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, 2003
|--------------------- | ------------------

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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes _  No X



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 12, 2003, the registrant had outstanding 2,517,291shares 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,               
|                                                                                   | 2003                     | 2003                   
|Assets                                                                             |                          |                        
|Cash and due from banks                                                            | $     
      12,309,697  | $     
      16,621,692
|Interest bearing deposits                                                          | 746,199                  | 656,227                
|Federal Home Loan Bank overnight
      deposits                                    | 8,195,000                | 1,530,000              
|Available for sale securities                                                      | 47,117,383               | 41,729,122             
|Loans held for sale                                                                | 608,975                  | 3,382,719              
|                                                                                   |                          |                        
|Loans                                                                              | 381,420,599              | 378,986,788            
|Less allowance for loan losses                                                     | 4,222,408                | 4,016,000              
|Net loans                                                                          | 377,198,191              | 374,970,788            
|                                                                                   |                          |                        
|Premises and equipment, net                                                        | 4,156,500                | 3,950,757              
|Federal Home Loan Bank stock                                                       | 6,644,500                | 6,644,500              
|Aquired assets - net                                                               | 130,842                  | 96,756                 
|Goodwill                                                                           | 407,897                  | 407,897                
|Intangible assets, net of
      accumulated amortization of $1,687,350 at 09/30/03 |                          |                        
|and $1,620,882 at 6/30/03                                                          | 517,378                  | 583,846                
|Bank owned life insurance (BOLI)                                                   | 7,525,095                | 7,429,821              
|Due from broker                                                                    | -                        | 3,091,672              
|Other assets                                                                       | 6,777,264                | 6,587,835              
|Total assets                                                                       | $    
      472,334,921  | $    
      467,683,632
|                                                                                   | =============            | =============          
|                                                                                   |                          |                        
|Liabilities and Shareholders'
      Equity                                         |                          |                        
|                                                                                   |                          |                        
|Liabilities:                                                                       |                          |                        
|Deposits                                                                           | $    
      312,852,216  | $    
      318,742,948
|Securities sold under repurchase
      agreements                                  | 29,610,425               | 16,102,418             
|FHLB borrowings                                                                    | 82,895,176               | 86,595,570             
|Guaranteed Preferred Beneficial
      Interest in the                              |                          |                        
|Company's Junior Subordinated
      Debentures                                     | 7,172,998                | 7,172,998              
|Other liabilities                                                                  | 2,795,583                | 2,570,250              
|Total liabilities                                                                  | 435,326,398              | 431,184,184            
|                                                                                   |                          |                        
|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 2,584,577 and
      2,576,827 shares outstanding                 |                          |                        
|at 09/30/03 and 06/30/03,
      respectively                                       | 2,786,095                | 2,786,095              
|Additional paid in capital                                                         | 10,403,582               | 10,381,692             
|Retained earnings                                                                  | 26,461,467               | 25,756,832             
|Accumulated other comprehensive
      (loss) income                                | (192,513)                | 91,169                 
|Treasury Stock at cost, 201,518
      and 209,268 shares at 09/30/03 and           |                          |                        
|6/30/03, respectively.                                                             | (2,450,108)              | (2,516,340)            
|Total shareholders' equity                                                         | 37,008,523               | 36,499,448             
|Total liabilities and
      shareholders' equity                                   | $     
      472,334,921 | $    
      467,683,632
|                                                                                   | =============            | =============          



|                                                              |                            | Page 4                    
|------------------------------------------------------------- | -------------------------- | --------------------------
|                                                              |                            |                           
|NORTHEAST BANCORP AND
      SUBSIDIARIES                     
|Consolidated Statements of Income                            
|(Unaudited)                                                  
|                                                              |                            |                           
|                                                              | Three
      Months Ended  
|                                                              | September
      30,       
|                                                              | 2003                       | 2002                      
|Interest and dividend income:                                 |                            |                           
|Interest on loans                                             | $     
      6,205,283     | $     
      7,014,612    
|Interest on FHLB overnight
      deposits                     | 6,143                      | 30,364                    
|Interest and dividends on
      available for sale securities | 367,494                    | 329,993                   
|Dividends on Federal Home Loan
      Bank stock               | 51,081                     | 62,804                    
|Other interest and dividend
      income                      | 1,028                      | 2,807                     
|Total interest and dividend
      income                      | 6,631,029                  | 7,440,580                 
|                                                              |                            |                           
|Interest expense:                                             |                            |                           
|Deposits                                                      | 1,613,636                  | 2,279,131                 
|Repurchase agreements                                         | 65,988                     | 26,134                    
|Borrowed funds                                                | 1,167,169                  | 1,210,089                 
|Trust preferred securities                                    | 176,520                    | 176,520                   
|Total interest expense                                        | 3,023,313                  | 3,691,874                 
|                                                              |                            |                           
|Net interest income before
      provision for loan losses    | 3,607,716                  | 3,748,706                 
|Provision for loan losses                                     | 240,000                    | 225,476                   
|Net interest income after
      provision for loan losses     | 3,367,716                  | 3,523,230                 
|                                                              |                            |                           
|Noninterest income:                                           |                            |                           
|Fees and service charges on
      loans                       | 148,959                    | 150,827                   
|Fees for other services to
      customers                    | 241,671                    | 202,425                   
|Net securities gains                                          | 43,495                     | 182,850                   
|Gain on trading activities                                    | 7,065                      | -                         
|Gain on sales of loans                                        | 431,166                    | 118,551                   
|Investment and insurance
      commissions                    | 444,868                    | 297,090                   
|Increase in cash surrender value
      of BOLI                | 103,260                    | -                         
|Other income                                                  | 77,728                     | 82,330                    
|Total noninterest income                                      | 1,498,212                  | 1,034,073                 
|                                                              |                            |                           
|Noninterest expense:                                          |                            |                           
|Salaries and employee benefits                                | 2,002,693                  | 1,785,327                 
|Occupancy expense                                             | 310,071                    | 269,008                   
|Equipment expense                                             | 258,806                    | 212,062                   
|Intangible assets amortization                                | 66,468                     | 66,468                    
|Other                                                         | 889,853                    | 843,019                   
|Total noninterest expense                                     | 3,527,891                  | 3,175,884                 
|                                                              |                            |                           
|Income before income taxes                                    | 1,338,037                  | 1,381,419                 
|Income tax expense                                            | 421,656                    | 474,480                   
|Net income                                                    | $        
      916,381    | $        
      906,939   
|                                                              | ============               | ============              
|Earnings per common share:                                    |                            |                           
|Basic                                                         | $              
      0.36 | $              
      0.34
|Diluted                                                       | $              
      0.35 | $              
      0.34
|                                                              |                            |                           
|Net interest margin                                           | 3.28%                      | 3.57%                     
|Net interest spread                                           | 2.97%                      | 3.12%                     
|Return on average assets
      (annualized)                   | 0.78%                      | 0.83%                     
|Return on average equity
      (annualized)                   | 9.89%                      | 10.23%                    
|Efficiency ratio                                              | 69%                        | 66%                       

|Page 5                                                                                                                                                             
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NORTHEAST BANCORP AND SUBSIDIARIESConsolidated Statements of Changes in Shareholders' Equity
      Three Months Ended September 30, 2003 and 2002
      (Unaudited)
|                                                                                                                                                                   
|Balance at June 30, 2002                                                                                                                                           
|Net income for the three months ended 9/30/02                                                                                                                      
|Adjustment of net unrealized loss/gain on securities available for sale                                                                                            
|Total Comprehensive income                                                                                                                                         
|                                                                                                                                                                   
|Dividends on common stock at $0.08 per share                                                                                                                       
|Common stock issued in connection with employee benefit and stock
      option plans                                                                               
|Balance at September 30, 2002                                                                                                                                      
|                                                                                                                                                                   
|Balance at June 30, 2003                                                                                                                                           
|Net income for the three months ended 9/30/03                                                                                                                      
|Adjustment of net unrealized loss/gain on securities available for sale                                                                                            
|Total Comprehensive income                                                                                                                                         
|                                                                                                                                                                   
|Dividends on common stock at $0.08 per share                                                                                                                       
|Common stock issued in connection with employee benefit and stock
      option plans                                                                               
|Balance at September 30, 2003                                                                                                                                      
|                                                                                                                                                                   



|                                                                                |                          | Page 6                  
|------------------------------------------------------------------------------- | ------------------------ | ------------------------
|                                                                                |                          |                         
|NORTHEAST BANCORP AND
      SUBSIDIARIES                                       
|Consolidated Statements of Cash
      Flows                                    
|(Unaudited)                                                                    
|                                                                                |                          |                         
|                                                                                | Three
      Months Ended
|                                                                                | September
      30,     
|                                                                                | 2003                     | 2002                    
|Cash provided by operating
      activities                                     | $      
      4,368,337  | $         
      777,206
|                                                                                |                          |                         
|Cash flows from investing
      activities:                                     |                          |                         
|Available for sale securities
      purchased                                   | (11,148,682)             | (152,089)               
|Available for sale securities
      matured                                     | 1,982,661                | 1,125,807               
|Available for sale securities
      sold                                        | 6,413,944                | 10,198,300              
|Net change in loans                                                             | (2,658,465)              | (9,936,624)             
|Net capital expenditures                                                        | (368,744)                | (86,173)                
|Proceeds from sale of acquired
      assets                                     | 60,669                   | 390,510                 
|Bank owned life insurance
      purchased                                       | -                        | (7,143,999)             
|Net cash used in investing
      activities                                     | (5,718,617)              | (5,604,268)             
|                                                                                |                          |                         
|Cash flows from financing
      activities:                                     |                          |                         
|Net change in deposits                                                          | (5,890,732)              | 11,650,689              
|Net change in repurchase
      agreements                                       | 13,508,007               | 1,504,390               
|Dividends paid                                                                  | (211,746)                | (211,817)               
|Proceeds from stock issuance                                                    | 88,122                   | 15,000                  
|Net increase (decrease) in
      advances from Federal Home Loan Bank of Boston | (3,700,394)              | (751,036)               
|Net cash provided by financing
      activities                                 | 3,793,257                | 12,207,226              
|                                                                                |                          |                         
|Net increase in cash and cash
      equivalents                                 | 2,442,977                | 7,380,164               
|                                                                                |                          |                         
|Cash and cash equivalents,
      beginning of period                            | 18,807,919               | 18,749,092              
|Cash and cash equivalents, end
      of period                                  | $     
      21,250,896  | $     
      26,129,256 
|                                                                                | ============             | ============            
|                                                                                |                          |                         
|Cash and cash equivalents
      include cash on hand, amounts due               |                          |                         
|from banks,  interest
      bearing deposits, and FHLB overnight deposits.      |                          |                         
|                                                                                |                          |                         
|Supplemental schedule of noncash
      activities:                              |                          |                         
|Net change in valuation for
      unrealized gains/losses, net of tax,          |                          |                         
|on available for sale securities                                                | (283,682)                | 131,986                 
|Net transfer from loans to
      acquired assets                                | 112,755                  | 253,929                 
|                                                                                |                          |                         
|Supplemental disclosure of cash
      paid during the period for:               |                          |                         
|Income taxes paid, net of
      refunds                                         | 3,868                    | -                       
|Interest paid                                                                   | 2,998,971                | 3,682,709               

Page 7

NORTHEAST BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2003

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,
2003 are not necessarily indicative of the results that may be expected for the
fiscal year ending June 30, 2004. For further information, refer to the audited
consolidated financial statements and footnotes thereto for the fiscal year
ended June 30, 2003 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 December 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 December 31, 2004 at the 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, 2003                  | June 30, 2003                      
|----------------------- | ----------------------------------- | -----------------------------------
|Residential real estate | $  123,442,543                      | $  125,436,951                     
|Commercial real estate  | 103,148,716                         | 97,853,671                         
|Construction            | 6,675,125                           | 7,200,465                          
|Commercial              | 65,897,226                          | 67,585,418                         
|Consumer & Other        | 79,693,835                          | 78,235,230                         
|Total                   | 378,857,445                         | 376,311,735                        
|Net Deferred Costs      | 2,563,154                           | 2,675,053                          
|Net Loans               | $  381,420,599  
      ============ | $  378,986,788  
      ============

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,
|------------------------------------------ | --------------------------------------
|                                           | 2003                                  
|Balance at beginning of period             | $   4,016,000                         
|Add provision charged to operations        | 240,000                               
|Recoveries on loans previously charged off | 78,778                                
|                                           | 4,334,778                             
|Less loans charged off                     | 112,370                               
|Balance at end of period                   | $   4,222,408  
      ==========      

5.  Securities

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

|                                                                                                            | September 30, 2003              | June 30, 2003                 
|----------------------------------------------------------------------------------------------------------- | ------------------------------- | ------------------------------
|                                                                                                            | Cost                            | Market
              Value    
|Debt securities issued by the U.S. Treasury
      and other U.S. Government corporations
      and agencies | $  19,069,758                   | $  18,989,031                 
|Mortgage-backed securities                                                                                  | 25,577,661                      | 25,429,232                    
|Equity securities                                                                                           | 2,761,650                       | 2,699,120                     
|                                                                                                            | $  47,409,069 
      ========== | $  47,117,383
      ==========

|                                                                                                                                                           | September 30, 2003              | June 30, 2003                  
|---------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------- | -------------------------------
|                                                                                                                                                           | Cost                            | Market
              Value     
|Due after one year through five years                                                                                                                      | $   14,562,252                  | $   14,477,761                 
|Due after five years through ten years                                                                                                                     | 3,517,358                       | 3,546,270                      
|Due after ten years                                                                                                                                        | 990,148                         | 965,000                        
|Mortgage-backed securities (including
      securities with interest rates ranging from
      4.0% to 8.5% maturing February 2005 to
      September 2032) | 25,577,661                      | 25,429,232                     
|Equity securities                                                                                                                                          | 2,761,650                       | 2,699,120                      
|                                                                                                                                                           | $  47,409,069 
      ========== | $  47,117,383 
      ==========

Page 9

6.  Deposits.

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

|                        | September 30, 2003                  | June 30, 2003                      
|----------------------- | ----------------------------------- | -----------------------------------
|Demand                  | $    33,583,807                     | $    34,156,534                    
|NOW                     | 61,996,126                          | 68,078,750                         
|Money Market            | 13,853,150                          | 25,570,052                         
|Regular Savings         | 28,342,532                          | 26,026,860                         
|Brokered Deposits       | 38,829,462                          | 27,693,306                         
|Certificates of Deposit | 136,247,139                         | 137,217,446                        
|Total Deposits          | $   312,852,216 
      ============ | $   318,742,948 
      ============

7.  Advances from the Federal Home Loan Bank

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

|September 30, 2003                     
|---------------------------------------
|Principal
                Amounts      
|$   28,467,575                         
|29,867,205                             
|1,000,000                              
|3,000,000                              
|13,560,396                             
|7,000,000                              
|$    82,895,176     
      ============



|June 30, 2003                         
|--------------------------------------
|Principal
                Amounts     
|$   19,732,620                        
|16,113,460                            
|27,000,000                            
|16,749,490                            
|7,000,000                             
|$   86,595,570     
      ============

Page 10

8.  Stock Option Plans

Northeast Bancorp grants options only to employees of the Company,
"incentive stock options", and grants other options to employees and
non-employee directors, "nonqualified stock options". All options
granted under these plans are required to have an exercise price per share equal
to at least the fair market value per share of common stock on the date the
option is granted. Under Accounting Principle Board Opinion No. 25, no
compensation expense is recognized if the exercise price of the option is
greater than or equal to the fair market value of the underlying stock on the
date of grant. The options vest immediately upon being granted.

The Company had elected to present in the notes of the consolidated financial
statements the impact to net income and earnings per share of estimating the
fair value of each option on the date of grant using the Black-Scholes
option-pricing model. No options have been granted for the current or previous
fiscal year. The Company has elected to continue to disclose in the notes to the
consolidated financial statements under SFAS 148, Accounting for Stock-Based
Compensation - Transition and Disclosure, an amendment of SFAS 123. If the
Company had determined the cost for its stock options based on the fair value
method at the grant date under SFAS 123, Accounting for Stock-Based
Compensation, the Company's pro forma net income and earnings per share for
the three months ended September 30, 2003 and 2002 would have been the amounts
shown below.

|                                                                                                                                         | For the Three Months
            Ended September 30
|---------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------
|                                                                                                                                         | 2003                                               
|Net Income as reported                                                                                                                   | $   916,381                                        
|Deduct: Total stock-based compensation expense determined under fair
      value based method for all awards, net of related tax effects | --                                                 
|Pro forma net income                                                                                                                     | $   916,381=======                                 
|                                                                                                                                         |                                                    
|Earnings per share                                                                                                                       |                                                    
|Basic - as reported                                                                                                                      | $         0.36                                     
|Basic - pro forma                                                                                                                        | $         0.36                                     
|                                                                                                                                         |                                                    
|Diluted - as reported                                                                                                                    | $         0.35                                     
|Diluted - pro forma                                                                                                                      | $         0.35                                     

Page 11

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

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, 2003 and 2002 and the financial condition at
September 30, 2003 and June 30, 2003. 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, 2003 for discussion of the critical accounting policies of the Company.

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") as its primary regulator. We conduct business from
our headquarters in Auburn, Maine and from 13 banking offices all located in
Western and South-Central Maine. At September 30, 2003, we had consolidated
assets of $472 million and consolidated shareholders' equity of $37.0 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, Portland, Richmond, and South Paris, Maine. The
Bank's wholly owned subsidiary Northeast Financial Services, Inc. ("NFS"),
has its principal offices in Falmouth, Maine from which loan applications are
accepted and investment, insurance and financial planning products and services
are offered. It also has an office in Bethel, Maine where its insurance division
offers property and casualty insurance products.

Bank Strategy

The principal business of the Bank consists of attracting deposits from the
general public and applying those funds to originate or acquire residential
mortgage loans, commercial loans, commercial real estate loans, and a variety of
consumer loans. The Bank sells residential mortgage loans into the secondary
market. The Bank also invests in mortgage-backed securities and securities
issued by agencies of the United States Government. The Bank emphasizes the
growth of noninterest sources of income from trust management, financial
planning, and investment and insurance brokerage. The Bank's profitability
depends primarily on net interest income, which is the difference between
interest income earned from interest-earning assets (i.e. loans and investments)
and interest expense incurred on interest-bearing liabilities (i.e. customer
deposits, securities sold under repurchase agreements and borrowed funds). Net
interest income is affected by the relative balances of interest-earning assets
and interest-bearing liabilities, and the rates paid on these balances.

Our goal is to continue modest, but profitable growth by increasing our loan
and deposit market share in our existing markets in Western and South-Central
Maine, closely manage the yields on earning assets and rates on interest-bearing
liabilities, introduce new financial products and services, increase
non-interest income from expanded trust, investment and insurance brokerage
services, and control the growth of non-interest expenses. It also is part of
our business strategy to make targeted acquisitions in our current market areas
from time to time when opportunities present themselves. As part of our growth
strategy, Northeast Financial Services, Inc., a wholly owned subsidiary of the
Bank, acquired an insurance agency in fiscal 2002.

The Company's profitability is affected by such factors as the Bank's
interest rate spread, which is the difference between the average yield earned
on its interest-earning assets and the average rate paid on its interest-bearing
liabilities. It is also affected by the level of non-interest income and
expenses of Northeast Bancorp and the Bank, the provision for loan losses, and
the effective tax rate. Non-interest income consists primarily of loan and
deposit service fees; trust, investment brokerage and insurance brokerage fees;
and gains on the sales of loans and investments. Noninterest expenses consist of
compensation and benefits, occupancy related expenses, and other operating
expenses which include advertising, computer services, supplies,
telecommunication and postage expenses.

A Note about Forward Looking Statements

This report contains "forward-looking statements" within the
meaning of federal securities law Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, such as statements relating
to our financial condition, prospective results of operations, future
performance or expectations, plans, objectives, prospects, loan loss reserve
adequacy, simulation of changes in interest rates, capital spending and finance
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". In addition, the Company may from time
to time make such oral or written "forward-looking statements" in
future filings with the Securities and Exchange Commission (including exhibits
thereto), in its reports to shareholders, and in other communications made by or
with the approval of the Company.

Page 12

Such forward-looking statements reflect our current views and expectations
based largely on information currently available to our management, and upon
current expectations, estimates, and projections regarding the Company and its
industry, our management's belief with respect thereto, and certain assumptions
made by our management. Although we believe 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, contingencies, and other factors. Accordingly, we can not give
you any assurance that our expectations will in fact occur or that our estimates
or assumptions will be correct. We caution you that actual results could differ
materially from those expressed or implied by such 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. Accordingly, investors and others
are cautioned not to place undue reliance on such forward-looking statements.
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 our Form 10-K for the fiscal year ended June 30,
2003.

Results of Operations

Comparison of the Three Months Ended September 30, 2003 and 2002

General

The Company reported net income of $916,381 or $0.35 per diluted share for
the three months ended September 30, 2003 compared with $906,939, or $0.34 per
diluted share for the three months ended September 30, 2002, an increase of
$9,442 or 1%. Net interest income decreased $140,990, or 4%, primarily from
lower yields on earning assets. Non-interest income improved $464,139, or 45%,
from increased gains on sales of loans, investment and insurance commissions,
increased cash surrender value of bank owned life insurance, partially offset by
lower net securities gains. The provision for loan losses increased $14,524, or
6%, compared to the three months ended September 30, 2002, to reflect the
increasing mix of commercial real estate and commercial loans in the Bank's loan
portfolio. Non-interest expense increased $352,007, or 11%, primarily from the
impact of opening a new commercial banking center in Portland and staff
additions to support the high volumes of residential real estate loan sales and
origination of commercial loans. Full-time equivalent staff increased by 14 as
of the quarter ended September 30, 2003 compared to the same period last year.

Net Interest Income

Net interest income for the three months ended September 30, 2003 decreased
$140,990 compared to the same period in 2002. Net interest margin decreased to
3.28% from 3.57% for the respective periods. Average earning assets increased
$19,754,000 for the three months ended September 30, 2003 compared to September
30, 2002. The decrease in net interest income was primarily due to the
decreasing yields on earning assets. In the same period last year, rates paid on
interest-bearing liabilities, both non-maturing and maturing deposits, declined
faster than the decrease in yields on earning assets improving net interest
margin. For the quarter ended September 30, 2003, yields on earning assets
decreased faster than the decrease in cost of funds, decreasing
net interest margin. This was primarily due to the difference between the old
interest rates and interest rates after repricing of maturing certificates of
deposits which was much smaller than the prior year. During the quarter ended
September 30, 2003, prepayments on residential real estate loans were at their
highest levels as compared to any other quarterly period during the past twelve
months. Residential real estate and commercial loan balances declined, offset by
a $7,357,816 increase in commercial real estate loans and a $1,458,605 increase
in consumer loans. Average loans increased $453,000, or 0.1%, compared to
September 30, 2002. Average loans as a percentage of average earning assets was
87% and 91% for the quarters ended September 30, 2003 and 2002, respectively.

Page 13

A decrease in yields on earning assets was the most significant factor
contributing to the $140,990, or 4%, decrease in net interest income for the
three months ended September 30, 2003. The changes in net interest income are
presented in the schedule below.

|                                                                                                                                                            | Difference Due to             |                              
|----------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------- | -----------------------------
|                                                                                                                                                            | Volume                        | Rate                         
|Investments                                                                                                                                                 | $    183,161                  | $    (157,383)               
|Loans, net                                                                                                                                                  | 48,134                        | (857,463)                    
|FHLB & Other Deposits                                                                                                                                       | (12,904)                      | (13,096)                     
|Total Interest-earnings Assets                                                                                                                              | 218,391                       | (1,027,942)                  
|                                                                                                                                                            |                               |                              
|Deposits                                                                                                                                                    | 39,805                        | (705,300)                    
|Repurchases Agreements                                                                                                                                      | 38,615                        | 1,239                        
|Borrowings                                                                                                                                                  | (1,006)                       | (41,914)                     
|Total Interest-bearing Liabilities                                                                                                                          | 77,414                        | (745,975)                    
|Net Interest Income                                                                                                                                         | $    140,977   
    ========= | $    (281,967) 
    =========
|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 maintained an
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 interest rates.

As of September 30, 2003 and 2002, 49% and 45%, respectively, of the Bank's
loan portfolio was 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 decrease, 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 three months ended September 30, 2003
was $240,000, an increase of $14,524 from $225,476 for the three months ended
September 30, 2002. Net charge-offs amounted to $33,392 for the three months
ended September 30, 2003 compared to $71,476 for the same period in 2002. The
Bank experienced continued net loan growth in the commercial real estate and
consumer loans during the quarter ended September 30, 2003. Increases in the
provision for loan losses were needed to address a shift in loan mix to loans
with a higher risk profile, a slight increase in non-performing loans, and an
increase in classified loans. The allowance as a percentage of outstanding loans
increased to 1.11% compared to 1.06% at June 30, 2003.

Noninterest Income

Total non-interest income was $1,498,212 for the three months ended September
30, 2003, an increase of $464,139, or 45%, from $1,034,073 for the three months
ended September 30, 2002. This increase was primarily due to $312,615 higher
gains on sale of residential real estate loans, from the record levels of
residential real estate loans sold to the secondary market. Also contributing to
the improved non-interest income was $37,378 in higher fees and service charges
on loan and other services (primarily deposit related), $147,778 higher
investment and insurance commissions, and $103,260 increase in the cash
surrender value of bank owned life insurance (BOLI). The increase in other
non-interest income was partially offset by $1,868 lower loan service fees,
$132,290 lower net securities and trading gains, and $4,602 lower other income.
Increases for other services resulted from increased monthly and per item
service charges on transaction accounts effective December, 2002. Increased
volumes and co-brokerage insurance commissions increased investment and
insurance commissions. There was no BOLI cash surrender value in 2002. Lower
sales volume accounts for the decreased net securities and trading gains. See
Financial Condition for further discussion of BOLI.

Page 14

Total non-interest expense for the three months ended September 30, 2003 was
$3,527,891 an increase of $352,007 from $3,175,884 for the three months ended
September 30, 2002. This increase was primarily due to increased salaries and
employee benefits of $217,366 in connection with the addition of 14 full-time
equivalent employees comprised of new staff for (a) a new call center, (b) the
new commercial banking center in Portland, and (c) staff to support increased
commercial and residential real estate loan volume. Occupancy expense increased
$41,063 for the quarter ended September 30, 2003 as compared to the prior year.
This increase reflects additional leased space for the Portland commercial
banking center and new leased space for the investment brokerage division of NFS.
Equipment expense increased $46,744 for the three months ended September 30,
2003 as compared to the prior year due to higher depreciation expense from the
technology initiative completed late in the fiscal 2003. Other expense increased
$46,834 for the three months ended September 30, 2003 as compared to the prior
year due to higher marketing expenses, expenses to liquidate acquired assets,
electronic banking transaction fees, partially offset by lower collection and
loan servicing expenses.

The decrease in income tax expense was due to a decrease in income before
income taxes and the increase in cash surrender value of BOLI which is not
subject to income tax.

Our efficiency ratio was 69% and 66% for the three months ended September 30,
2003 and 2002, respectively.

Financial Condition

Our consolidated assets amounted to $472,334,921 and $467,683,632 as of
September 30, 2003 and June 30, 2003, respectively, an increase of $4,651,289,
or 1%. The increase in assets was a net increase in loans - primarily commercial
real estate loans - purchases of investment securities, and an increase in FHLB
overnight deposits from temporary increases in securities sold under repurchase
agreement. The increases other than overnight deposits were funded with the
purchase of brokered certificates of deposit. For the quarter ended September
30, 2003, total average assets were $466,958,884, an increase of $28,280,737
from $438,678,147 for the same period last year.

Total stockholders' equity was $37,008,523 and $36,499,448 at September 30,
2003 and June 30, 2003, respectively, an increase of $509,075, or 1.4%. The book
value per outstanding share was $14.32 at September 30, 2003 and $14.16 at June
30, 2003.

Investment Activities

The investment portfolio was $47,117,383 as of September 30, 2003, an
increase of $5,388,261, or 13%, from $41,729,122 as of June 30, 2003. This
increase was due to the purchases of $1,000,000 in trust preferred securities
issued by eight other financial institutions and almost $10 million of
government agency and mortgage-backed securities, net of principal payments,
sales and maturities. The investment portfolio as of September 30, 2003 consists
of government agency and mortgage-backed securities, and equity securities.
Generally, 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 recent purchases have been for collateral to
maintain our borrowing capacity with the Federal Home Loan Bank of Boston as
eligible residential real estate loans have declined from significant
prepayments. The investment portfolio averaged $45,443,179 for the three months
ended September 30, 2003 as compared to $23,815,835 for the three months ended
September 30, 2002, an increase of $21,627,344 or 91%.

Our entire investment portfolio is classified as available for sale at
September 30, 2003 and June 30, 2003, and is 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, 2003 was $47,409,069 and $47,117,383, respectively. The difference
between the carrying value and the cost of the securities of $291,686 was
primarily attributable to the market value of government agency and
mortgage-backed securities below their cost. The net unrealized loss on equity
securities was $62,530 and the net unrealized loss on government agency and
mortgage-backed securities was $229,156 at September 30, 2003. Compared to June
30, 2003, the mix of debt securities has increased due to the purchase of
government mortgage-backed securities with lower interest rates and shorter
maturities . Substantially all of the government agency and mortgage-backed
securities held in our portfolio are high investment grade , federal agency
securities. Management believes that the yields currently received on this
portfolio are satisfactory. 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 no other than temporary declines in values of
individual equity securities for the three months ended September 30, 2003.
Management also plans to hold the equity securities for the foreseeable future
because we believe that equity values are starting to recover, and the
underlying companies are viable and well managed.

Loan Portfolio

Total loans of $381,420,599 as of September 30, 2003 increased $2,433,811 or
1%, from $378,986,788 as of June 30, 2003. Compared to June 30, 2003, commercial
real estate and consumer loan portfolios increased and residential real estate,
commercial and construction loan portfolios declined. Aggregate commercial real
estate and commercial loans increased $3,606,853, or 2%, compared to June 30,
2003. The increase in commercial real estate loans was due to new opportunities
with small businesses within our market areas. Compared to the same period last
year, consumer loans increased $1,458,605, or 2%. The increase in consumer loans
was due to origination of indirect recreational vehicle, indirect auto loans,
and personal loans. These loan portfolios contain higher levels 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, decreased by
$1,994,408, or 2% compared to June 30, 2003. Prepayments continue to be high on
purchased and portfolio residential real estate loans. The total loan portfolio
averaged $380,208,813 for the quarter ended September 30, 2003, an increase of
$453,519, or less than 1%, from the quarter ended September 30, 2002.

Page 15

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, 2003 has changed with increases in commercial real
estate and consumer loans when compared to June 30, 2003. 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 selected loan products have been reduced to
compete in the various markets.

Residential real estate loans consisting of primarily owner-occupied
residential loans as a percentage of total loans were 32%, 33% and 43% as of
September 30, 2003, June 30, 2003, and September 30, 2002, respectively. The
variable rate product as a percentage of total residential real estate loans was
36%, 35% and 38% for the same periods, respectively. Variable rate residential
loans have declined slightly when compared to the prior year primarily due to
the refinance activity by customers locking in low fixed rates. Generally,
management has pursued a strategy of increasing the percentage of variable rate
loans as a percentage of the total loan portfolio to help manage interest rate
risk. We have sold virtually all of the newly originated fixed-rate residential
real estate loans also to manage interest rate risk. We will continue to sell
all 30-year fixed-rate residential real estate loans into the secondary market.
Average residential real estate mortgages of $124,611,205 for the three months
ended September 30, 2003 decreased $35,599,797, or 22%, from the three months
ended September 30, 2002. The decrease was due to increased refinancing activity
in a low interest rate environment increasing loan prepayments, 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 27%, 26% and
21% as of September 30, 2003, June 30, 2003 and September 30, 2002,
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 94%,
93% and 92% 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 $101,635,561
for the three months ended September 30, 2003 increased $20,948,080, or 26%,
from the same period in 2002. The increase in commercial real estate loans was
due to market share increases in its existing business markets.

Construction loans as a percentage of total loans were 2% as of September 30,
2003, June 30, 2003 and September 30, 2002, respectively. Risk is controlled by
limiting disbursements to the percentage of construction completed. The
construction progress is verified by an independent consultant or appraiser.
Construction loans have maturity dates less than one year. The variable rate
products as a percentage of total construction loans were 61%, 73%, and 73% for
the same periods respectively. Average construction loans were $6,528,379 and
$8,981,687 for the three months ended September 30, 2003 and 2002, respectively.

Commercial loans as a percentage of total loans were 17%, 18%, and 14% as of
September 30, 2003, June 30, 2003 and September 30, 2002, respectively. The
variable rate products as a percentage of total commercial loans were 64%, 63%,
and 55% for the same periods respectively. The repayment ability of commercial
loan 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 $66,174,821 for the three months
ended September 30, 2003 increased $15,098,229, or 30%, from $51,076,592 for the
same period in 2002.

Consumer and other loans as a percentage of total loans were 21%, 21%, and
20% for the periods ended September 30, 2003, June 30, 2003, and September 30,
2002, respectively. Indirect recreational vehicle and mobile home loans comprise
approximately 65% of total consumer loans at September 30, 2003. Indirect auto
loans account for 26% of total consumer loans at September 30, 2003. Since these
loans are primarily fixed rate products, they have interest rate risk when
market rates increase. 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 $78,650,726 and $75,917,589 for the
three months ended September 30, 2003 and 2002, respectively. The $2,733,137, or
4%, increase was due primarily to increased indirect recreational vehicle and
indirect auto lending. The composition of consumer loans is detailed in the
following table.

|Consumer Loans      
|--------------------
|                    
|Indirect Auto       
|Indirect RV         
|Indirect Mobile Home
|Subtotal Indirect   
|Other               
|Total               

Page 16

Classification of Assets

The Bank had non-performing loans totaling $2,015,000 and $1,829,000 at
September 30, 2003 and June 30, 2003, respectively, or 0.53% and 0.49% of total
loans, respectively. The Bank's allowance for loan losses was equal to 210% and
220% of the total non-performing loans at September 30, 2003 and June 30, 2003,
respectively. The following table represents the Bank's non-performing loans as
of September 30, 2003 and June 30, 2003, respectively:

|Description             | September 30, 2003                | June 30,2003                     
|----------------------- | --------------------------------- | ---------------------------------
|Residential Real Estate | $     708,000                     | $     568,000                    
|Commercial Real Estate  | 585,000                           | 585,000                          
|Commercial Loans        | 427,000                           | 600,000                          
|Consumer and Other      | 295,000  
      ____________      | 76,000  
      ____________      
|Total non-performing    | $   2,015,000  
      =========== | $   1,829,000  
      ===========

Allowance for Loan Losses

Management does not believe that the increase in non-performing residential
real estate and consumer and other loans as of September 30, 2003 was indicative
of a trend. As experienced by financial institutions nationwide, we have had an
increase in the number of consumers filing bankruptcy, which accounts for the
increase in consumer and other non-performing loans as of September 30, 2003. At
September 30, 2003, the Bank had $450,000 in loans classified substandard that
management believes could potentially become non-performing due to delinquencies
or marginal cash flows. These substandard loans increased by $90,000 when
compared to the $360,000 at June 30, 2003. The Bank's delinquent loans, as a
percentage of total loans, decreased during the September 30, 2003 quarter. 
To
control the amount of such loans, management continues to allocate substantial
resources to the collection area.

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:



|09-30-03 | 06-30-03 | 03-31-03 | 12-31-02
|-------- | -------- | -------- | --------
|0.97%    | 1.09%    | 0.97%    | 1.41%   

At September 30, 2003, loans classified as non-performing included
approximately $127,000 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 0.93% as of September 30, 2003.

The Bank's allowance for loan losses was $4,222,408 as of September 30, 2003
as compared to $4,016,000 as of June 30, 2003, representing 1.11% and 1.06% of
total loans, respectively. Management has increased the provision to maintain
an allowance at a level that management believes is reasonable for the overall
risk inherent in the loan portfolio. The factors considered include the
increasing mix of commercial and consumer loans, the slight increase in
non-performing loans, the decrease in net charge offs compared to the three
months ended September 30, 2002, internal risk ratings and credit
concentrations.

Provisions for loan losses are based on management's ongoing evaluation of
the adequacy of the allowance for loan losses. This evaluation 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. For the three months ended September 30, 2003, we have not changed our
approach in the determination of the allowance for loan losses. There have been
no material changes in the assumptions or estimation techniques as compared to
prior periods in determining the adequacy of the allowance for loan losses.

Page 17

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 August 2003. At
the time of the exam the regulators proposed no adjustments to the allowance for
loan losses.

Other Assets

At September 30, 2003, the Company had acquired assets of $130,842 an
increase of $34,086 compared to June 30, 2003. The increase is net of additions
of $112,755, less dispositions of $60,669, and less provisions for the allowance
for losses of $18,000. 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 $27,564 is adequate to state the portfolio at lower
of cost, or fair value less estimated selling expenses.

Bank owned life insurance (BOLI) was purchased on September 30, 2002. 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, 2003. Interest
earnings increase the cash surrender value. These interest earnings are based on
interest rates reset each year, subject to minimum interest rates. The increases
in cash surrender value offsets a portion of employee benefit costs. These
increases were recognized in other income and are not subject to income taxes.
Borrowing on or surrendering the policy may subject the Bank to income tax
expense on the increase in cash surrender value. For these reasons, management
considers BOLI an illiquid asset. BOLI represented 18% of capital and the
allowance for loan losses at September 30, 2003.

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 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 $312,852,216 as of September 30, 2003 decreased $5,890,732,
or 2%, from $318,742,948 as of June 30, 2003. Demand deposits, NOW accounts, and
money market accounts decreased $572,727, $6,082,624, and $11,716,902,
respectively, for the three months ended September 30, 2003. The decrease in
money market account balances was due to discontinuing the Maximum Return Sweep
account. These customers who required collateralized deposit balances were moved
to repurchase accounts with similar interest rates. Regular savings increased
$2,315,672 for the three months ended September 30, 2003. Certificates of
deposits increased during the same period by $10,165,849. Management's strategy
is to continue offering certificate of deposit rates in the middle of the
market, thus reducing the related interest expense as certificates of deposits
renew.

Total average deposits of $311,709,141 for the three months ended September
30, 2003 increased $12,653,429, or 4%, from the average for the three months
ended September 30, 2002. The increase in total average deposits compared to
September 30, 2002 is net of a $5,174,561 or 18% increase in demand deposit,
$575,725 or 0.90% increase in NOW accounts, $134,446 or 0.84% decrease in money
market accounts, and $4,924,328 or 22% increase in regular savings accounts. The
increase in demand deposits reflects the cross sales efforts on commercial
accounts and increase usage of sweeps. All interest-bearing non-maturing deposit
accounts have market interest rates. Brokered certificates of deposit increased
$13,014,122 or 60%. Regular certificates of deposit decreased $10,900,861 or 7%.
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 and competitive pressure. 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.

At September 30, 2003, brokered certificates of deposit were $38,829,462, and
increased by $11,136,156, or 40%, compared to the $27,693,306 balance as of June
30, 2003. This increase reflects our decision to use brokered certificates of
deposits as an alternative to FHLB advances.

Securities sold under repurchase agreements were $29,610,425 as of September
30, 2003, an increase of $13,508,007, or 84%, from $16,102,418 as of June 30,
2003. The increase was attributable primarily to funds moved from money market
accounts, formerly Maximum Return Sweep customers. Average securities sold under
repurchase agreements were $23,918,040 for the three months ended September 30,
2003, an increase of $14,015,318, or 142%, compared to the average for the three
months ended September 30, 2002. Repurchase agreements enhance the Bank's
ability to obtain additional municipal and commercial deposits, improving its
overall liquidity position in a cost-effective manner.

Page 18

Advances from the Federal Home Loan Bank (FHLB) were $82,895,176 as of
September 30, 2003, a decrease of $3,700,394, or 4%, from $86,595,570 as of June
30, 2003. The decrease in FHLB advances was due to the pay down of an overnight
advance of $3,046,000 on July 1, 2003. The Bank's current advance availability,
our unused borrowing capacity subject to the satisfaction of certain conditions,
is approximately $2,870,000 over and above the September 30, 2003 advances.
During the quarter ended September 30, 2003, we had pledged securities of
$10,796,000 and realized declines in eligible loans of some $7,785,000,
primarily due to significant prepayments in the residential real estate loan
portfolio. We plan to purchase additional government agency and mortgage-backed
securities to pledge as collateral for advances. These purchases will be funded
from the cash flow from mortgage-backed securities and residential real estate
loans principal and interest payments, and, if needed, purchases of brokered
certificates of deposit. Newly originated 15-year fixed-rate mortgages will be
held in portfolio and will qualify as collateral. In addition to government
agency and mortgage-backed securities, residential and certain commercial real
estate loans and certain FHLB deposits free of liens, pledges and encumbrances
are required be pledged to secure FHLB advances. Average advances from the FHLB
were $84,516,651 for the three months ended September 30, 2003, a decrease of
$66,648, or less than 1%, compared to $84,583,299 average for the same period
last year.

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, repurchase agreements and brokered
deposits.

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 2002, 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. For the three months
ended September 30, 2003, there have been no shares repurchased. As of September
30, 2003, the Company had repurchased $2,450,108 of its common stock and
management believes that the purchases have not had a significant effect on the
Company's liquidity and earnings per share.

Total equity of the Company was $37,008,523 as of September 30, 2003 as
compared to $36,499,448 at June 30, 2003. The increase of $509,075, or 1%, was
primarily from net income increasing retained earnings less dividends paid. Book
value per common share was $14.32 as of September 30, 2003 as compared to $14.16
at June 30, 2003. The total average equity to total average assets ratio of the
Company was 7.87% as of September 30, 2003 and 8.11% at June 30, 2003.

The Company's net cash provided by operating activities was $4,368,337
during the three months ended September 30, 2003, which was a $3,591,131
increase compared to the same period in 2002. The increase was due primarily
from the liquidation of residential real estate loans held for sale. Investing
activities were a net use of cash primarily due to the purchase of securities
during the three months ended September 30, 2003 compared to the same period in
2002. Financing activities provided net cash from the increase in repurchase
agreements compared to the same period in 2002. Overall, the Company's position
of cash and cash equivalents increased by $2,442,977 during the three months
ended September 30, 2003.

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, 2003, 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, 2003, 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, 2003: |           |                                              |                                                                                  
|Tier 1 (Core) capital to risk weighted assets          | $  41,406 | 11.39%                                       | $  14,535                                                                        
|Tier 1 (Core) capital to total assets                  | $  41,406 | 8.79%                                        | $  18,842                                                                        
|Total Capital to risk weighted assets                  | $  42,619 | 11.73%                                       | $  29,070                                                                        

Management believes that there are adequate funding sources to meet its
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 potential 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, 2003 for residential real estate,
commercial real estate, and commercial loans totaled $22,315,000, compared to
$32,452,000 at June 30, 2003. Unused lines of credit from commercial,
construction, and home equity loans totaled $38,581,000 compared to $32,942,000
at June 30, 2003. 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, 2003. For information regarding the Company's market risk, refer to the
Company's Annual Report on Form 10-K dated as of June 30, 2003.

Item 4. Controls and Procedures

Management with the participation of the Company's President and Chief
Executive Officer and Chief Financial Officer (its principal executive officer
and principal financial officer, respectively), have evaluated the effectiveness
of our disclosure controls and procedures (as defined in Rules 13a - 15(e) and
15d - 15(e) under the Securities Exchange Act of 1934, as amended) as of the end
of the period covered by this For 10-Q. Based on that evaluation, our President
and Chief Executive Officer and Chief Financial Officer have concluded that
these disclosure controls and procedures were effective to ensure the disclosure
of material information related 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.



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                                                                                                                                                                                                                                                                                                                                       
|        | 31.1                                                                                                                                                                                                                                                                                                                                     
|        | 31.2                                                                                                                                                                                                                                                                                                                                     
|        | 32.1                                                                                                                                                                                                                                                                                                                                     
|        | 32.2                                                                                                                                                                                                                                                                                                                                     
|(b)     | Reports on Form 8- K                                                                                                                                                                                                                                                                                                                     
|        | During the last
      quarter of the fiscal period covered by this report, the Registrant filed
      the following reports on form 8K:                                                                                                                                                                                                  
|        | On July 22, 2003, the Company filed a Current Report on Form 8-K under
      Item 9 to disclose the Press Release for annual earnings for the year
      ended June 30, 2003.                                                                                                                                                            
|        | On August 26, 2003, the Company filed a Current Report on Form 8-K
      under Item 5 to disclose the Press Release for the Northeast Bancorp Board
      of Directors announcing that they approved a 12.5% increase in their
      dividend which will be effective for the first quarter of the period ended
      September 30, 2003.

Page 20

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 12, 2003 | 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 21

NORTHEAST BANCORP
Index to Exhibits

|EXHIBIT NUMBER | DESCRIPTION
|-------------- | -----------
|               | 11         
|               | 31.1       
|               | 31.2       
|               | 32.1       
|               | 32.2