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Newport, Rhode Island, October 26, 2007. Newport Bancorp, Inc. (the "Company") (Nasdaq: NFSB), the holding company for Newport Federal Savings Bank (the "Bank" or "NewportFed"), today announced third quarter earnings for 2007. For the quarter ended September 30, 2007, the Company reported net income of $261,000, or $.06 per share (basic and diluted), compared to a net loss of $2.3 million for the quarter ended September 30, 2006. For the nine months ended September 30, 2007, the Company reported net income of $804,000, or $.18 per share (basic and diluted), compared to a net loss of $ 2.1 million for the nine months ended September 30, 2006. The Company completed its initial stock offering on July 6, 2006, therefore earnings per share data is not available for the three and nine months ended September 30, 2006.
In the first nine months of 2007, the Company's assets increased by $30.6 million, or 10.5%, to $321.0 million. The majority of the asset growth was concentrated in net loans, which increased by $25.6 million, or 10.0%. The loan portfolio growth was primarily concentrated in commercial real estate mortgages (up $14.1 million or 24.5%), residential mortgages (up $9.4 million or 6.0%) and home equity loans and lines of credit (up $1.6 million or 5.5%). The asset growth was funded by a $29.3 million, or 85.0%, increase in Federal Home Loan Bank borrowings and a $2.4 million, or 1.2%, increase in deposit balances.
Deposit growth was focused in money market accounts (up $4.7 million, or 21.8%) and NOW/Demand accounts (up $ 2.7 million, or 4.7%). The increase in these accounts was partially offset by decreases in time deposit accounts (down $2.9 million, or 3.5%) and savings accounts (down $2.1 million, or 6.8%).
Total stockholders' equity at September 30, 2007 was $59.4 million compared to $60.0 million at December 31, 2006. The decrease was primarily attributable to share buybacks under the Company's stock repurchase plan, partially offset by the increase in earnings and the allocation of committed ESOP shares.
Net interest income decreased to $2.6 million for the quarter ended September 30, 2007 from $2.8 million for the quarter ended September 30, 2006, a decrease of 8.5%, primarily due to the increased expense from Federal Home Loan Bank borrowings utilized to fund the quarter's loan growth and increased rates paid on interest-bearing deposits. Net interest income for the nine months ended September 30, 2007 was $7.6 million, compared to $7.2 million for the nine months ended September 30, 2006, an increase of 5.8%. The yield on interest-earning assets for the three and nine months ended September 30, 2007 was 6.26% and 6.19%, respectively, compared to 6.09% and 5.94% for the three and nine months ended September 30, 2006, respectively. The Company's third quarter net interest margin decreased to 3.60% from 4.08% in 2006, down 48 basis points. However, for the nine months ended September 30, 2007, the net interest margin of 3.60% remained unchanged from September 30, 2006.
Non-performing assets as a percentage of total assets was 0.28% at September 30, 2007. There were no non-performing assets at December 31, 2006. The loan loss provision for the three and nine months ended September 30, 2007 was $126,000 and $286,000, respectively, compared to $50,000 and $82,000 for the three and nine months ended September 30, 2006, respectively. The Bank's management reviews the level of the allowance for loan losses on a quarterly basis and establishes the provision for loan losses based upon the volume and types of lending, delinquency levels, loss experience, the amount of impaired and classified loans, economic conditions and other factors related to the collectability of the loan portfolio. The provision was increased primarily due to the growth in the loan portfolio, and changes in the trends in volume and contractual terms of loans, economic conditions and concentrations of credit. Asset quality continues to remain strong.
Non-interest income for the third quarter of 2007 totaled $584,000, an increase of $459,000, or 367.2%, compared to the third quarter of 2006. For the nine months ended September 30, 2007, non-interest income totaled $1.7 million, an increase of $817,000, or 88.8%, compared to the nine months ended September 30, 2006. FHLB pre-payment penalties incurred during the third quarter of 2006 resulted in lower non-interest income for the three and nine months ended September 2006 when compared to the same periods in 2007. Excluding the debt pre-payment expense, the increase in non-interest income is primarily due to the higher income earned on checking accounts and on bank-owned life insurance.
Total operating expenses decreased to $2.6 million for the quarter ended September 30, 2007 from $6.1 million for the quarter ended September 30, 2006, a decrease of 57.1%. For the nine months ended September 30, 2007, operating expenses decreased to $7.7 million from $10.9 million for the nine months ended September 30, 2006, a decrease of 29.0%. The higher operating expenses reported in the 2006 periods is due to the $3.6 million donation payment to the NewportFed Charitable Foundation. Excluding the charitable donation paid in 2006, operating expenses increased due to increases in salaries and employee benefits, resulting from ESOP expense, professional fees due to increased auditing and legal costs associated with being a public company and marketing costs reflective of a stronger marketing focus for the Bank and its deposit products during the first nine months of 2007.
As anticipated in the prospectus used in the Company's stock offering related to the mutual-to-stock conversion and in the Company's Annual Report on Form 10-K for the year ended December 31, 2006, the Company's board of directors has adopted a stock-based incentive plan, which was approved at the August 16, 2007 annual meeting of stockholders. The granting of restricted stock and stock options under the stock-based incentive plan will increase the Company's compensation costs in the periods starting October 1, 2007 through September 30, 2012, which is the period such awards and options vest.
This news release may contain forward-looking statements, which can be identified by the use of words such as "believes," "expects," "anticipates," "estimates" or similar expressions. Such forward-looking statements and all other statements that are not historic facts are subject to risks and uncertainties which could cause actual results to differ materially from those currently anticipated due to a number of factors. These factors include, but are not limited to, general economic conditions, changes in the interest rate environment, legislative or regulatory changes that may adversely affect our business, changes in accounting policies and practices, changes in competition and demand for financial services, adverse changes in the securities markets, changes in deposit flows and changes in the quality or composition of the Company's loan or investment portfolios. Additionally, other risks and uncertainties may be described in the Company's annual report on Form 10-K, its quarterly reports on Form 10-Q or its other reports as filed with the Securities and Exchange Commission which are available through the SEC's website at www.sec.gov. Should one or more of these risks materialize, actual results may vary from those anticipated, estimated or projected. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Except as may be required by applicable law or regulation, the Company assumes no obligation to update any forward-looking statements.
Contact:
Bruce Walsh
Senior Vice-President and Chief Financial Officer
(401) 847-5500
