products and markets, especially as we are seeing
substantial progress in the delivery of property & casualty insurance to our
customers, the result of our aggressive agency acquisition
strategy.”




As of
September 30, 2008, Northeast Bancorp had total assets of approximately $605
million. Loans decreased $12.5 million compared to September 30, 2007; primarily
resulting from a $9.1 million decrease in commercial loans. In addition, the
allowance for loan losses as a percentage of total loans was 1.38% at September
30, 2008 as compared to 1.37% for the same period one year ago.




“Our risk
management program, adopted some time ago, called for the full analysis and
rating of our loan portfolio. Therefore, we believe that we have properly
measured our credit risk and that our allowance for loan losses is adequate. We
are pleased to see growth in mortgages and consumer loans, and anticipate an
increase in fee income related to the origination and sale of mortgages into the
secondary market as more customers return to ‘community banks’ where they will
find a better understanding of the need for quality advice,” said
Delamater.




The
Company continued to reduce its reliance on brokered deposits to fund asset
growth, with brokered deposits declining by $6.2 million since September 2007.
Over the past year, deposits declined by $4.4 million as the decline in brokered
deposits was partially offset by an increase in core deposits, primarily money
market accounts, of $1.8 million.





“With the
recent changes to the FDIC deposit insurance levels from $100,000 to $250,000,
we’re anticipating a further increase in core deposits as customers look for
safe places to invest and save. We are taking this opportunity to bolster our
liquidity levels so as to position the Company to take advantage of quality
lending opportunities,” noted Delamater.





In
addition to announcing earnings, the Board of Directors declared a dividend of
$0.09 per share payable on November 21, 2008 to shareholders of record as of the
close of business on October 31, 2008. The board approved a dividend payout plan
of quarterly cash dividends at this level for fiscal year 2009; this plan is
subject to exceeding the regulatory definition of well-capitalized.




“Community
banks are vital to local economies and to helping families and businesses
weather this current financial situation. Northeast Bancorp is fortunate to have
investors and shareholders who have embraced our long-term strategy for product
and income diversification and understand the importance of a more conservative
approach to pricing and lending; a plan that the Board of Directors and
Management executed three years ago. And, for that reason, we are pleased to
continue to pay a quarterly dividend, as we have since our
inception.”




Northeast
Bancorp common shares trade on the NASDAQwith
approximately 2.3 million shares outstanding and, as of September 30, 2008, had
a book value of $17.80 per share, an increase from $17.14 at the end of the
same period last year.




“We have
taken a number of steps to protect our investors, customers and other
stakeholders from the risks impacting the financial services industry, including
full product and income diversification, conservative lending and prudent
oversight. We have a strong capital position, adequate liquidity, good products,
growing revenues, strong risk management discipline and multiple revenue streams
with a high level of product and income diversity. As a result, we believe the
Company is in a solid position for continued growth,” Delamater
said.




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,
together with its wholly-owned subsidiary, Northeast Bank Insurance Group, Inc.,
operates 25 retail and insurance locations 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 interested in learning more about the Company can 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, 2008.




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 EndedSeptember
      30,
              
              
              %2008
              
              
              2007
              
              
              ChangeSelected
      financial informationIncome
      statement data:Interest
      income
              
              $
              8,595
              
              
              $
              8,957
              
              
              
              -4
              %Interest
      expense
              
              
              4,554
              
              
              
              5,364
              
              
              
              -15
              %Net
      interest income
              
              
              4,041
              
              
              
              3,593
              
              
              
              12
              %Provision
      for loan losses
              
              
              521
              
              
              
              190
              
              
              
              174
              %Net
      interest income afterprovision for loan losses
              
              
              3,520
              
              
              
              3,403
              
              
              
              3
              %Gain
      on sale of loans
              
              
              111
              
              
              
              153
              
              
              
              -27
              %Loss
      on securities sales
              
              
              (108
              )
              
              
              (6
              )
              
              
              1700
              %Investment
      brokerage income
              
              
              421
              
              
              
              398
              
              
              
              6
              %Insurance
      agency income
              
              
              1,517
              
              
              
              866
              
              
              
              75
              %Other
      noninterest income
              
              
              620
              
              
              
              578
              
              
              
              7
              %Noninterest
      Income
              
              
              2,561
              
              
              
              1,989
              
              
              
              29
              %Noninterest
      expense
              
              
              6,089
              
              
              
              4,842
              
              
              
              26
              %Operating
      (loss) income before income tax
              
              
              (8
              )
              
              
              550
              
              
              
              -101
              %Income
      tax (benefit) expense
              
              
              (77
              )
              
              
              119
              
              
              
              -165
              %Net
      income
              
              $
              69
              
              
              $
              431
              
              
              
              -84
              %Per
      share data:Basic
      earning per common share
              
              $
              0.03
              
              
              $
              0.18
              
              
              
              -83
              %Diluted
      earnings per common share
              
              $
              0.03
              
              
              $
              0.18
              
              
              
              -83
              %Weighted
      average shares outstanding:Basic
              
              
              2,315,443
              
              
              
              2,415,952
              
              
              
              -4
              %Diluted
              
              
              2,324,916
              
              
              
              2,432,977
              
              
              
              -4
              %Book
      value per share
              
              $
              17.80
              
              
              $
              17.14Tangible
      book value per share
              
              $
              12.36
              
              
              $
              13.66Net
      interest margin
              
              
              2.92
              %
              
              
              2.75
              %Net
      interest spread
              
              
              2.69
              %
              
              
              2.42
              %Return
      on average assets (annualized)
              
              
              0.05
              %
              
              
              0.31
              %Return
      on equity (annualized)
              
              
              0.68
              %
              
              
              4.17
              %Tier
      I leverage ratio (Bank)
              
              
              6.92
              %
              
              
              8.11
              %Tier
      I risk-based capital ratio (Bank)
              
              
              9.62
              %
              
              
              10.84
              %Total
      risk-based capital ratio (Bank)
              
              
              10.97
              %
              
              
              12.09
              %Efficiency
      ratio
              
              
              92
              %
              
              
              87
              %Nonperforming
      loans
              
              
              6,561
              
              
              
              4,737Total
      nonperforming assets
              
              
              7,040
              
              
              
              4,737Nonperforming
      loans as a % of total loans
              
              
              1.61
              %
              
              
              1.12
              %Nonperforming
      assets as a % of total assets
              
              
              1.16
              %
              
              
              0.83
              %September
      30,
              
              
              %2008
              
              
              2007
              
              
              ChangeBalance
      sheet highlights:Available-for-sale
      securities, at fair value
              
              $
              143,445
              
              
              $
              109,526
              
              
              
              31
              %Loans
      held for sale
              
              
              1,046
              
              
              
              830
              
              
              
              26
              %Loans
              
              
              408,759
              
              
              
              421,290
              
              
              
              -3
              %Allowance
      for loan losses
              
              
              5,656
              
              
              
              5,756
              
              
              
              -2
              %Goodwill
      & intangibles
              
              
              12,640
              
              
              
              8,254
              
              
              
              53
              %Total
      assets
              
              
              605,170
              
              
              
              573,680
              
              
              
              5
              %Deposits:NOW
      and money market
              
              
              69,696
              
              
              
              63,597
              
              
              
              10
              %Savings
              
              
              20,123
              
              
              
              21,519
              
              
              
              -6
              %Certificates
      of deposits
              
              
              216,291
              
              
              
              222,478
              
              
              
              -3
              %Brokered
      time deposits
              
              
              12,603
              
              
              
              18,861
              
              
              
              -33
              %Noninterest-bearing
      deposits
              
              
              37,879
              
              
              
              34,558
              
              
              
              10
              %Total
      deposits
              
              
              356,592
              
              
              
              361,013
              
              
              
              -1
              %Borrowings
              
              
              204,393
              
              
              
              169,242
              
              
              
              21
              %Shareholders'
      equity
              
              
              41,324
              
              
              
              40,641
              
              
              
              2
              %Shares
      outstanding
              
              
              2,321,182
              
              
              
              2,371,332
              
              
              
              -2
              %