NEWPORT – Newport Bancorp Inc. (Nasdaq: NFSB), the parent of Newport Federal Savings Bank, posted a first-quarter profit of $74,000, a 71.4-percent decrease from its year-ago net income of $259,000 but an improvement from its fourth-quarter loss of $47,000.

Earnings per diluted share were 2 cents, lagging the year-ago period’s 6-cents-per-share gain but leading the 2007 fourth quarter’s 1-cent-per-share loss.

Total interest and dividend income rose to $5.22 million, a 23.7-percent increase from the 2007 first quarter, “primarily due to the increase in interest earned on loans and securities,” which surged to $491,000 from the year-ago period’s $104,000, “due to an increase in average interest-earning assets,” the bank said.

Newport Fed’s net interest margin shrank 40 basis points compared with a year ago, to 3.32 percent, as its yield on interest-earning assets declined while the cost of interest-bearing liabilities increased.

Non-interest income edged up 0.7 percent year-over-year to $559,000, as higher income on bank-owned life insurance was partly offset by lower income from checking accounts.

Total assets grew to $383.64 million on March 31, an increase of 6.2 percent compared with Dec. 31 and 26.4 percent compared with a year ago. Net loans increased 3.5 percent compared with year’s end to $303.34 million, continuing the “consistent growth in the bank’s loan portfolio” cited last year by Kevin McCarthy, NewportFed’s president and CEO. (READ MORE) Loan growth was led by growth in commercial real estate loans (+8.0 percent) and residential mortgages (+2.8 percent).

Fueling that asset growth, the bank said, were increases in Federal Home Loan Bank borrowings, which rose $10.0 million, or 9.5 percent, from year’s end; and deposit balances, which rose $13.7 million, or 7.1 percent.

Total deposits at March 31 amounted to $206.99 million. First-quarter deposit growth was focused in NOW/demand accounts, which rose $10.1 million, or 17.1 percent; and money market accounts, up $2.7 million, or 9.4 percent; while savings accounts fell $717,000 or 2.8 percent compared with Dec. 31, the bank said, adding: “Emphasis on promoting a new high-interest earning rewards checking account is responsible for most of the increase in the NOW/demand deposit category.”

Non-performing assets amounted to 0.24 percent of total assets at March 31, down from 0.25 percent on Dec. 31. Accordingly, the bank pared its provision against loan losses to $111,000 for the quarter ended March 31, from the fourth quarter’s $140,000 and the 2007 first quarter’s $113,000.

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.