NewportFed posts $757,000 profit for 2007

NEWPORT – Newport Bancorp Inc. (Nasdaq: NFSB), the holding company for Newport Federal Savings Bank, reported a profit of $757,000 or 17 cents per diluted share for the year ended Dec. 31, compared with a net loss of $1.66 million in 2006.
(Per-share data are not available for periods before the 2006 third quarter, as the company’s initial stock offering was conducted on July 6, 2006.)
The 2006 period included a one-time charge of $3.61 million for the establishment of the NewportFed Charitable Foundation, excluding which the bank would have shown a profit for the year. (READ MORE) Excluding that charge, operating expenses increased from $9.59 million in 2006 to $10.8 million in 2007, boosted by higher costs for employee salaries and benefits, increased professional fees associated with Sarbanes-Oxley and other requirements of being a public company, and increased spending on marketing.
Total assets increased by $70.8 million or 24.4 percent to $361.26 million on Dec. 31, more than doubling the previous year’s 10.7-percent increase. The growth was led by increases in net loans, which rose $36.3 million or 14.1 percent. Commercial real estate mortgages surged 33.4 percent or $19.3 million while residential mortgages rose $11.7 million or 7.5 percent and home equity loans and lines of credit rose $1.7 million or 5.7 percent. Securities held to maturity also increased, rising $29.0 million, the company said.
That asset growth was fueled by a $70.9 million or 205.8 percent increase in borrowing, $25.0 million of which was used to buy securities.
Deposits edged up $311,000 or 0.2 percent to $193.28 million, after rising 2 percent in 2006.
Money market accounts surged $7.4 million or 34.7 percent and NOW/demand accounts rose $935,000 or 1.6 percent. But those increases were mostly offset by declines in time deposits, which fell $3.5 million or 4.2 percent; and savings accounts, which shrank by $4.5 million or 14.9 percent.
Net interest income grew 4.2 percent to $10.3 million, slowing from the previous year’s 12.7-percent rise, as higher borrowing costs and higher rates on deposit accounts partly offset growth in the company’s loan portfolio. NewportFed’s net interest margin shrank by 12 basis points to 3.55 percent in 2007 from 3.67 percent in 2006.
Non-performing assets increased to 0.25 percent of total assets at Dec. 31, from none a year earlier. Meanwhile, the company’s provision against loan losses increased to $426,000 in 2007 from $120,000 in 2006. “The 2007 provision increased due to the growth and composition in the loan portfolio and changes in economic conditions,” NewportFed said in its report, adding: “Asset quality continues to remain strong.”
Non-interest income increased $868,000 or 59.8 percent compared with the 2006 level, to $2.3 million. Besides higher income from checking accounts and bank-owned life insurance, NewportFed cited a one-time charge in 2006 of $367,000 for Federal Home Loan Bank prepayment penalties.
For the quarter ended Dec. 31, the company posted a loss of $47,000 or 1 cent per diluted share, compared with year-ago net income of $468,000 or 10 cents per share.
Net interest income was unchanged from a year ago at $2.7 million, while other income increased 9.6 percent to $582,000. The company’s provision against fourth-quarter loan losses increased to $140,000 from the year-ago period’s $38,000.
Newport Bancorp Inc. (Nasdaq: NFSB) is the holding company for Newport Federal Savings Bank. A $290 million institution created by the 2005 merger of NewportFed and Westerly Savings bank, it converted from a mutual bank to a shareholder institution in mid-2006. Additional information is available at www.newportfederal.com.