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 | March 31, 2005
|--------------------- | --------------

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
May 09, 2005, the registrant had outstanding 2,518,332 shares of common stock, $1.00 stated 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)                                                                       
|                                                                                   |                                                                                  |                                                                                      |                                 |                      |              
|                                                                                   |                                                                                  |                                                                                      |                                 | March 31, 2005       | June 30, 2004
|Assets                                                                             |                                                                                  |                                                                                     
|Cash and due from
      banks                                                      | $  
      11,595,383                                                             | $  
      13,955,361                                                                
|Interest bearing
      deposits                                                    | 1,213,902                                                                        | 692,424                                                                             
|                                                                                   |                                                                                  |                                                                                      | Total cash and cash equivalents | 12,809,285           | 14,647,785   
|                                                                                   |                                                                                  |                                                                                      |                                 |                      |              
|Available for sale
      securities, at market value                               | 76,340,571                                                                       | 67,471,144                                                                          
|Loans held for sale                                                                | 222,831                                                                          | 545,722                                                                             
|                                                                                   |                                                                                  |                                                                                      |                                 |                      |              
|Loans receivable                                                                   | 459,741,168                                                                      | 432,594,348                                                                         
|                                                                                   | Less allowance for
      loan losses                                             | 4,937,000                                                                            | 4,577,000                      
|                                                                                   | Net loans                                                                        | 454,804,168                                                                          | 428,017,348                    
|                                                                                   |                                                                                  |                                                                                      |                                 |                      |              
|Premises and
      equipment, net                                                  | 4,305,719                                                                        | 4,353,208                                                                           
|Aquired assets - net                                                               | 118,260                                                                          | 38,583                                                                              
|Accrued interest
      receivable - loans                                          | 1,934,828                                                                        | 1,725,894                                                                           
|Accrued interest
      receivable - investments                                    | 468,182                                                                          | 467,275                                                                             
|FHLB and FRB stock,
      at cost                                                  | 7,050,000                                                                        | 6,644,500                                                                           
|Goodwill                                                                           | 407,897                                                                          | 407,897                                                                             
|Intangible assets,
      net of accumulated amortization of $2,094,705 at 03/31/05 |                                                                                  |                                                                                     
|and $1,875,835 at
      6/30/04                                                    | 2,191,523                                                                        | 328,893                                                                             
|Bank owned life
      insurance (BOLI)                                             | 7,961,984                                                                        | 7,759,944                                                                           
|Other assets                                                                       | 6,397,705                                                                        | 6,345,707                                                                           
|                                                                                   | Total assets                                                                     | $
      575,012,953                                                                  | $
      538,753,900            
|                                                                                   |                                                                                  |                                                                                      |                                 | ========             | ========     
|                                                                                   |                                                                                  |                                                                                      |                                 |                      |              
|Liabilities and
      Stockholders' Equity                                         |                                                                                  |                                                                                     
|                                                                                   |                                                                                  |                                                                                      |                                 |                      |              
|Liabilities:                                                                       |                                                                                  |                                                                                     
|                                                                                   | Deposits                                                                         |                                                                                      |                                
|                                                                                   |                                                                                  | Demand                                                                               | $  
      37,012,225            | $  
      37,799,644
|                                                                                   |                                                                                  | NOW                                                                                  | 60,764,971                      | 64,317,533          
|                                                                                   |                                                                                  | Money market                                                                         | 16,766,409                      | 17,553,102          
|                                                                                   |                                                                                  | Regular savings                                                                      | 29,738,434                      | 28,804,916          
|                                                                                   |                                                                                  | Brokered time
      deposits                                                         | 88,567,446                      | 96,713,190          
|                                                                                   |                                                                                  | Certificates of
      deposit                                                        | 168,474,909                     | 132,631,344         
|                                                                                   |                                                                                  |                                                                                      | Total deposits                  | 401,324,394          | 377,819,729  
|                                                                                   |                                                                                  |                                                                                      |                                 |                      |              
|                                                                                   | FHLB advances                                                                    | 86,686,755                                                                           | 82,977,634                     
|                                                                                   | Other borrowings                                                                 | 353,404                                                                              | -                              
|                                                                                   | Securities sold
      under repurchase agreements                                | 28,850,151                                                                           | 24,884,869                     
|                                                                                   | Junior subordinated
      debentures issued to affiliated trusts                 | 16,496,000                                                                           | 13,580,849                     
|                                                                                   | Other liabilities                                                                | 2,765,122                                                                            | 3,037,799                      
|                                                                                   |                                                                                  |                                                                                      | Total liabilities               | 536,475,826          | 502,300,880  
|                                                                                   |                                                                                  |                                                                                      |                                 |                      |              
|Commitments and
      contingent liabilities                                       |                                                                                  |                                                                                     
|                                                                                   |                                                                                  |                                                                                      |                                 |                      |              
|Stockholders' equity                                                               |                                                                                  |                                                                                     
|                                                                                   | Preferred stock,
      cumulative, $1 par value, 1,000,000 shares authorized     |                                                                                      |                                
|                                                                                   |                                                                                  | and none issued and
      outstanding                                                | -                               | -                   
|                                                                                   | Common stock, at
      stated value, 15,000,000 shares authorized; 2,522,832 and |                                                                                      |                                
|                                                                                   |                                                                                  | 2,525,416 shares
      outstanding at March 31, 2005 and June 30, 2004, respectively | 2,522,832                       | 2,525,416           
|                                                                                   | Additional paid in
      capital                                                 | 6,610,997                                                                            | 6,943,894                      
|                                                                                   | Retained earnings                                                                | 30,534,766                                                                           | 28,380,678                     
|                                                                                   | Accumulated other
      comprehensive (loss)                                     | (1,131,468)                                                                          | (1,396,968)                    
|                                                                                   |                                                                                  | Total stockholders'
      equity                                                     | 38,537,127                      | 36,453,020          
|                                                                                   |                                                                                  |                                                                                      |                                 |                      |              
|                                                                                   |                                                                                  |                                                                                      |                                 |                      |              
|                                                                                   |                                                                                  | Total liabilities
      and stockholders' equity                                     | $
      575,012,953             | $
      538,753,900 
|                                                                                   |                                                                                  |                                                                                      |                                 | =========            | =========    

|                                   |                                                               |                                                            |                          | Page 4             
|---------------------------------- | ------------------------------------------------------------- | ---------------------------------------------------------- | ------------------------ | -------------------
|                                   |                                                               |                                                            |                          |                    
|NORTHEAST BANCORP AND SUBSIDIARIES
|Consolidated Statements of Income 
|(Unaudited)                       
|                                   |                                                               |                                                            |                          |                    
|                                   |                                                               |                                                            | Three
      Months Ended
|                                   |                                                               |                                                            | March 31,               
|                                   |                                                               |                                                            | 2005                     | 2004               
|Interest and dividend income:      |                                                               |                                                           
|                                   | Interest on loans                                             | $  
      7,428,522                                        | $  
      6,338,030     
|                                   | Interest on FHLB overnight
      deposits                     | 20,060                                                     | 3,115                   
|                                   | Interest on fed funds sold                                    | 4,719                                                      | -                       
|                                   | Interest and dividends on
      available for sale securities | 607,857                                                    | 618,553                 
|                                   | Dividends on FHLB and FRB stock                               | 71,617                                                     | 35,519                  
|                                   | Other interest income                                         | 3,397                                                      | 945                     
|                                   |                                                               | Total interest and dividend income                         | 8,136,172                | 6,996,162          
|                                   |                                                               |                                                            |                          |                    
|Interest expense:                  |                                                               |                                                           
|                                   | Deposits                                                      | 2,175,502                                                  | 1,631,390               
|                                   | Repurchase agreements                                         | 112,369                                                    | 65,859                  
|                                   | FHLB advances                                                 | 967,432                                                    | 998,696                 
|                                   | Other borrowings                                              | 2,865                                                      | -                       
|                                   | Junior subordinated debentures                                | 249,286                                                    | 261,918                 
|                                   |                                                               | Total interest expense                                     | 3,507,454                | 2,957,863          
|                                   |                                                               |                                                            |                          |                    
|                                   |                                                               | Net interest income before provision for
      loan losses | 4,628,718                | 4,038,299          
|                                   |                                                               |                                                            |                          |                    
|Provision for loan losses          | 400,554                                                       | 240,256                                                   
|                                   |                                                               | Net interest income after provision for loan
      losses  | 4,228,164                | 3,798,043          
|                                   |                                                               |                                                            |                          |                    
|Noninterest income:                |                                                               |                                                           
|                                   | Fees and service charges on
      loans                       | 176,975                                                    | 129,047                 
|                                   | Fees for other services to
      customers                    | 267,063                                                    | 237,261                 
|                                   | Net securities gains                                          | 40,771                                                     | 69,055                  
|                                   | Gain (loss) on trading
      activities                       | 138                                                        | (2,629)                 
|                                   | Gain on sales of loans                                        | 57,887                                                     | 96,364                  
|                                   | Investment commissions                                        | 318,914                                                    | 445,314                 
|                                   | Insurance commissions                                         | 544,702                                                    | 133,333                 
|                                   | BOLI income                                                   | 84,013                                                     | 97,677                  
|                                   | Other income                                                  | 120,111                                                    | 98,960                  
|                                   |                                                               | Total noninterest income                                   | 1,610,574                | 1,304,382          
|                                   |                                                               |                                                            |                          |                    
|Noninterest expense:               |                                                               |                                                           
|                                   | Salaries and employee benefits                                | 2,486,952                                                  | 2,161,459               
|                                   | Occupancy expense                                             | 371,818                                                    | 319,369                 
|                                   | Equipment expense                                             | 292,612                                                    | 192,930                 
|                                   | Intangible assets amortization                                | 97,736                                                     | 66,468                  
|                                   | Other                                                         | 954,630                                                    | 842,727                 
|                                   |                                                               | Total noninterest expense                                  | 4,203,748                | 3,582,953          
|                                   |                                                               |                                                            |                          |                    
|Income before income taxes         | 1,634,990                                                     | 1,519,472                                                 
|Income tax expense                 | 520,625                                                       | 499,124                                                   
|                                   |                                                               |                                                            |                          |                    
|                                   |                                                               | Net income                                                 | $  
      1,114,365      | $  
      1,020,348
|                                   |                                                               |                                                            | ========                 | ========           
|                                   |                                                               |                                                            |                          |                    
|Earnings per common share:         |                                                               |                                                           
|                                   | Basic                                                         | $          
      0.44                                     | $           
      0.40 
|                                   | Diluted                                                       | $          
      0.44                                     | $           
      0.40 
|                                   |                                                               |                                                            |                          |                    
|                                   |                                                               | Net interest margin                                        | 3.49%                    | 3.43%              
|                                   |                                                               | Net interest spread                                        | 3.13%                    | 3.12%              
|                                   |                                                               | Return on average assets (annualized)                      | 0.80%                    | 0.82%              
|                                   |                                                               | Return on average equity (annualized)                      | 11.57%                   | 11.02%             
|                                   |                                                               | Efficiency ratio                                           | 67%                      | 67%                

|                                         |                                                               |                                                            |                        | Page 5             
|---------------------------------------- | ------------------------------------------------------------- | ---------------------------------------------------------- | ---------------------- | -------------------
|                                         |                                                               |                                                            |                        |                    
|NORTHEAST BANCORP
      AND SUBSIDIARIES
|Consolidated
      Statements of Income 
|(Unaudited)                             
|                                         |                                                               |                                                            |                        |                    
|                                         |                                                               |                                                            | Nine Months Ended     
|                                         |                                                               |                                                            | March 31,             
|                                         |                                                               |                                                            | 2005                   | 2004               
|Interest
      and dividend income:      |                                                               |                                                           
|                                         | Interest
      on loans                                       | $  
      21,458,879                                       | $  
      18,831,164  
|                                         | Interest
      on FHLB overnight deposits                     | 40,306                                                     | 12,969                
|                                         | Interest
      on fed funds sold                              | 4,719                                                      | -                     
|                                         | Interest
      and dividends on available for sale securities | 1,957,962                                                  | 1,519,722             
|                                         | Dividends
      on FHLB and FRB stock                         | 188,290                                                    | 132,656               
|                                         | Other
      interest income                                   | 6,192                                                      | 2,873                 
|                                         |                                                               | Total interest and
      dividend income                   | 23,656,348             | 20,499,384         
|                                         |                                                               |                                                            |                        |                    
|Interest
      expense:                  |                                                               |                                                           
|                                         | Deposits                                                      | 6,251,473                                                  | 4,807,243             
|                                         | Repurchase
      agreements                                   | 293,071                                                    | 211,413               
|                                         | FHLB
      advances                                           | 2,843,365                                                  | 3,287,724             
|                                         | Other
      borrowings                                        | 13,308                                                     | -                     
|                                         | Junior
      subordinated debentures                          | 831,492                                                    | 625,683               
|                                         |                                                               | Total interest
      expense                               | 10,232,709             | 8,932,063          
|                                         |                                                               |                                                            |                        |                    
|                                         |                                                               | Net interest income
      before provision for loan losses | 13,423,639             | 11,567,321         
|                                         |                                                               |                                                            |                        |                    
|Provision
      for loan losses          | 1,000,675                                                     | 721,058                                                   
|                                         |                                                               | Net interest income
      after provision for loan losses  | 12,422,964             | 10,846,263         
|                                         |                                                               |                                                            |                        |                    
|Noninterest
      income:                |                                                               |                                                           
|                                         | Fees and
      service charges on loans                       | 390,439                                                    | 444,084               
|                                         | Fees for
      other services to customers                    | 759,241                                                    | 724,295               
|                                         | Net
      securities gains                                    | 79,862                                                     | 187,406               
|                                         | (Loss)
      gain on trading activities                       | (21)                                                       | 8,875                 
|                                         | Gain on
      sales of loans                                  | 168,427                                                    | 628,950               
|                                         | Investment
      commissions                                  | 1,153,675                                                  | 1,223,340             
|                                         | Insurance
      commissions                                   | 1,017,980                                                  | 295,758               
|                                         | BOLI
      income                                             | 244,106                                                    | 286,638               
|                                         | Other
      income                                            | 388,655                                                    | 250,191               
|                                         |                                                               | Total noninterest
      income                             | 4,202,364              | 4,049,537          
|                                         |                                                               |                                                            |                        |                    
|Noninterest
      expense:               |                                                               |                                                           
|                                         | Salaries
      and employee benefits                          | 7,151,413                                                  | 6,224,788             
|                                         | Occupancy
      expense                                       | 1,027,272                                                  | 921,194               
|                                         | Equipment
      expense                                       | 834,711                                                    | 704,867               
|                                         | Intangible
      assets amortization                          | 218,870                                                    | 199,404               
|                                         | Other                                                         | 3,259,652                                                  | 2,666,015             
|                                         |                                                               | Total noninterest
      expense                            | 12,491,918             | 10,716,268         
|                                         |                                                               |                                                            |                        |                    
|Income
      before income taxes         | 4,133,410                                                     | 4,179,532                                                 
|Income
      tax expense                 | 1,298,047                                                     | 1,352,785                                                 
|                                         |                                                               |                                                            |                        |                    
|                                         |                                                               | Net income                                                 | $  
      2,835,363    | $  
      2,826,747
|                                         |                                                               |                                                            | ========               | ========           
|                                         |                                                               |                                                            |                        |                    
|Earnings
      per common share:         |                                                               |                                                           
|                                         | Basic                                                         | $          
      1.13                                     | $          
      1.11
|                                         | Diluted                                                       | $          
      1.11                                     | $          
      1.08
|                                         |                                                               |                                                            |                        |                    
|                                         |                                                               | Net interest margin                                        | 3.38%                  | 3.38%              
|                                         |                                                               | Net interest spread                                        | 3.12%                  | 3.10%              
|                                         |                                                               | Return on average
      assets (annualized)                | 0.68%                  | 0.78%              
|                                         |                                                               | Return on average
      equity (annualized)                | 9.85%                  | 10.21%             
|                                         |                                                               | Efficiency ratio                                           | 71%                    | 69%                

|                                                                 |                                                    |                                                   |             |                      |                         |               |             | Page 6   
|---------------------------------------------------------------- | -------------------------------------------------- | ------------------------------------------------- | ----------- | -------------------- | ----------------------- | ------------- | ----------- | ---------
|NORTHEAST BANCORP
      AND SUBIDIARIES                         
|Consolidated
      Statements of Changes in Stockholders' Equity
|Nine Months Ended
      March 31, 2005 and 2004                 
|(Unaudited)                                                     
|                                                                 |                                                    |                                                   |             |                      |                         |               |             |          
|                                                                 |                                                    |                                                   |             |                      |                         | Accumulated   |             |          
|                                                                 |                                                    |                                                   |             | Additional           |                         | Other         |             |          
|                                                                 |                                                    |                                                   | Common      | Paid-in              | Retained                | Comprehensive | Treasury    |          
|                                                                 |                                                    |                                                   | Stock       | Capital              | Earnings                | Income (Loss) | Stock       | Total    
|Balance
      at June 30, 2003                                   | $2,786,095                                         | $10,381,692                                       | $25,756,832 | $      
      91,169 | $(2,516,340)            | $36,499,448  
|                                                                 | Net
      income for nine months ended 3/31/04     | -                                                 | -           | 2,826,747            | -                       | -             | 2,826,747  
|                                                                 | Other
      comprehensive income net of tax:       |                                                   |             |                      |                         |               |            
|                                                                 |                                                    | Net unrealized
      losses on investments        |             |                      |                         |               |             |          
|                                                                 |                                                    | available for sale,
      net of reclassification |             |                      |                         |               |             |          
|                                                                 |                                                    | adjustment                                        | -           | -                    | -                       | (104,211)     | -           | (104,211)
|                                                                 |                                                    | Total comprehensive
      income                  | -           | -                    | -                       | -             | -           | 2,722,536
|                                                                 |                                                    |                                                   |             |                      |                         |               |             |          
|                                                                 | Dividends
      on common stock at $0.26 per share | -                                                 | -           | (690,024)            | -                       | -             | (690,024)  
|                                                                 | Reclassification
      of treasury stock           | (209,268)                                         | (2,307,072) |                      |                         | 2,516,340     | -          
|                                                                 | Purchase
      of 69,486 shares of Company stock   | (69,486)                                          | (1,102,719) | -                    | -                       |               | (1,172,205)
|                                                                 | Common
      stock issued in connection with       |                                                   |             |                      |                         |               |            
|                                                                 |                                                    | employee benefit and
      stock option plan      | 25,875      | 241,472              | -                       | -             | -           | 267,347  
|Balance
      at March 31, 2004                                  | 2,533,216                                          | 7,213,373                                         | 27,893,555  | (13,042)             | -                       | 37,627,102   
|                                                                 |                                                    |                                                   | ======      | ======               | =======                 | =======       | =======     | ======   
|Balance
      at June 30, 2004                                   | $2,525,416                                         | $6,943,894                                        | $28,380,678 | $ 
      (1,396,968) | $              
      - | $36,453,020  
|                                                                 | Net
      income for nine months ended 3/31/05     | -                                                 | -           | 2,835,363            | -                       | -             | 2,835,363  
|                                                                 | Other
      comprehensive income net of tax:       |                                                   |             |                      |                         |               |            
|                                                                 |                                                    | Net unrealized gains
      on investments         |             |                      |                         |               |             |          
|                                                                 |                                                    | available for sale,
      net of reclassification |             |                      |                         |               |             |          
|                                                                 |                                                    | adjustment                                        | -           | -                    | -                       | 265,500       | -           | 265,500  
|                                                                 |                                                    | Total comprehensive
      income                  | -           | -                    | -                       | -             | -           | 3,100,863
|                                                                 |                                                    |                                                   |             |                      |                         |               |             |          
|                                                                 | Dividends
      on common stock at $0.27 per share | -                                                 | -           | (681,275)            | -                       | -             | (681,275)  
|                                                                 | Purchase
      of 30,000 shares of Company stock   | (30,000)                                          | (540,000)   | -                    | -                       | -             | (570,000)  
|                                                                 | Common
      stock issued in connection with       |                                                   |             |                      |                         |               |            
|                                                                 |                                                    | employee benefit and
      stock option plan      | 27,416      | 207,103              | -                       | -             | -           | 234,519  
|Balance
      at March 31, 2005                                  | $2,522,832                                         | $6,610,997                                        | $30,534,766 | $ 
      (1,131,468) | $              
      - | $38,537,127  
|                                                                 | ======                                             | ======                                            | =======     | =======              | ======                  | =======      

|                                                                       |                         | Page 7              
|---------------------------------------------------------------------- | ----------------------- | --------------------
|                                                                       |                         |                     
|NORTHEAST BANCORP
      AND SUBSIDIARIES                              
|Consolidated
      Statements of Cash Flows                           
|(Unaudited)                                                           
|                                                                       |                         |                     
|                                                                       | Nine
      Months Ended
|                                                                       | March 31,              
|                                                                       | 2005                    | 2004                
|Cash provided by
      operating activities:                           | $  
      3,713,359     | $  
      5,936,483 
|                                                                       |                         |                     
|Cash flows from
      investing activities:                            |                         |                     
|Federal Reserve
      stock purchased                                  | (405,500)               | -                   
|Available for sale
      securities purchased                          | (22,040,838)            | (36,955,322)        
|Available for sale
      securities matured                            | 12,526,526              | 8,350,301           
|Available for sale
      securities sold                               | 968,300                 | 8,828,593           
|Net change in loans                                                    | (27,792,953)            | (27,394,741)        
|Net capital
      expenditures                                         | (850,627)               | (827,301)           
|Proceeds from sale
      of premises and equipment                     | 481,794                 | -                   
|Proceeds from sale
      of acquired assets                            | 368,980                 | 306,492             
|Real estate held for
      investment sold                             | 8,465                   | -                   
|Purchase of
      retirement annuity                                   | (900,000)               | -                   
|Acquisition of
      business                                          | (993,469)               | -                   
|Net cash used in
      investing activities                            | (38,629,322)            | (47,691,978)        
|                                                                       |                         |                     
|Cash flows from
      financing activities:                            |                         |                     
|Net change in
      deposits                                           | 23,504,665              | 33,828,452          
|Net change in
      repurchase agreements                              | 3,965,282               | 14,919,390          
|Dividends paid                                                         | (681,275)               | (690,024)           
|Proceeds from stock
      issuance                                     | 234,519                 | 267,347             
|Company stock
      repurchased                                        | (570,000)               | (1,172,205)         
|Advances from the
      Federal Home Loan Bank                         | 45,500,000              | 16,500,000          
|Repayment of
      advances from the Federal Home Loan Bank            | (38,356,879)            | (20,940,493)        
|Net repayments on
      Federal Home Loan Bank overnight advances      | (3,434,000)             | (3,045,000)         
|Debt issuance cost
      paid                                          | -                       | (120,000)           
|Proceeds from
      issuance of junior subordinated debentures         | 10,310,000              | 6,000,000           
|Repayment of junior
      subordinated debentures                      | (7,394,849)             | -                   
|Net cash provided by
      financing activities                        | 33,077,463              | 45,547,467          
|                                                                       |                         |                     
|Net
      (decrease) increase in cash and cash equivalents             | (1,838,500)             | 3,791,972           
|                                                                       |                         |                     
|Cash and cash
      equivalents, beginning of period                   | 14,647,785              | 18,807,919          
|Cash and cash
      equivalents, end of period                         | $ 
      12,809,285     | $  
      22,599,891
|                                                                       | ========                | ========            
|                                                                       |                         |                     
|Cash and cash
      equivalents include cash on hand, amounts due      |                         |                     
|from banks, and
      interest bearing deposits.                       |                         |                     
|                                                                       |                         |                     
|Supplemental
      schedule of noncash activities:                     |                         |                     
|Net change in
      valuation for unrealized gains/losses, net of tax, |                         |                     
|on available for
      sale securities                                 | 265,500                 | (104,211)           
|Net transfer from
      loans to acquired assets                       | 468,657                 | 341,595             
|Assumption of debt
      from Solon-Anson Insurance Agency acquisition | 683,104                 | -                   
|Deferred tax
      liability related to Solon-Anson acquisition        | 450,877                 | -                   
|                                                                       |                         |                     
|Supplemental
      disclosure of cash paid during the period for:      |                         |                     
|Income taxes paid,
      net of refunds                                | 1,411,222               | 1,243,868           
|Interest paid                                                          | 9,742,076               | 8,670,838           

Page 8

NORTHEAST BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2005

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 nine-month period ended March 31, 2005
are not necessarily indicative of the results that may be expected for the
fiscal year ending June 30, 2005. For further information, refer to the audited
consolidated financial statements and footnotes thereto for the fiscal year
ended June 30, 2004 included in the Company's Annual Report on Form 10-K.
Certain June 30, 2004 amounts have been reclassified to be consistent with the
March 31, 2005 financial statements.

2.  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 of NBNCT to the
public (together the "NBNCT Trust Securities"), (ii) using the
proceeds of the sale of NBNCT 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 NBNCT Trust Securities). NBNCT sold $7,172,998 of its trust
preferred securities to the public and $221,851 of its common securities to the
Company. The NBNCT Trusts 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 had the right to
redeem the Junior Subordinated Debentures, in whole or in part on or after
December 31, 2004. The Company exercised its right to redeem the Junior
Subordinated Debentures on December 31, 2004. On that date, NBNCT paid the
liquidation amount of $7.00 per preferred security plus accrued interest due
based upon an annual interest rate of 9.60%, or a total of $7,345,150. The
proceeds from the sale of Trust Preferred Securities by NBN Capital Trust IV,
described below, were used in part for this redemption.

NBN Capital Trust II and III were created in December 2003 and NBN Capital
Trust IV was created December 2004. Each such trust is a Delaware statutory
trust (together, the "Private Trusts"). The exclusive purpose of the
Private Trusts was (i) issuing and selling Common Securities and Preferred
Securities in a private placement offering, (ii) using the proceeds of the sale
of the Private Trust Securities to acquire Junior Subordinated Deferrable
Interest Notes ("Junior Subordinated Notes"); and (iii) engaging only
in those other activities necessary, convenient, or incidental thereto.
Accordingly the Junior Subordinated Notes are the sole assets of each of the
Private Trusts.

NBN Capital Trusts II and III sold a total of $6,000,000 and NBN Capital
Trust IV sold a total of $10,000,000 of its trust preferred securities in two
separate private placement offerings. NBN Capital Trusts II and III sold a total
of $186,000 and NBN Capital Trust IV sold a total of $310,000 of its common
securities to the Company. The Private Trusts Preferred Securities are
mandatorily redeemable upon the maturity of the Junior Subordinated Debentures
on March 30, 2034 for NBN Capital Trusts II and III and on February 23, 2035 for
NBN Capital Trust IV, or upon earlier redemption as provided in the indenture.
The Company has the right to redeem the Junior Subordinated Notes, in whole or
in part on or after March 30, 2009 for NBN Capital Trusts II and III, and on or
after February 23, 2010 for NBN Capital Trust IV at the redemption price
specified in the Indenture plus any accrued but unpaid interest to the
redemption date.

NBN Capital Trust II pays a variable rate based on three month LIBOR, NBN
Capital Trust III pays a 6.50% fixed rate until March 30, 2009 when the rate
changes to a variable rate based on three month LIBOR, and NBN Capital Trust IV
pays a 5.88% fixed rate until February 23, 2010 when the rate changes to a
variable rate based on three month LIBOR. Accordingly, the Preferred Securities
of the Private Trusts currently pay quarterly distributions at an annual rate of
5.89% for the stated liquidation amount of $1,000 per Preferred Security for NBN
Capital Trust II, an annual rate of 6.50% for the stated liquidation amount of
$1,000 per Preferred Security for NBN Capital Trust III and an annual rate of
5.88% for the state liquidation amount of $1,000 per Preferred Security for NBN
Capital Trust IV. The Company has fully and unconditionally guaranteed all of
the obligations of each trust. The guaranty covers the quarterly distributions
and payments on liquidation or redemption of the Private Trust Preferred
Securities, but only to the extent of funds held by the trusts. Based on the
current rates, the annual interest expense is approximately $989,451.

Page 9

3.  Loans

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

|                        | March 31, 2005            | June 30, 2004            
|----------------------- | ------------------------- | -------------------------
|Residential real estate | $  148,430,894            | $  138,031,157           
|Commercial real estate  | 125,744,564               | 122,431,149              
|Construction            | 11,752,282                | 8,367,388                
|Commercial              | 74,897,411                | 69,738,330               
|Consumer & Other        | 96,501,143                | 91,433,974               
|Total                   | 457,326,294               | 430,001,998              
|Net Deferred Costs      | 2,414,874                 | 2,592,350                
|Net Loans               | $  459,741,168  ========= | $  432,594,348  =========

4.  Allowance for Loan Losses

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

|                                           | Nine months Ended
      March 31,
|------------------------------------------ | ---------------------------------
|                                           | 2005                             
|Balance at beginning of period             | $  4,577,000                     
|Add provision charged to operations        | 1,000,675                        
|Recoveries on loans previously charged off | 111,106                          
|                                           | 5,688,781                        
|Less loans charged off                     | 751,781                          
|Balance at end of period                   | $   4,937,000   =========        

5.  Securities

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

|                                                    | March 31, 2005          | June 30, 2004        
|--------------------------------------------------- | ----------------------- | ---------------------
|                                                    | Cost                    | Market   Value       
|                                                    |                         |                      
|Government sponsored enterprises-FHLMC, FNMA & FHLB | $ 26,270,438            | $ 25,550,345         
|Corporate bonds                                     | 500,000                 | 487,505              
|Mortgage-backed securities                          | 49,512,312              | 48,575,682           
|Equity securities                                   | 1,772,166               | 1,727,039            
|                                                    | $   78,054,916 ======== | $ 76,340,571 ========

|                                                                                                                                                           | March 31, 2005         | June 30, 2004         
|---------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------- | ----------------------
|                                                                                                                                                           | Cost                   | Market   Value        
|Due after one year through five years                                                                                                                      | $   22,391,963         | $   21,785,290        
|Due after five years through ten years                                                                                                                     | 2,988,242              | 2,942,040             
|Due after ten years                                                                                                                                        | 1,390,233              | 1,310,520             
|Mortgage-backed securities (including
      securities with interest rates ranging from
      4.0% to 8.5% maturing November 2007 to
      September 2032) | 49,512,312             | 48,575,682            
|Equity securities                                                                                                                                          | 1,772,166              | 1,727,039             
|                                                                                                                                                           | $  78,054,916 ======== | $  76,340,571 ========

Page 10

6.  Advances from the Federal Home Loan Bank

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

|March 31, 2005                        
|--------------------------------------
|PrincipalAmounts                      
|$ 47,790,530                          
|14,000,000                            
|17,896,225                            
|4,000,000                             
|3,000,000                             
|$   86,686,755   
         ===========



|June 30, 2004            
|-------------------------
|PrincipalAmounts         
|$   21,493,278           
|31,500,000               
|7,000,000                
|15,984,356               
|7,000,000                
|$   82,977,634===========

Page 11

7.  Stock Option Plans

Northeast Bancorp grants "incentive stock options" only to
employees of the Company, and grants "nonqualified stock options" to
employees and non-employee directors. 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. Generally options issued
under the plan vest immediately upon being granted.

The Company has 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 were granted for the 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 and nine
months ended March 31, 2005 and 2004 would have been the amounts shown below.
The Financial Accounting Standards Board has issued a revision of SFAS 123,
effective after July 1, 2005, that requires the fair value method be used to
account for stock based compensation and the recognition of the fair value of
stock options as compensation expense in the financial statements.

|                                                                                                                                         | For the Three MonthsEnded March 31, | For the Nine MonthsEnded March 31,
|---------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------- | ----------------------------------
|                                                                                                                                         | 2005                                | 2004                              
|Net Income as reported                                                                                                                   | $   1,114,365                       | $ 1,020,348                       
|Deduct: Total stock-based compensation expense determined under fair
      value based method for all awards, net of related tax effects | 1,509                               | --                                
|Pro forma net income                                                                                                                     | $  1,112,856=======                 | $  1,020,348=======               
|                                                                                                                                         |                                     |                                   
|Earnings per share                                                                                                                       |                                     |                                   
|Basic - as reported                                                                                                                      | $          0.44                     | $          0.40                   
|Basic - pro forma                                                                                                                        | $          0.44                     | $          0.40                   
|                                                                                                                                         |                                     |                                   
|Diluted - as reported                                                                                                                    | $          0.44                     | $          0.40                   
|Diluted - pro forma                                                                                                                      | $          0.44                     | $          0.40                   

Page 12

8.  Acquisition of Solon-Anson Insurance Agency, Inc.

On September 29, 2004, the Bank's wholly owned subsidiary, Northeast
Financial Services, Inc ("NFS"), acquired 100% of the outstanding
stock of Solon-Anson Insurance Agency, Inc. ("Solon-Anson"),
headquartered in Rangeley, Maine. See the details of the purchase price below.
In connection with the acquisition, NFS entered into certain compensation
arrangements with the sellers. NFS purchased an annuity for $900,000 to provide
deferred compensation payments to the former owners, Craig and Sharon Sargent.
The annuity remains an asset of the Company and is included in other assets in
the consolidated balance sheet. These payments are contingent on meeting the
conditions of their respective employment contracts, and are subject to a
vesting schedule over the term of each employment contract. The acquisition of
Solon-Anson Insurance Agency used purchase accounting and resulted in a customer
list intangible asset of $2,081,500, which will be amortized over seven years.
No goodwill was recognized. The results of operations of Solon-Anson have been
included in the consolidated financial statements of the Company since the
acquisition date. There is no pro-forma disclosure included because Solon-Anson
was not considered a significant acquisition. The following is a summary of the
assets and liabilities acquired and allocation of the purchase price.

Purchase Price:

|Cash Paid         | $    993,469  
|----------------- | --------------
|Debt Assumed      | $    683,104  
|Other Liabilities | $        6,743
|Deferred Taxes    | $    450,877  
|Total             | $ 2,134,193   
|                  |               
|Allocation:       |               
|Customer List     | $ 2,081,500   
|Office Equipment  | $      50,831 
|Other Assets      | $        1,862
|Total             | $ 2,134,193   

This transaction added six insurance offices located in Anson, Auburn,
Augusta, Mexico, Rangeley, and South Paris, Maine and 21,000 customers. This
acquisition is part of the Company's plans to enhance sources of fee income.

Solon-Anson merged with NFS, with NFS being the surviving company, effective
April 1, 2005. This had no impact on the financial position or results of
operations of the Company.

Page 13

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
and nine months ended March 31, 2005 and 2004 and the financial condition at
March 31, 2005 and June 30, 2004. This discussion and analysis is intended to
assist in understanding the results of operations and financial condition of
Northeast Bancorp and its wholly owned subsidiary, Northeast 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, 2004 for discussion of the critical
accounting policies of the Company.

A Note about Forward Looking Statements

This report contains certain "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. Accordingly, statements that are based on
management's projections, estimates, assumptions, and judgments constitute
forward-looking statements. These 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.

Such forward-looking statements reflect our current views and expectations
based largely on information currently available to our management, and on our
current expectations, assumptions, plans, estimates, judgments, and projections
about our business and our industry, and they involve inherent risks and
uncertainties. 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, the availability of and the costs associated with
sources of liquidity and properly managing and operating our insurance agency.
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, 2004. These forward-looking statements speak only
as of the date of this report and we do not undertake any obligation to update
or revise any of these forward-looking statements to reflect events or
circumstances occurring after the date of this report or to reflect the
occurrence of unanticipated events.

Description of Operations

Northeast Bancorp (the "Company") is a Maine corporation and a bank
holding company registered with the Federal Reserve Bank of Boston
("FRB") under the Bank Holding Company Act of 1956. After completing
our charter conversion on August 30, 2004, the Federal Reserve Bank of Boston
became the primary regulator of the Company and it supervises and examines our
activities on a continual basis. The Company also is a registered Maine
financial institution holding company under Maine law and is subject to
regulation and examination by the Superintendent of Maine Bureau of Financial
Institutions. The Company's wholly-owned subsidiary is no longer a federal
savings and loan association subject to regulation by the Office of Thrift
Supervision. In connection with its charter conversion, the name of our bank
subsidiary was changed to Northeast Bank. We conduct business from our
headquarters in Auburn, Maine and, as of March 31, 2005, we had 12 banking
offices and six insurance offices all located in Western and South-Central
Maine. At March 31, 2005, we had consolidated assets of $575.0 million and
consolidated stockholders' equity of $38.5 million.

Northeast Bancorp's principal asset is all the capital stock of Northeast
Bank (the "Bank"), a Maine state-chartered universal bank.
Accordingly, Northeast Bancorp's results of operations are primarily dependent
on the results of the operations of the Bank. The Bank has offices in Auburn,
Augusta, Bethel, Brunswick, Buckfield, Harrison, Lewiston, Lisbon Falls,
Mechanic Falls, Portland, and South Paris, Maine. The Bank's investment
brokerage division has an office in Falmouth, Maine from which investment,
insurance and financial planning products and services are offered.

On September 29, 2004, the Bank's wholly owned subsidiary, Northeast
Financial Services, Inc ("NFS"), acquired 100% of the outstanding
stock of Solon-Anson Insurance Agency, Inc. ("Solon-Anson"),
headquartered in Rangeley, Maine. See Note 8 to our consolidated financial
statement included herein for more information on this transaction. This
transaction added six insurance offices located in Anson, Auburn, Augusta,
Mexico, Rangeley, and South Paris, Maine and 21,000 customers. All of our
insurance offices offer personal and commercial property and casualty insurance
products. Effective April 1, 2005, Solon-Anson Insurance Agency was merged with
and now operates as NFS. NFS also has an insurance agency in our Bethel, Maine
branch.

Page 14

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, indirect auto and indirect recreational vehicle loans. The Bank sells
fixed rate 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 and government sponsored enterprises. 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 and borrowed funds). The relative balances of interest-earning
assets and interest-bearing liabilities, and the rates paid on these balances
affect net interest income. The Bank emphasizes the growth of non-interest
sources of income from trust management, financial planning, and investment and
insurance brokerage to reduce its dependency on net interest income.

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 managing the yields on earning assets and rates on
interest-bearing liabilities, introducing new financial products and services,
increasing the number of bank services sold to each household, increase
non-interest income from expanded trust services, investment and insurance
brokerage services, and controlling 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 a
continuation of our growth plans, the Bank also plans to open a new retail
banking branch in Windham, Maine in 2005; one of the most rapidly growing
communities in Southern Maine. Also, in an effort to more efficiently manage the
Bank's operations, the Bank will consolidate its operations into a new
headquarters building in Lewiston Maine in August 2005.

The Company's profitability is affected by 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. Net
interest income continues to be our largest source of revenue, and is affected
by the level of interest rates, changes in interest rates and by changes in the
amount and composition of interest-earning assets and interest-bearing
liabilities. The level of the provision for loan losses, non-interest income and
expenses of Northeast Bancorp and the Bank, and the effective tax rate also
affect profitability. 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. Non-interest expenses consist of
compensation and benefits, occupancy related expenses, deposit insurance
premiums paid to the FDIC, and other operating expenses, which include
advertising, computer services, supplies, telecommunication, and postage
expenses.

Results of Operations

Comparison of the Three and Nine Months Ended March 31, 2005 and 2004

General

The Company reported consolidated net income of $1,114,365, or $0.44 per
diluted share for the three months ended March 31, 2005 compared with
$1,020,348, or $0.40 per diluted share for the three months ended March 31,
2004, an increase of $94,017, or 9%. Net interest income increased $590,419, or
15%, primarily from 11% higher average earning assets. Non-interest income
increased $306,192, or 23%, primarily from increased insurance commissions and
fees and service charges on loans. The provision for loan losses increased
$160,298, or 67%, compared to the three months ended March 31, 2004, due to the
increase in charge-offs and the increased volume of commercial and consumer
indirect loans, both which carry a higher credit risk. Non-interest expense
increased $620,795, or 17%, primarily from higher salary and benefit expenses
and other operating expenses. Full-time equivalent staff increased by 12 to 193
as of the quarter ended March 31, 2005 compared to the same period last year,
primarily from the Solon Anson Insurance Agency acquisition ("Solon
Anson").

Annualized return on average equity ("ROE") and return on average
assets ("ROA") were 11.57% and 0.80%, respectively, for the quarter
ended March 31, 2005 as compared to 11.02% and 0.82%, respectively, for the
quarter ended March 31, 2004. The increase in the return on average equity was
due to higher net income for the current quarter. The return on average assets
decreased due to higher average assets compared to the quarter ended March 31,
2004.

Net income for the nine months ended March 31, 2005 was $2,835,363, or $1.11
per diluted share, as compared to $2,826,747, or $1.08 per diluted share, for
the same period one year ago. The results for the nine months ended March 31,
2005 was impacted by increased net interest income from higher average earning
assets, increased non-interest income due to increased insurance commissions,
and increased non-interest expense from the impact of staff additions from Solon
Anson.

ROE and ROA were 9.85% and 0.68%, respectively, for the nine months ended
March 31, 2005 and 10.21% and 0.78% for the nine months ended March 31, 2004.
The decline in ROE was primarily due to an increase in average equity in fiscal
2005. The decline in ROA was due to an increase in average assets in fiscal
2005.

Page 15

Net Interest Income

Net interest income for the three months ended March 31, 2005 increased
$590,419, or 15%, compared to the same period in 2004. The increase in net
interest income was due to higher average earning assets, increasing
$64,982,455, or 14%, for the quarter ended March 31, 2005 as compared to the
quarter ended March 31, 2004. The increase in earning assets was primarily due
to an increase in loan volume of $58,918,873, or 15%, and the purchase of
government sponsored enterprises, and mortgage-backed securities which increased
average investments $3,086,806, or 5%. Average loans as a percentage of average
earning assets was 85% and 84%, respectively, for quarters ended March 31, 2005
and 2004. Net interest margin was 3.49% and 3.43% for the period ended March 31,
2005 and 2004, respectively. Net interest spread for the three months ended
March 31, 2005 was 3.13%, an increase of 1 basis point from 3.12% for the same
period a year ago. Comparing the three months ended March 31, 2005 and 2004, the
yields on earning assets increased 13 basis points compared to a 12 basis point
increase in the cost of interest-bearing liabilities. The increases in yield on
earning assets and the cost of interest-bearing liabilities reflect the general
rising interest rate environment. The greater increase in the yield on earning
assets over the cost of interest-bearing liabilities was due to the repricing of
variable, prime rate based loans.

The changes in net interest income are presented in the schedule below, which
compares the three months ended March 31, 2005 and 2004.

|                                                                                                                                                              | Difference Due to             |                               
|------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------- | ------------------------------
|                                                                                                                                                              | Volume                        | Rate                          
|Investments                                                                                                                                                   | $   29,078                    | $     (3,676)                 
|Loans, net                                                                                                                                                    | 951,691                       | 138,801                       
|FHLB & Other Deposits                                                                                                                                         | 6,270  
      _____________   | 17,846  
      _____________  
|Total Interest-earnings Assets                                                                                                                                | 987,039                       | 152,971                       
|                                                                                                                                                              |                               |                               
|Deposits                                                                                                                                                      | 324,066                       | 220,046                       
|Repurchase Agreements                                                                                                                                         | 26,476                        | 20,034                        
|Borrowings                                                                                                                                                    | 93,984  
      _____________  | (135,015) 
      _____________
|Total Interest-bearing Liabilities                                                                                                                            | 444,526  
      _____________ | 105,065  
      _____________ 
|Net Interest Income                                                                                                                                           | $   542,513  ==========       | $   47,906  ==========        
|Rate/Volume amounts spread proportionately between volume and rate.
      Borrowings in the table include junior subordinated debt and FHLB
      borrowings.

Net interest income for the nine months ended March 31, 2005 increased
$1,856,318, or 16%, compared to the same period in 2004. The increase in net
interest income was due to higher average earning assets, increasing
$74,080,795, or 16%, for the nine months ended March 31, 2005 as compared to the
nine months ended March 31, 2004. The increase in earning assets was primarily
due to an increase in loans of $60,635,231, or 16%, and the purchase of
government sponsored enterprise and mortgage-backed securities, increasing
average investments $12,317,981 or 22%. Average loans, as a percentage of
average earning assets was 85% and 86% for the nine months ended March 31, 2005
and 2004, respectively. Net interest margin was 3.38% for the periods ended
March 31, 2005 and 2004. Net interest spread for the nine months ended March 31,
2005 was 3.12%, an increase of 2 basis point from 3.10% for the same period a
year ago, primarily from a 6 basis point decrease in the cost of
interest-bearing liabilities compared to a 4 basis points decrease in the yield
on earning assets.

Page 16

The changes in net interest income are presented in the schedule below, which
compares the nine months ended March 31, 2005 and 2004.

|                                                                                                                                                              | Difference Due to               |                               
|------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------- | ------------------------------
|                                                                                                                                                              | Volume                          | Rate                          
|Investments                                                                                                                                                   | $    366,346                    | $    127,528                  
|Loans, net                                                                                                                                                    | 2,888,819                       | (261,104)                     
|FHLB & Other Deposits                                                                                                                                         | 4,783  
      _____________     | 30,592  
      _____________  
|Total Interest-earnings Assets                                                                                                                                | 3,259,948                       | (102,984)                     
|                                                                                                                                                              |                                 |                               
|Deposits                                                                                                                                                      | 1,285,929                       | 158,301                       
|Repurchase Agreements                                                                                                                                         | 48,939                          | 32,719                        
|Borrowings                                                                                                                                                    | 133,156  
      _____________   | (358,398) 
      _____________
|Total Interest-bearing Liabilities                                                                                                                            | 1,468,024  
      _____________ | (167,378) 
      _____________
|Net Interest Income                                                                                                                                           | $  1,791,924==========          | $    64,394  ==========       
|Rate/Volume amounts spread proportionately between volume and rate.
      Borrowings in the table include junior subordinated debt and FHLB
      borrowings.

The Company's business primarily consists of the commercial banking
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 and discounts 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 is generally
expected to experience an improvement in its net interest margins during a
period of increasing interest rates. In fact, a slight improvement has been
experienced for the three and nine month periods ended March 31, 2005.

As of March 31, 2005 and 2004, 51% and 49%, respectively, of the Bank's loan
portfolio was composed of adjustable 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 increase, the impact on future 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.

Provision for Loan Losses

The provision for loan losses for the three months ended March 31, 2005 was
$400,554, an increase of $160,298, or 67%, from $240,256 for the three months
ended March 31, 2004. For the nine months ended March 31, 2005 and 2004, we
provided $1,000,675 and $721,058 for loan losses, respectively. The higher
provision was primarily due to higher net charge-offs, $381,554 for the three
months ended March 31, 2005 compared to $220,256 for the same period in 2004,
and $640,675 for the nine months ended March 31, 2005 compared to $379,058 for
the nine months ended March 31, 2004, and the increase in the aggregate volume
of commercial and consumer loans. The net charge-offs for the three and nine
month periods ended March 31, 2005 were attributable to commercial loans and is
not believed by management to be a trend. See Financial Condition for discussion
of the Allowance for Loan Losses for the factors impacting the provision for
loan losses. The allowance as a percentage of outstanding loans increased to
1.07% at March 31, 2005 compared to 1.06% at June 30, 2004.

Non-interest Income

Total non-interest income was $1,610,574 for the three months ended March 31,
2005, an increase of $306,192, or 23%, from $1,304,382 for the three months
ended March 31, 2004. This increase was the combined impact of a $411,369
increase in insurance commissions resulting primarily from the Solon-Anson
acquisition, $47,928 increase in fees and service charges on loans, $29,802
increase in other service fees, and $21,151 increase in other non-interest
income due to increased trust fee revenue. These increases were partially offset
by a $25,517 decrease in net securities and trading gains from lower security
sales volume, $38,477 lower gains on sale of residential real estate loans from
lower loan sales volume, $126,400 decrease in lower investment brokerage
commission revenue, and $13,664 decrease in the cash surrender value of bank
owned life insurance (BOLI) from lower interest crediting rates. We expect gains
on the sales of residential real estate loans to decrease for fiscal 2005
because origination volume will be approximately 40% lower than fiscal 2004, a
result of the rising interest rate environment.

Total non-interest income was $4,202,364 for the nine months ended March 31,
2005, an increase of $152,827, or 4%, from $4,049,537 for the nine months ended
March 31, 2004. This increase was the net impact of a $722,222 increase in
insurance commissions, $23,878 increase in fees and service charges on loans
from prepayment penalties, $34,946 increase in fees for other services to
customers from debit card usage fees, and $138,464 increase in other
non-interest income due primarily from the net gain realized on the disposal of
premises and equipment (including the sale of the former Richmond branch
building) of $59,179 and trust fees that increased $47,864. These increases were
partially offset by decreases of $116,440 in net securities and trading gains,
$460,523 in gain on sales of residential real loans due to lower sales volume,
$77,523 in loan servicing fees from write-downs on mortgage servicing rights,
$69,665 in investment commission from lower sales volume, and $42,532 in lower
BOLI cash surrender value due to lower interest crediting rates.

Page 17

Non-interest Expense

Total non-interest expense for the three months ended March 31, 2005 was
$4,203,748 an increase of $620,795, or 17%, from $3,582,953 for the three months
ended March 31, 2004. This increase was primarily due to increased salaries and
employee benefits of $325,493 from an additional 12 full-time equivalent
employees, primarily employees from Solon-Anson. Net occupancy expense increased
from the lease expense for the headquarters building, the site for the new
Windham branch, and the lease expense from four Solon-Anson offices. Solon Anson
also accounted for the increase in equipment expense and intangible asset
amortization. Other expense variance of $111,903, or 13%, primarily includes
$42,806 higher professional fees from increased fees for external and internal
audit services and other professional fees, $11,266 for third party item
processing services, $20,434 for increased loan expenses from higher collection
expense, $22,644 higher deposit fees due to miscellaneous losses and ATM
transaction fees, and higher dues and assessments from regulatory assessments
paid.

Total non-interest expense for the nine months ended March 31, 2005 was
$12,491,918 an increase of $1,775,650 or 17%, from $10,716,268 for the nine
months ended March 31, 2004. This increase was primarily due to increased
salaries and employee benefits of $926,625 from an additional 12 full-time
equivalent employees, primarily from Solon Anson. Intangible asset amortization
increased $19,466 due to a customer list intangible asset created from the
acquisition of Solon-Anson Insurance Agency. Included in the increase in other
expense of $593,637 was a loss of $392,249 on the early redemption of trust
preferred securities recorded in December 2004; increased professional fees for
legal services, external and internal audit, and other professional fees
totaling $79,999; increased business insurance premiums of $20,696; increased
outsourced processing services for item processing, trust, and internet banking
of $41,641; increased dues and assessments of $38,531; and other than temporary
write-downs on equity and non-marketable securities of $11,841.

For the three months ended March 31, 2005 and 2004, the increase in
income tax expense was primarily due to the increase in income before income
taxes as compared to 2004. For the nine months ended March 31, 2005, the
decrease in income tax expense reflects the decrease in income before income
taxes compared to 2004.

Our efficiency ratio was 67% for the three months ended March 31, 2005 and
2004, and 71% and 69% for the nine months ended March 31, 2005 and 2004,
respectively.

Financial Condition

Our consolidated assets were $575,012,953 and $538,753,900 as of March 31,
2005 and June 30, 2004, respectively, an increase of $36,259,053, or 7%. For the
nine months ended March 31, 2005, total average assets were $558,854,202, an
increase of $76,555,977, or 16%, from $482,298,225 for the same period last
year. This asset increase was primarily attributable to an increase in loans
resulting from opportunities in our market areas to meet the needs of
under-served residential real estate and commercial real estate customers and
automobile dealers, and purchases of investment securities with net excess
funding. The increases in assets were funded with deposits, securities sold
under repurchase agreements, increases in FHLB advances, and junior subordinated
debentures.

Total stockholders' equity was $38,537,127 and $36,453,020 at March 31, 2005
and June 30, 2004, respectively, an increase of $2,084,107, or 6%, due to net
income for the nine months ended March 31, 2005, increase in accumulated other
comprehensive income, and stock issued in connection with employee stock options
partially offset by stock repurchases and dividends. The book value per
outstanding share was $15.28 at March 31, 2005 and $14.43 at June 30, 2004.

Investment Activities

The investment portfolio was $76,340,571 as of March 31, 2005, an increase of
$8,869,427 from $67,471,144 as of June 30, 2004. The investment portfolio as of
March 31, 2005 consisted of debt securities issued by government sponsored
enterprises, and corporations, 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.

Our entire investment portfolio is classified as available for sale at March
31, 2005 and June 30, 2004, 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 March 31, 2005 was
$78,054,916 and $76,340,571, respectively. The difference between the carrying
value and the cost of the securities of $1,714,345 was primarily attributable to
the market value of,government sponsored enterprises and mortgage-backed
securities below their cost. The net unrealized loss on equity securities was
$45,127 and the net unrealized losses government sponsored enterprises,
corporate debt, and mortgage-backed securities were $1,669,218 at March 31,
2005. The government sponsored enterprises, corporate debt, and mortgage-backed
securities have decreased in market value due to the recent increases in the
interest rates as compared to June 30, 2004. Substantially all of the government
sponsored enterprises, corporate debt, and mortgage-backed securities held in
our portfolio are high investment grade 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. Management also plans to hold
the equity, government sponsored enterprises, corporate debt, and
mortgage-backed securities until a recovery of market value.

Page 18

Loan Portfolio

Total loans of $459,741,168 as of March 31, 2005 increased $27,146,820 or 6%,
from $432,594,348 as of June 30, 2004. Compared to June 30, 2004, all loan
categories increased. For the nine months ended March 31, 2005, commercial real
estate and commercial loans increased $3,313,415, or 3%, and $5,159,081, or 7%,
respectively. Consumer loans increased $5,067,169, or 6%, due to origination of
indirect recreational vehicle and indirect auto loans. The residential real
estate loan portfolio, which is comprised of purchased loans, residential real
estate loans originated for portfolio, and commercial real estate 1 to 4 family
loans, increased by $10,399,737, or 8% compared to June 30, 2004. This increase
was due to a shift to originating more adjustable rate residential real estate
loans, which are held in portfolio. Construction loans increased $3,384,894 or
40%. Net deferred loan origination fees decreased $177,476. The total loan
portfolio averaged $450,482,588 for the nine months ended March 31, 2005, an
increase of $61,694,734, or 16%, from the nine months ended March 31, 2004.

The Bank primarily lends within its local market areas, which management
believes helps them to better evaluate credit risk. The Bank's loan portfolio as
of March 31, 2005 has changed with increases in residential real estate,
commercial loans, and consumer loans when compared to June 30, 2004. 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.

Residential real estate loans consisting of primarily owner-occupied
residential loans as a percentage of total loans were 33%, 32% and 32% as of
March 31, 2005, June 30, 2004, and March 31, 2004, respectively. The variable
rate product as a percentage of total residential real estate loans was 42%, 37%
and 36% for the same periods, respectively. 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 currently plan to continue to sell all
newly originated 30-year fixed-rate residential real estate loans into the
secondary market, and hold 15-year fixed rate residential real estate loans in
portfolio. Average residential real estate mortgages of $145,670,685 for the
nine months ended March 31, 2005 increased $19,064,933, or 15%, from the nine
months ended March 31, 2004. This increase was due to originating more
adjustable rate residential real estate loans, which are held in portfolio, than
fixed rates. Also, the volume of residential real estate loan originations has
decreased to $17.1 million for the nine months ended March 31, 2005 compared to
$42.8 million for the same period one year ago. This origination volume is
expected to decrease as interest rates increase. Purchased loans included in
this portfolio are pools of residential real estate loans acquired from and
serviced by other financial institutions. In the past, the Bank has purchased
these loan pools as an alternative to mortgage-backed securities. The Bank has
not recently pursued a similar strategy.

Commercial real estate loans as a percentage of total loans were 27%, 30%,
and 29% as of March 31, 2005, June 30, 2004 and March 31, 2004, 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 96%, 93% and
94% 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 $125,912,699 for the
nine months ended March 31, 2005 increased $18,802,215, or 18%, from the same
period in 2004. The increase in commercial real estate loans reflects the sales
efforts of additional commercial lending staff in the Bank's existing business
markets.

Construction loans as a percentage of total loans were 3%, 2%, 2% as of March
31, 2005, June 30, 2004 and March 31, 2004, respectively. Limiting disbursements
to the percentage of construction completed controls risk. An independent
consultant or appraiser verifies the construction progress. Construction loans
have maturity dates less than one year. The variable rate products as a
percentage of total construction loans were 56%, 73%, and 52% for the same
periods respectively. Average construction loans were $10,463,186 and $7,380,565
for the nine months ended March 31, 2005 and 2004, respectively, an increase of
$3,082,621 or 42%.

Commercial loans as a percentage of total loans were 16%, 15%, and 16% as of
March 31, 2005, June 30, 2004 and March 31, 2004, respectively. The variable
rate products as a percentage of total commercial loans were 61%, 57%, and 61%
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 $70,506,167 for the nine months
ended March 31, 2005 increased $5,766,887, or 9%, from $64,739,280 for the same
period in 2004.

Page 19

Consumer and other loans as a percentage of total loans were 21%, 21%, and
21% for the periods ended March 31, 2005, June 30, 2004, and March 31, 2004,
respectively. At March 31, 2005, indirect auto, indirect recreational vehicle,
and indirect mobile home loans represented 34%, 26%, and 35% of total consumer
loans, respectively, compared to 32%, 22%, and 40% of total consumer loans at
June 30, 2004. 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 with average
lives of no longer than five years, 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 $95,397,144 and $80,423,693 for the nine months
ended March 31, 2005 and 2004, respectively. The $14,973,451, or 19%, increase
was due primarily to increased indirect recreational vehicle and indirect auto
lending. The composition of consumer loans is detailed in the following table.

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

Classification of Assets

The Bank had non-performing loans totaling $1,934,000 and $1,677,000 at March
31, 2005 and June 30, 2004, respectively, or 0.42% and 0.39% of total loans,
respectively. The Bank's allowance for loan losses was equal to 255% and 273% of
the total non-performing loans at March 31, 2005 and June 30, 2004,
respectively. The following table represents the Bank's non-performing loans as
of March 31, 2005 and June 30, 2004, respectively:

|Description             | March 31, 2005      | June 30,2004         
|----------------------- | ------------------- | ---------------------
|Residential Real Estate | $    545,000        | $    214,000         
|Commercial Real Estate  | 856,000             | 920,000              
|Commercial Loans        | 377,000             | 442,000              
|Consumer and Other      | 156,000             | 101,000              
|Total non-performing    | $  1,934,000======= | $  1,677,000  =======

Allowance for Loan Losses

Management does not believe that the increase in non-performing residential
real estate and consumer and other loans as of March 31, 2005 was indicative of
a trend. At March 31, 2005, the Bank had $700,500 in loans classified special
mention or substandard that management believes could potentially become
non-performing due to delinquencies or marginal cash flows. These special
mention and substandard loans increased by $300,500 when compared to the
$400,000 at June 30, 2004. The Bank's delinquent loans, as a percentage of total
loans, decreased at March 31, 2005 compared to June 30, 2004.

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

|03-31-05 | 12-31-04 | 09-30-04 | 06-30-04
|-------- | -------- | -------- | --------
|0.68%    | 0.87%    | 0.97%    | 0.95%   

At March 31, 2005, loans classified as non-performing included approximately
$1,238,000 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
0.42% as of March 31, 2005.

Page 20

The Bank's allowance for loan losses was $4,937,000 as of March 31, 2005 as
compared to $4,577,000 as of June 30, 2004, representing 1.07% and 1.06% of
total loans for each of the periods. Management maintains an allowance at a
level that they believe is reasonable for the overall risk inherent in the loan
portfolio. The allowance for loan losses represents management's estimate of
probable losses inherent in the loan portfolio. This evaluation process is
subject to numerous estimates and judgments. The frequency of default, risk
ratings, and the loss recovery rates, among other things, are considered in
making this evaluation, as are the size and diversity of individual large
credits. Changes in these estimates could have a direct impact on the provision
and could result in a change in the allowance. The larger the provision for loan
loss, the greater the negative impact on our net income. Larger balance,
commercial and commercial real estate loans representing significant individual
credit exposures are evaluated based upon the borrower's overall financial
condition, resources, and payment record; the prospects for support from any
financially responsible guarantors; and, if appropriate, the realizable value of
any collateral. The allowance for loan losses attributed to these loans is
established through a process that includes estimates of historical and
projected default rates and loss severities; internal risk ratings; and
geographic, industry, and other environmental factors. Management also considers
overall portfolio indicators, including trends in internally risk-rated loans,
classified loans, non accrual loans, and historical and forecasted write-offs;
and a review of industry, geographic, and portfolio concentrations, including
current developments. In addition, management considers the current business
strategy and credit process, including credit limit setting and compliance,
credit approvals, loan underwriting criteria, and loan workout procedures.
Within the allowance for loan losses, amounts are specified for larger-balance,
commercial and commercial real estate loans that have been individually
determined to be impaired. These specific reserves consider all available
evidence, including, as appropriate, the present value of the expected future
cash flows discounted at the loan's contractual effective rate and the fair
value of collateral. Each portfolio of smaller balance, residential real estate
and consumer loans, is collectively evaluated for impairment. The allowance for
loan losses is established via a process that includes historical delinquency
and credit loss experience, together with analyses that reflect current trends
and conditions. Management also considers overall portfolio indicators including
historical credit losses; delinquent, non-performing and classified loans;
trends in volumes; terms of loans; an evaluation of overall credit quality and
the credit process, including lending policies and procedures; and economic
factors. For the nine months ended March 31, 2005, 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.

Management believes that the allowance for loan losses is adequate
considering the level of risk in the loan portfolio. 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.
These 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 joint examination by the
Federal Reserve Bank of Boston and the Maine Bureau of Financial Institutions
was completed in November 2004. At the time of the examination the regulators
proposed no adjustments to the allowance for loan losses.

Other Assets

Bank owned life insurance (BOLI) was purchased on December 31, 2002. BOLI was
invested in the general account of two quality insurance companies. Standard and
Poor's rated these companies AA+ or better at November 18, 2004. 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 Company's capital plus
the allowance for loan losses at March 31, 2005.

Intangible assets of $2,191,523 as of March 31, 2005 increased $1,862,630
from $328,893 as of June 30, 2004 from the customer list intangible recognized
in the Solon-Anson acquisition. See Note 8 of our consolidated financial
statements included herein for more information on the acquisition.

Page 21

Capital Resources and Liquidity

The Bank continues to attract new local core and certificates of deposit
relationships. As alternative sources of funds, the Bank utilizes brokered time
deposits ("brokered 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 $401,324,394 as of March 31, 2005 increased $23,504,665, or
6%, from $377,819,729 as of June 30, 2004. Savings accounts and certificates of
deposits increased $933,518 and $35,843,565, respectively, during the nine
months ended March 31, 2005. Demand deposits accounts, NOW accounts, money
market accounts and brokered certificates of deposit decreased $787,419,
$3,552,562, $786,693, and $8,145,744, respectively, for the same period.
Certificates of deposits increased from successful promotions of an 18 and 24
month certificates of deposit. Management's continuing strategy has certificate
of deposit rates for maturities two years and less near the top of the market to
attract new deposit account relationships. Brokered certificates of deposit
decreased as maturing balances were repaid during the nine months ended March
31, 2005.

Total average deposits of $390,978,353 for the nine months ended March 31,
2005 increased $65,631,915, or 20%, compared to the average for the nine months
ended March 31, 2004. This increase in total average deposits compared to March
31, 2004 was due to a $4,037,487, or 12% increase in average demand deposits,
$2,917,594 or 5% increase in average NOW accounts, $1,686,147 or 11% increase in
average money market accounts, and $723,070 or 3% increase in average regular
savings accounts. All interest-bearing non-maturing deposit accounts have market
interest rates. Generally, the increase in these non-maturing deposits resulted
from promotion of NOW accounts combined with advertising campaign of other
transaction accounts and employee incentive programs to increase the sale of
non-maturing deposit accounts. Increasing non-maturing deposits is a strategic
focus in fiscal 2005. These deposits generally have lower interest rates and
would result in a decrease in our cost of funds. Average brokered time deposits
increased $42,061,912 or 87% to $90,644,192 for the nine months ended March 31,
2005. This increase reflects our use of brokered time deposits as an alternative
to FHLB advances to fund the increase in our earning assets. The weighted
average maturity for the brokered time deposits was approximately 1.1 years.
Average certificates of deposit increased $14,205,705, or 10%, to $150,624,566
for the nine months ending March 31, 2005. Even though deposit interest rates
have remained competitive, the rates of return are potentially higher with other
financial instruments such as mutual funds and annuities. Like other companies
in the banking industry, the Bank will be challenged to maintain or increase its
core deposits.

Securities sold under repurchase agreements were $28,850,151 as of March 31,
2005, an increase of $3,965,282, or 16%, from $24,884,869 as of June 30, 2004.
This increase reflects additional funds deposited by existing customers. Market
interest rates are offered on this product. Average securities sold under
repurchase agreements were $30,760,288 for the nine months ended March 31, 2005,
an increase of $5,420,450, or 21%, compared to the average for the nine months
ended March 31, 2004.

Advances from the Federal Home Loan Bank (FHLB) were $86,686,755 as of March
31, 2005, an increase of $3,709,121, or 4%, from $82,977,634 as of June 30,
2004. For the nine months ended March 31, 2005, we had pledged government agency
and mortgage-backed securities of $35,851,163 as collateral for FHLB advances.
We plan to continue 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 promotion of deposit accounts
including retail and brokered certificiates of deposit. Newly originated
adjustable residential real estate loans will be held in portfolio and will
qualify as collateral. In addition to government agency and mortgage-backed
securities, residential real estate loans, certain commercial real estate loans,
and certain FHLB deposits free of liens, pledges and encumbrances are required
to be pledged to secure FHLB advances. Average advances from the FHLB were
$80,351,472 for the nine months ended March 31, 2005, a decrease of $2,440,478,
or 3%, compared to $82,791,950 average for the same period last year.

In addition to the traditional retail deposit products, the Bank has the
ability to access liquidity through the following as of March 31, 2005:

|Brokered time deposit                   | $  55,186,000 | Subject to policy limitation of 25% of total assets                 
|--------------------------------------- | ------------- | --------------------------------------------------------------------
|Federal Home Loan Bank of Boston        | $  27,517,000 | Unused advance capacity subject to eligible and qualified collateral
|Fed Discount Window Borrower-in-Custody | $  24,306,000 | Unused credit line subject to the pledge of indirect auto loans     

The Bank expects to maintain the level of brokered time deposits, using
retail deposits and FHLB advances to fund its balance sheet growth for the next
twelve months. Brokered time deposits, retail deposits and FHLB advances are
used by the Bank uses to manage its overall liquidity.position. While we closely
monitor and forecast our liquidity position, it is affected by asset growth,
deposit withdrawals and meeting other contractual obligations and commitments.
The accuracy of our forecast assumptions may increase or decrease the level of
brokered time deposits Brokered time deposit are sourced through four brokers
that have nationwide networks for raising funds. Management believes that the
Company's available liquidity resources are sufficient to support the Company's
needs.

The following table summarizes the outstanding junior subordinated debentures
as of March 31, 2005:

Affiliated Trusts
      OutstandingBalance
      Rate
      First Call DateNBN Capital Trust II
      $   3,093,000
      5.89%
      March 30, 2009NBN Capital Trust III
      3,093,000
      6.50%
      March 30, 2009NBN Capital Trust IV
      10,310,000
      5.88%
      February 23, 2010Total
      $  16,496,000
      6.00%


The excess funds raised from the issuance of trust preferred securities are
available for capital contributions to the Bank.

The Company exercised its option to redeem the securities issued by NBN
Capital Trust on December 31, 2004. This call retired the junior subordinated
debentures of $7,394,849 originally issued on November 23, 1999 with an interest
rate of 9.60%. This resulted in recognizing a loss of $392,294 ($269,789 after
income taxes), from expensing the unamortized deferred costs related to this
issue. This redemption was financed, in part, from the issuance of a new junior
subordinated debt offering through NBN Capital Trust IV.

See Note 2 for more information on NBN Capital Trusts II, III and IV and the
related junior subordinated debt.

Page 22

The 2004 Stock Repurchase Plan replaced a temporary stock repurchase
plan on January 16, 2004. Under the 2004 Stock Repurchase Plan, the Company may
purchase up to 200,000 shares of its common stock from time to time in the open
market at prevailing prices. The 2004 Stock Repurchase Plan was extended by the
Company's Board vote on December 17, 2004 until December 31, 2005. Common stock
repurchased pursuant to the plan will be classified as authorized but un-issued
shares of common stock available for future issuance as determined by the Board
of Directors, from time to time. Northeast Bancorp may discontinue the
repurchase program at any time. From time to time, the Company believes that the
current market price for its common stock is inadequate and does not reflect the
full value of its common stock and at such times purchases its common stock in
the market. For the nine months ended March 31, 2005, the Company repurchased
30,000 shares. The number of shares that may yet be purchased under the 2004
Stock Repurchase Plan is 151,200 shares. As of March 31, 2005, the Company had
outstanding $4,100,656 of repurchased common stock and management believes that
the purchases have not had a significant effect on the Company's liquidity and
earnings per share.

Total stockholders' equity of the Company was $38,537,127 as of March 31,
2005 as compared to $36,453,020 at June 30, 2004. The increase of $2,084,107, or
6%, was primarily due to the net income for the nine months ended March 31, 2005
and an increase in other comprehensive income, less stock repurchases and
dividends paid. Book value per common share was $15.28 as of March 31, 2005 as
compared to $14.43 at June 30, 2004. The total average equity to total average
assets ratio of the Company was 6.87% as of March 31, 2005 and 7.51% at June 30,
2004.

The Company's net cash provided by operating activities was $3,713,359 during
the nine months ended March 31, 2005, which was a $2,223,124 decrease compared
to the same period in 2004. This decrease was due primarily from the lower
volume of residential real estate loans held for sale. Investing activities were
a net use of cash primarily due to purchasing investment securities, originating
loans held in portfolio and the insurance agency acquisition during the nine
months ended March 31, 2005, compared to the same period in 2004. Financing
activities provided net cash from the increases in deposits, repurchase
agreements, FHLB advances net of repayments, and the net increase in junior
subordinated notes compared to the same period in 2004.

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 FRB 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 FRB 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 capital equal to 4.0% of adjusted
total average 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 March 31, 2005, the most recent notification from
the FRB 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 March 31, 2005, 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 March 31, 2005: |         |                                              |                                                                                  
|Tier 1 capital to risk weighted assets              | $45,759 | 10.59%                                       | $17,554                                                                          
|Tier 1 capital to total average assets              | $45,759 | 8.12%                                        | $22,516                                                                          
|Total capital to risk weighted assets               | $50,696 | 11.73%                                       | $35,108                                                                          

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, the potential growth in the deposit base, and the credit availability
from the Federal Home Loan Bank of Boston and the Fed Discount Window
Borrower-in-Custody program. 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.

Page 23

Off-balance Sheet Arrangements and Aggregate Contractual Obligations

The Company is a party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit, unused lines
of credit and standby letters of credit. These instruments involve, to varying
degrees, elements of credit and interest-rate risk in excess of the amounts
recognized in the condensed consolidated balance sheet. The contract or notional
amounts of these instruments reflect the extent of the Company's involvement in
particular classes of financial instruments.

The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit, unused
lines of credit and standby letters of credit is represented by the contractual
amount of those instruments. To control the credit risk associated with entering
into commitments and issuing letters of credit, the Company uses the same credit
quality, collateral policies, and monitoring controls in making commitments and
letters of credit as it does with its lending activities. The Company evaluates
each customer's creditworthiness on a case-by-case basis. The amount of
collateral obtained, if deemed necessary by the Company upon extension of
credit, is based on management's credit evaluation.

Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total committed amounts do not necessarily
represent future cash requirements. The Company evaluates each customer's credit
worthiness on a case-by-case basis. The amount of collateral obtained, if it is
deemed necessary by the Company upon extension of credit, is based on
management's credit evaluation of the counter party.

Standby letters of credit are conditional commitments issued by the Company
to guarantee the performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loans to customers.

Unused lines of credit and commitments to extend credit typically result in
loans with a market interest rate.

A summary of the amounts of the Company's (a) contractual obligations, and
(b) other
commitments with off-balance sheet risk, both at March 31, 2005, follows:

|                                              |                         | Payments Due by Period                      
|--------------------------------------------- | ----------------------- | --------------------------------------------
|Contractual Obligations                       | Total                   | Less Than  1 Year                           
|FHLB advances                                 | $   86,686,755          | $  47,790,530                               
|Junior subordinated debentures                | 16,496,000              | -                                           
|Other borrowings                              | 353,404                 | 222,337                                     
|Total long-term debt                          | 103,536,159             | 48,012,867                                  
|                                              |                        
|Operating lease obligations                   | 5,581,852               | 608,461                                     
|Total contractual obligations                 | $ 109,118,011========   | $  48,621,328  ========                     
|                                             
|                                              |                         | Amount of Commitment Expiration - Per Period
|Commitments with
      off-balance sheet risk | Total                   | Less Than  1 Year                           
|Commitments to extend credit (1)(3)           | $  15,217,000           | $  15,217,000                               
|Commitments related to loans held for sale(2) | 2,488,000               | 2,488,000                                   
|Unused lines of credit (3)(4)                 | 50,143,000              | 25,183,000                                  
|Standby letters of credit (5)                 | 2,037,000               | 2,037,000                                   
|                                              | $  69,885,000  ======== | $  44,925,000  ========                     



|(1) | Represents commitment outstanding for residential real estate,
      commercial real estate, and commercial loans.                                      
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Commitments of residential real estate loans that will be held for
      sale.                                                                          
|(3) | Loan commitments and unused lines of credit for commercial and
      construction loans expire or are subject to renewal in twelve months or
      less.
|(4) | Represents unused lines of credit from commercial, construction, and
      home equity loans.                                                           
|(5) | Standby letters of credit generally expire in twelve months.                                                                                            

Management believes that the Company has adequate resources to fund all of
its commitments

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.

Page 24

Item 3. Quantitative and Qualitative Disclosure about Market Risk

There have been no material changes in the Company's market risk from June
30, 2004. For information regarding the Company's market risk, refer to the
Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2004.

Item 4. Controls and Procedures

The Company maintains controls and procedures designed to ensure that
information required to be disclosed in the reports the Company files or submits
under the Securities Exchange Act of 1934 ("Exchange Act") is
recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the Securities and Exchange Commission, and that such
information is accumulated and communicated to the Company's management,
including our Chief Executive Officer and Chief Financial Officer (the Company's
principal executive officer and principal financial officer, respectively), as
appropriate to allow for timely decisions regarding timely disclosure. In
designing and evaluating disclosure controls and procedures, management
recognizes that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives and management is required to apply its judgment in evaluating the
cost/benefit relationship of possible controls and procedures.

Our management, with the participation of the Company's Chief Executive
Officer and Chief Financial Officer, have evaluated the effectiveness of our
disclosure controls and procedures (as defined in Rules 13a - 15(e) and 15d -
15(e) under the Exchange Act) as of the end of the period covered by this Form
10-Q.

Based on this evaluation of our disclosure controls and procedures, our Chief
Executive Officer and Chief Financial Officer have concluded that these
disclosure controls and procedures were effective as of March 31, 2005.

There were no significant changes in our internal controls over financial
reporting (as defined in Rule 13a - 15(f) of the Exchange Act) that occurred
during the first nine months of our 2005 fiscal year that has materially
effected, or in other factors that could affect, the Company's internal controls
over financial reporting.

Page 25

Part II - Other Information

|Item 1.          | Legal ProceedingsNone.                                                                                                                                                                                                                                                                                                                                                                                                  
|---------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item 2.(c)       | Unregistered Sales of Equity Securities and Use of ProceedsThe following table provides the information on
      any purchase made by or on behalf of the Company of shares of Northeast
      Bancorp common stock during the indicated periods.                                                                                                                                                                       
|Period (1)       | Total Number
      Of SharesPurchased (2)                                                                                                                                                                                                                                                                                                                                                                               
|Jan. 1 - Jan. 31 | -                                                                                                                                                                                                                                                                                                                                                                                                                       
|Feb.1 - Feb. 28  | -                                                                                                                                                                                                                                                                                                                                                                                                                       
|Mar. 1 - Mar. 31 | -                                                                                                                                                                                                                                                                                                                                                                                                                       
|(1)              | Based on trade date, not settlement date.                                                                                                                                                                                                                                                                                                                                                                               
|(2)              | Represents share purchased in open-market transactions
      pursuant to the Company's 2004 Stock Repurchase Plan.                                                                                                                                                                                                                                                                                                      
|(3)              | On January 30, 2004, the Company announced that its
      Board of Directors of the Company approved the 2004 Stock Repurchase Plan
      pursuant to which the Company is authorized to repurchase in open-market
      transactions up to 200,000 shares from time to time until the plan expires
      on December 31, 2004, unless extended. The 2004 Stock Repurchase Plan was
      extended to December 31, 2005.
|Item 3.          | Defaults Upon Senior SecuritiesNone.                                                                                                                                                                                                                                                                                                                                                                                    
|Item 4.          | Submission of Matters to a Vote of Security HoldersNone                                                                                                                                                                                                                                                                                                                                                                 
|Item 5.          | Other InformationNone.                                                                                                                                                                                                                                                                                                                                                                                                  
|Item 6.          | Exhibits                                                                                                                                                                                                                                                                                                                                                                                                                
|                 | List of Exhibits:                                                                                                                                                                                                                                                                                                                                                                                                       
|                 | Exhibits No.                                                                                                                                                                                                                                                                                                                                                                                                            
|                 |                                                                                                                                                                                                                                                                                                                                                                                                                         
|                 | 11                                                                                                                                                                                                                                                                                                                                                                                                                      
|                 | 31.1                                                                                                                                                                                                                                                                                                                                                                                                                    
|                 | 31.2                                                                                                                                                                                                                                                                                                                                                                                                                    
|                 | 32.1                                                                                                                                                                                                                                                                                                                                                                                                                    
|                 | 32.2                                                                                                                                                                                                                                                                                                                                                                                                                    

Page 26

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: May 10, 2005 |     | 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 27

NORTHEAST BANCORP
Index to Exhibits

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