Newport Bancorp Inc., the holding company for Newport Federal Savings Co., recently posted a $7,000 loss for the first quarter, compared to a profit of $74,000 in the year-ago period.
Despite being in the red for the first three months of 2009, Kevin McCarthy, Newport Fed’s president and CEO, says he’s pleased with the way things are going at the bank. He recently answered a few questions about it.
PBN: It’s been almost three years since Newport Fed went public. How has that move helped the institution in the current economic downturn?
McCARTHY: In the current environment, it has helped enormously. Our capital level is well in excess of our New England peers, and … “capital is king.” Though we have not experienced any deterioration in the quality of our loan assets, the excess capital will cushion the impact of any problems should they arise. In this sense, it guarantees our safety and stability. The capital has also allowed us to expand. We’ve recently opened two new branches [at a time] when most banks have had to put a halt to their growth plans. Lastly, we are well positioned to seize opportunities should smaller competitors stumble, or larger competitors elect to shrink their footprint or otherwise downsize.
In the banking world, all strategic choices involve a regulatory component. That, almost by definition, adds layers of reporting and burdensome paperwork requirements. The increased cost in time and staff to manage these new requirements is probably the most significant downside to our having gone public.
Beyond Cash Donations: How New Forms of Giving Are Transforming Not-for-Profit Accounting
Evolving Funding Landscape for Not-for-Profits Not-for-profit organizations are being asked to do more with less,…
Learn More
PBN: There were some local banks – Independence Bank and Bank Rhode Island, for example – that participated in the Treasury’s Capital Purchase Program. You didn’t. Why?
McCARTHY: Again, it gets back to capital. Not only did we feel we had the capacity to weather any economic storms, but we felt we had the wherewithal to pursue all our strategic goals without having to incur the expense of the government’s capital and any potential interference from the government, no matter how well intended.
PBN: Has Newport Fed been able to take advantage while some of the bigger players in the Rhode Island market have been distracted?
McCARTHY: Definitely. It is clearly evident in our 2008 results, which reflect record growth in both loans and deposits. Our internal tracking tells us that these customers came from the “bigger players.” … We have also benefited from the considerable downsizing and, in some cases, the disappearance of the larger mortgage brokers.
PBN: I have noticed some deterioration in asset quality at other publicly traded banks in the area because of the economic conditions. How is your portfolio holding up?
McCARTHY: Our portfolio is holding up well. At year end 2008, we had no nonperforming loans and just a small amount – about one-third of a percent – of delinquent loans. Our underwriting is grounded in sound principals from which we have never wavered, despite the temptation to do so in the pursuit of earnings. It’s in times like these when we realize the payoff for having minded our mending. Many banks have not been as fortunate. Despite our current condition, we’re not taking anything for granted. The high unemployment rate and continued weak economic conditions are factors we have no control over. Though we’re fortunate to be in the position we are in, now is no time to rest on our laurels.
PBN: What are the future growth plans for Newport Fed?
McCARTHY: After a quiet period to absorb our current round of expansion, we will continue to pursue opportunities to grow our footprint and to take advantage of any strategic offerings should they arise. Without question, controlled growth, remains very much on our minds.
