**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      DC 20549**

**FORM      10-Q**

| ý | QUARTERLY                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934 |
|--------|--------------------------------------------------------------------------------------------------------------------------------------|

|  ̈ | TRANSITION                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934 |
|--------|---------------------------------------------------------------------------------------------------------------------------------------|

**Newport      Bancorp, Inc.**

| **Maryland**                                                                                      | **20-4465271**                                      |
|---------------------------------------------------------------------------------------------------|-----------------------------------------------------|
| (State                or other jurisdiction of incorporation                or organization) | (I.R.S.                Employer Identification No.) |
|                                                                                              |                                                |
| **100                Bellevue Avenue, Newport, Rhode Island**                                     | **02840**                                           |
| (Address                of principal executive offices)                                           | (Zip                Code)                           |

**(401)      847-5500**

**N/A**

| Large                accelerated file  ̈  | Accelerated                filer  ̈ | Non-accelerated                filer ý |
|----------------------------------------------------|-----------------------------------------|---------------------------------------------|

----

**NEWPORT      BANCORP, INC.**

**Table      of Contents**

|                                                            |   |                                                                                                                                                 |   | **Page                No.** |
|-----------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|
| **Part                I. FINANCIAL                INFORMATION** |
|                                                            |   |                                                                                                                                                 |   |                        |
| Item                1.                                          |   | Financial                Statements (Unaudited)                                                                                                      |   | 1                           |
|                                                            |   |                                                                                                                                                 |   |                        |
|                                                            |   | Consolidated                Balance Sheets as of September 30, 2006 and                December 31, 2005                                             |   | 1                           |
|                                                            |   |                                                                                                                                                 |   |                        |
|                                                            |   | Consolidated                Statements of Operations for the Three and Nine                Months Ended September 30, 2006 and 2005                  |   | 2                           |
|                                                            |   |                                                                                                                                                 |   |                        |
|                                                            |   | Consolidated                Statements of Changes in Stockholders’ Equity                for the Nine Months Ended September 30, 2006 and 2005 |   | 3                           |
|                                                            |   |                                                                                                                                                 |   |                        |
|                                                            |   | Consolidated                Statements of Cash Flows for the Nine Months                Ended September 30, 2006 and 2005                            |   | 4                           |
|                                                            |   |                                                                                                                                                 |   |                        |
|                                                            |   | Notes                to Unaudited Consolidated Financial                Statements                                                                   |   | 5-7                         |
|                                                            |   |                                                                                                                                                 |   |                        |
| Item                2.                                          |   | Management’s                Discussion and Analysis of Financial Condition and                Results of Operations                            |   | 7-18                        |
|                                                            |   |                                                                                                                                                 |   |                        |
| Item                3.                                          |   | Quantitative                and Qualitative Disclosures about Market                Risk                                                             |   | 18-19                       |
|                                                            |   |                                                                                                                                                 |   |                        |
| Item                4.                                          |   | Controls                and Procedures                                                                                                               |   | 19                          |
|                                                            |   |                                                                                                                                                 |   |                        |
| **Part                II. OTHER INFORMATION**                   |
|                                                            |   |                                                                                                                                                 |   |                        |
| Item                1.                                          |   | Legal                Proceedings                                                                                                                     |   | 20                          |
|                                                            |   |                                                                                                                                                 |   |                        |
| Item                1A.                                         |   | Risk                Factors                                                                                                                          |   | 20                          |
|                                                            |   |                                                                                                                                                 |   |                        |
| Item                2.                                          |   | Unregistered                Sales of Equity Securities and Use of                Proceeds                                                            |   | 20                          |
|                                                            |   |                                                                                                                                                 |   |                        |
| Item                3.                                          |   | Defaults                Upon Senior Securities                                                                                                       |   | 20                          |
|                                                            |   |                                                                                                                                                 |   |                        |
| Item                4.                                          |   | Submission                of Matters to a Vote of Security                Holders                                                                    |   | 20                          |
|                                                            |   |                                                                                                                                                 |   |                        |
| Item                5.                                          |   | Other                Information                                                                                                                     |   | 20                          |
|                                                            |   |                                                                                                                                                 |   |                        |
| Item                6.                                          |   | Exhibits                                                                                                                                             |   | 20                          |
|                                                            |   |                                                                                                                                                 |   |                        |
|                                                            |   | Signatures                                                                                                                                           |   | 21                          |

----

*Table          of Contents*

**PART      I.**
**FINANCIAL      INFORMATION**

**Item      1.**
**Financial      Statements**

**CONSOLIDATED      BALANCE SHEETS**

|                                                                                                                                                                   |   | **September                30, 2006**            |    | **December                31, 2005** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------|---------|--------------------------------------|--------|
|                                                                                                                                                                   |   | **(Unaudited)****(In                thousands)** |    |
|                                                                                                                                                                   |   |
| **ASSETS**                                                                                                                                                             |
|                                                                                                                                                                   |
| Cash                and due from banks                                                                                                                                 |   | $                                                | 3,292   |                                 | $      | 1,695 |   |
| Short-term                investments                                                                                                                                  |   |                                             | 13,153  |                                 |   | 3,219 |   |
| Cash                and cash equivalents                                                                                                                               |   |                                             | 16,445  |                                 |   | 4,914 |   |
|                                                                                                                                                                   |   |                                             |    |                                 |   |   |   |
| Certificates                of deposit                                                                                                                                 |   |                                             | -       |                                 |   | 3,000 |   |
| Securities                available for sale, at fair value                                                                                                            |   |                                             | 6,543   |                                 |   | 6,334 |   |
| Securities                held to maturity, at amortized cost                                                                                                          |   |                                             | 1,987   |                                 |   | 2,292 |   |
| Federal                Home Loan Bank stock, at cost                                                                                                                   |   |                                             | 2,469   |                                 |   | 3,040 |   |
|                                                                                                                                                                   |   |                                             |    |                                 |   |   |   |
| Loans                                                                                                                                                                  |   |                                             | 255,515 |                                 |   | 234,179 |   |
| Allowance                for loan losses                                                                                                                               |   |                                             | (1,935  | )                                    |   | (1,853 | ) |
| Loans,                net                                                                                                                                              |   |                                             | 253,580 |                                 |   | 232,326 |   |
|                                                                                                                                                                   |   |                                             |    |                                 |   |   |   |
| Premises                and equipment, net                                                                                                                             |   |                                             | 6,043   |                                 |   | 6,000 |   |
| Accrued                interest receivable                                                                                                                             |   |                                             | 1,065   |                                 |   | 909 |   |
| Deferred                income taxes                                                                                                                                   |   |                                             | 1,807   |                                 |   | 739 |   |
| Bank-owned                life insurance                                                                                                                               |   |                                             | 1,863   |                                 |   | 1,807 |   |
| Other                assets                                                                                                                                            |   |                                             | 927     |                                 |   | 1,026 |   |
| Total                assets                                                                                                                                            |   | $                                                | 292,729 |                                 | $      | 262,387 |   |
|                                                                                                                                                                   |
|                                                                                                                                                                   |
|                                                                                                                                                                   |
| **LIABILITIES                AND STOCKHOLDERS’ EQUITY**                                                                                                          |   |                                             |    |                                 |   |   |   |
| Deposits                                                                                                                                                               |   | $                                                | 198,713 |                                 | $      | 192,581 |   |
| Short-term                borrowings                                                                                                                                   |   |                                             | -       |                                 |   | 6,233 |   |
| Long-term                borrowings                                                                                                                                    |   |                                             | 32,198  |                                 |   | 43,890 |   |
| Accrued                expenses and other liabilities                                                                                                                  |   |                                             | 2,563   |                                 |   | 1,699 |   |
| Total                liabilities                                                                                                                                       |   |                                             | 233,474 |                                 |   | 244,403 |   |
|                                                                                                                                                                   |   |                                             |    |                                 |   |   |   |
|                                                                                                                                                                   |
|                                                                                                                                                                   |   |                                             |    |                                 |   |   |   |
| Preferred                stock, $.01 par value; 1,000,000 shares authorized; none                issued                                                                |   |                                             |    |                                 |   |   |   |
| Common                stock, $.01 par value; 19,000,000 shares authorized; 4,878,349 shares                issued and outstanding at September                30, 2006 |   |                                             | 49      |                                 |   | - |   |
| Additional                paid in capital                                                                                                                              |   |                                             | 47,184  |                                 |   | - |   |
| Retained                earnings                                                                                                                                       |   |                                             | 16,009  |                                 |   | 18,133 |   |
| Unearned                ESOP shares                                                                                                                                    |   |                                             | (3,837  | )                                    |   | - |   |
| Accumulated                other comprehensive loss                                                                                                                    |   |                                             | (150    | )                                    |   | (149 | ) |
|                                                                                                                                                                   |   |                                             |    |                                 |   |   |   |
| Total                stockholders’ equity                                                                                                                        |   |                                             | 59,255  |                                 |   | 17,984 |   |
|                                                                                                                                                                   |   |                                             |    |                                 |   |   |   |
| Total                liabilities and stockholders’ equity                                                                                                        |   | $                                                | 292,729 |                                 | $      | 262,387 |   |

----

*Table          of Contents*

**CONSOLIDATED      STATEMENTS OF OPERATIONS**

|                                                                |   | **Three                Months Ended****September                30,** |   | **Nine                Months Ended****September                30,** |   |
|---------------------------------------------------------------------|--------|-----------------------------------------------------------------------|--------|----------------------------------------------------------------------|--------|
|                                                                |   | **2006**                                                              |   | **2005**                                                             |   | **2006** |   | **2005** |   |
|                                                                |   | **(Unaudited)****(In                thousands)**                      |   |
|                                                                |   |                                                                  |   |                                                                 |   |   |   |   |   |
| Interest                and dividend income:                        |   |                                                                  |   |                                                                 |   |   |   |   |   |   |   |   |   |
| Interest                and fees on loans                           |   | $                                                                     | 3,933  |                                                                 | $      | 3,348 |   | $ | 11,277 |   | $ | 9,879 |   |
| Interest                on securities                               |   |                                                                  | 99     |                                                                 |   | 78 |   |   | 281 |   |   | 223 |   |
| Dividends                on Federal Home Loan Bank stock            |   |                                                                  | 99     |                                                                 |   | 33 |   |   | 178 |   |   | 94 |   |
| Interest                on certificates of deposit                  |   |                                                                  | 1      |                                                                 |   | 23 |   |   | 13 |   |   | 80 |   |
| Interest                on short-term investments                   |   |                                                                  | 113    |                                                                 |   | 37 |   |   | 160 |   |   | 59 |   |
| Total                interest and dividend income                   |   |                                                                  | 4,245  |                                                                 |   | 3,519 |   |   | 11,909 |   |   | 10,335 |   |
|                                                                |   |                                                                  |   |                                                                 |   |   |   |   |   |   |   |   |   |
| Interest                expense:                                    |   |                                                                  |   |                                                                 |   |   |   |   |   |   |   |   |   |
| Interest                on deposits                                 |   |                                                                  | 969    |                                                                 |   | 694 |   |   | 2,766 |   |   | 1,801 |   |
| Interest                on short-term borrowings                    |   |                                                                  | -      |                                                                 |   | 16 |   |   | 369 |   |   | 65 |   |
| Interest                on long-term borrowings                     |   |                                                                  | 429    |                                                                 |   | 596 |   |   | 1,562 |   |   | 1,880 |   |
| Total                interest expense                               |   |                                                                  | 1,398  |                                                                 |   | 1,306 |   |   | 4,697 |   |   | 3,746 |   |
|                                                                |   |                                                                  |   |                                                                 |   |   |   |   |   |   |   |   |   |
| Net                interest income                                  |   |                                                                  | 2,847  |                                                                 |   | 2,213 |   |   | 7,212 |   |   | 6,589 |   |
| Provision                for loan losses                            |   |                                                                  | 50     |                                                                 |   | 66 |   |   | 82 |   |   | 198 |   |
|                                                                |   |                                                                  |   |                                                                 |   |   |   |   |   |   |   |   |   |
| Net                interest income, after provision for loan losses |   |                                                                  | 2,797  |                                                                 |   | 2,147 |   |   | 7,130 |   |   | 6,391 |   |
|                                                                |   |                                                                  |   |                                                                 |   |   |   |   |   |   |   |   |   |
| Other                income:                                        |   |                                                                  |   |                                                                 |   |   |   |   |   |   |   |   |   |
| Customer                service fees                                |   |                                                                  | 445    |                                                                 |   | 355 |   |   | 1,121 |   |   | 1,027 |   |
| Gain                on sales of loans                               |   |                                                                  | -      |                                                                 |   | 21 |   |   | 14 |   |   | 93 |   |
| FHLB                prepayment penalties                            |   |                                                                  | (367   | )                                                                    |   | - |   |   | (367 | ) |   | - |   |
| Miscellaneous                                                       |   |                                                                  | 47     |                                                                 |   | 47 |   |   | 152 |   |   | 140 |   |
| Total                other income                                   |   |                                                                  | 125    |                                                                 |   | 423 |   |   | 920 |   |   | 1,260 |   |
|                                                                |   |                                                                  |   |                                                                 |   |   |   |   |   |   |   |   |   |
| Operating                expenses:                                  |   |                                                                  |   |                                                                 |   |   |   |   |   |   |   |   |   |
| Salaries                and employee benefits                       |   |                                                                  | 1,387  |                                                                 |   | 1,211 |   |   | 3,976 |   |   | 3,509 |   |
| Occupancy                and equipment, net                         |   |                                                                  | 305    |                                                                 |   | 281 |   |   | 920 |   |   | 862 |   |
| Data                processing                                      |   |                                                                  | 278    |                                                                 |   | 270 |   |   | 771 |   |   | 792 |   |
| Professional                fees                                    |   |                                                                  | 118    |                                                                 |   | 201 |   |   | 294 |   |   | 379 |   |
| Marketing                                                           |   |                                                                  | 241    |                                                                 |   | 199 |   |   | 716 |   |   | 517 |   |
| Contribution                to NewportFed Charitable Foundation     |   |                                                                  | 3,614  |                                                                 |   | - |   |   | 3,614 |   |   | - |   |
| Other                general and administrative                     |   |                                                                  | 180    |                                                                 |   | 277 |   |   | 612 |   |   | 667 |   |
| Total                operating expenses                             |   |                                                                  | 6,123  |                                                                 |   | 2,439 |   |   | 10,903 |   |   | 6,726 |   |
|                                                                |   |                                                                  |   |                                                                 |   |   |   |   |   |   |   |   |   |
| Income                (loss) before income taxes                    |   |                                                                  | (3,201 | )                                                                    |   | 131 |   |   | (2,853 | ) |   | 925 |   |
|                                                                |   |                                                                  |   |                                                                 |   |   |   |   |   |   |   |   |   |
| Provision                (benefit) for income taxes                 |   |                                                                  | (855   | )                                                                    |   | 217 |   |   | (729 | ) |   | 509 |   |
|                                                                |   |                                                                  |   |                                                                 |   |   |   |   |   |   |   |   |   |
| Net                income (loss)                                    |   | $                                                                     | (2,346 | )                                                                    | $      | (86 | ) | $ | (2,124 | ) | $ | 416 |   |

----

*Table          of Contents*

**CONSOLIDATED      STATEMENTS OF CHANGES IN STOCKHOLDERS’EQUITY**

**(Unaudited)**

|                                                                                                                                          |   |                                                                                           |      |        |   |           |   |         |   |              |   |                    |   |       |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------|-----------|-------------|--------|----------------|--------|--------------|--------|-------------------|--------|-------------------------|--------|------------|--------|
|                                                                                                                                          |   |                                                                                           |      |        |   |           |   |         |   |              |   | **Accumulated**         |   |       |   |
|                                                                                                                                          |   |                                                                                           |      |        |   | **Additional** |   |         |   | **Unearned**      |   | **Other**               |   | **Total**  |   |
|                                                                                                                                          |   | **Common                  Stock**                                                              |      | **Paid-in** |   | **Retained**   |   | **ESOP**     |   | **Comprehensive** |   | **Stockholders’** |   |
|                                                                                                                                          |   | **Shares**                                                                                     |      | **Amount**  |   | **Capital**    |   | **Earnings** |   | **Shares**        |   | **Loss**                |   | **Equity** |   |
|                                                                                                                                          |   |                                                                                           |      |        |   |           |   |         |   |              |   |                    |   |       |   |
| Balance                  at December 31, 2004                                                                                                 |   |                                                                                           | -         |        | $      | -              |   | $            | -      |              | $      | 17,459                  |   |       | -      |   | $ | (80 | ) | $ | 17,379 |   |
|                                                                                                                                          |   |                                                                                           |      |        |   |           |   |         |   |              |   |                    |   |       |   |   |   |   |   |   |   |   |
| Comprehensive                  income:                                                                                                        |   |                                                                                           |      |        |   |           |   |         |   |              |   |                    |   |       |   |   |   |   |   |   |   |   |
| Net                  income                                                                                                                   |   |                                                                                           | -         |        |   | -              |   |         | -      |              |   | 416                     |   |       | -      |   |   | - |   |   | 416 |   |
| Net                  unrealized loss on securities                                                                                            |   |                                                                                           |      |        |   |           |   |         |   |              |   |                    |   |       |   |   |   |   |   |   |   |   |
| available                  for sale                                                                                                           |   |                                                                                           |      |        |   |           |   |         |   |              |   | -                       |   |       |   |   |   | (58 | ) |   | (58 | ) |
| Total                  comprehensive income                                                                                                   |   |                                                                                           |      |        |   |           |   |         |   |              |   |                    |   |       |   |   |   |   |   |   | 358 |   |
|                                                                                                                                          |   |                               |      |
| Balance                  - September 30, 2005                                                                                                 |   |                                                                                           | -         |        | $      | -              |   | $            | -      |              | $      | 17,875                  |   | $          | -      |   | $ | (138 | ) | $ | 17,737 |   |
|                                                                                                                                          |   |                                                                                           |      |        |   |           |   |         |   |              |   |                    |   |       |   |   |   |   |   |   |   |   |
| Balance                  at December 31, 2005                                                                                                 |   |                                                                                           | -         |        | $      | -              |   | $            | -      |              | $      | 18,133                  |   | $          | -      |   | $ | (149 | ) |   | 17,984 |   |
|                                                                                                                                          |   |                                                                                           |      |        |   |           |   |         |   |              |   |                    |   |       |   |   |   |   |   |   |   |   |
| Comprehensive                  loss:                                                                                                          |   |                                                                                           |      |        |   |           |   |         |   |              |   |                    |   |       |   |   |   |   |   |   |   |   |
| Net                  loss                                                                                                                     |   |                                                                                           | -         |        |   | -              |   |         | -      |              |   | (2,124                  | )      |       | -      |   |   | - |   |   | (2,124 | ) |
| Net                  unrealized loss on securities                                                                                            |   |                                                                                           |      |        |   |           |   |         |   |              |   |                    |   |       |   |   |   |   |   |   |   |   |
| available                  for sale                                                                                                           |   |                                                                                           | -         |        |   | -              |   |         | -      |              |   | -                       |   |       | -      |   |   | (1 | ) |   | (1 | ) |
| Total                  comprehensive loss                                                                                                     |   |                                                                                           | -         |        |   | -              |   |         | -      |              |   | -                       |   |       | -      |   |   | - |   |   | (2,125 | ) |
| Issuance                  of common stock forinitial                  public stock offering, net                  of expenses of $1.6 million |   |                                                                                           | 4,516,990 |        |   | 45             |   |         | 43,552 |              |   | -                       |   |       | -      |   |   | - |   |   | 43,597 |   |
| Issuance                  of common stock toNewportFed                  CharitableFoundation                                                  |   |                                                                                           | 361,359   |        |   | 4              |   |         | 3,610  |              |   | -                       |   |       | -      |   |   | - |   |   | 3,614 |   |
| Stock                  purchased for ESOP                                                                                                     |   |                                                                                           | -         |        |   | -              |   |         | -      |              |   | -                       |   |       | (3,903 | ) |   | - |   |   | (3,903 | ) |
| Release                  of ESOP stock                                                                                                        |   |                                                                                           | -         |        |   | -              |   |         | 22     |              |   | -                       |   |       | 66     |   |   | - |   |   | 88 |   |
| Balance                  at September 30, 2006                                                                                                |   |                                                                                           | 4,878,349 |        | $      | 49             |   | $            | 47,184 |              | $      | 16,009                  |   | $          | (3,837 | ) | $ | (150 | ) | $ | 59,255 |   |

----

*Table          of Contents*

**CONSOLIDATED      STATEMENTS OF CASH FLOWS**

|                                                                                                                             |   | **Nine                  Months Ended****September                  30,** |    |
|----------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------|---------|
|                                                                                                                             |   | **2006**                                                                 |    | **2005** |   |
|                                                                                                                             |   | **(Unaudited)****(In                  thousands)**                       |    |
| Cash                  flows from operating activities:                                                                           |
| Net                  income (loss)                                                                                               |   | $                                                                        | (2,124  | ) | $ | 416 |   |
| Adjustments                  to reconcile net income (loss) to net cash provided by operating                  activities:       |   |                                                                     |    |   |   |   |   |
| Provision                  for loan losses                                                                                       |   |                                                                     | 82      |   |   | 198 |   |
| Net                  accretion of securities                                                                                     |   |                                                                     | (13     | ) |   | - |   |
| Amortization                  of net deferred loan fees                                                                          |   |                                                                     | (93     | ) |   | (131 | ) |
| Depreciation                  and amortization of premises and equipment                                                         |   |                                                                     | 449     |   |   | 420 |   |
| Amortization                  of unearned compensation                                                                           |   |                                                                     | 88      |   |   | - |   |
| Deferred                  income tax provision (benefit)                                                                         |   |                                                                     | (1,068  | ) |   | 130 |   |
| Increase                  in bank-owned life insurance                                                                           |   |                                                                     | (56     | ) |   | (55 | ) |
| Net                  change in:                                                                                                  |   |                                                                     |    |   |   |   |   |
| Accrued                  interest receivable                                                                                     |   |                                                                     | (156    | ) |   | (111 | ) |
| Other                  assets                                                                                                    |   |                                                                     | 99      |   |   | (423 | ) |
| Accrued                  expenses and other liabilities                                                                          |   |                                                                     | 864     |   |   | 215 |   |
| Contribution                  to NewportFed Charitable Foundation                                                                |   |                                                                     | 3,614   |   |   | - |   |
| Net                  cash provided by operating activities                                                                       |   |                                                                     | 1,686   |   |   | 659 |   |
|                                                                                                                             |   |                                                                     |    |   |   |   |   |
| Cash                  flows from investing activities:                                                                           |
| Proceeds                  from maturities of certificates of deposit                                                             |   |                                                                     | 3,000   |   |   | 1,500 |   |
| Purchases                  of securities available for sale                                                                      |   |                                                                     | (210    | ) |   | (150 | ) |
| Principal                  payments received on securities held to maturity                                                      |   |                                                                     | 318     |   |   | 416 |   |
| Redemption                  (purchase) of Federal Home Loan Bank stock                                                           |   |                                                                     | 571     |   |   | (63 | ) |
| Loan                  originations, net of principal payments                                                                    |   |                                                                     | (21,243 | ) |   | (10,977 | ) |
| Additions                  to premises and equipment                                                                             |   |                                                                     | (492    | ) |   | (205 | ) |
| Net                  cash used by investing activities                                                                           |   |                                                                     | (18,056 | ) |   | (9,479 | ) |
|                                                                                                                             |   |                                                                     |    |   |   |   |   |
| Cash                  flows from financing activities:                                                                           |   |                                                                     |    |   |   |   |   |
| Net                  increase in deposits                                                                                        |   |                                                                     | 6,132   |   |   | 10,767 |   |
| Net                  increase (decrease) in borrowings with maturities of three months                  or                  less |   |                                                                     | (5,000  | ) |   | 250 |   |
| Proceeds                  from borrowings with maturities in excess of three months                                              |   |                                                                     | **-**   |   |   | 1,000 |   |
| Repayment                  of borrowings with maturities in excess of three months                                               |   |                                                                     | (12,925 | ) |   | (5,503 | ) |
| Net                  proceeds from offering common stock                                                                         |   |                                                                     | 43,597  |   |   | - |   |
| Stock                  purchased for ESOP                                                                                        |   |                                                                     | (3,903  | ) |   | - |   |
| Net                  cash provided by financing activities                                                                       |   |                                                                     | 27,901  |   |   | 6,514 |   |
|                                                                                                                             |   |                                                                     |    |   |   |   |   |
| Net                  change in cash and cash equivalents                                                                         |   |                                                                     | 11,531  |   |   | (2,306 | ) |
| Cash                  and cash equivalents at beginning of period                                                                |   |                                                                     | 4,914   |   |   | 11,952 |   |
| Cash                  and cash equivalents at end of period                                                                      |   | $                                                                        | 16,445  |   | $ | 9,646 |   |
|                                                                                                                             |   |                                                                     |    |   |   |   |   |
| Supplementary                  information:                                                                                      |   |                                                                     |    |   |   |   |   |
| Interest                  paid on deposit accounts                                                                               |   | $                                                                        | 2,191   |   | $ | 1,785 |   |
| Interest                  paid on short-term borrowings                                                                          |   |                                                                     | 374     |   |   | 65 |   |
| Interest                  paid on long-term borrowings                                                                           |   |                                                                     | 1,631   |   |   | 1,910 |   |
| Income                  taxes paid                                                                                               |   |                                                                     | 760     |   |   | 630 |   |

----

*Table          of Contents*

**NEWPORT      BANCORP, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**NOTE      1 - BASIS OF PRESENTATION**

*Use      of Estimates in the Preparation of Financial Statements *

**NOTE      2 - CONVERSION**

**NOTE      3 - EMPLOYEE STOCK OWNERSHIP PLAN **

**NOTE      4 -EARNINGS PER SHARE **

----

*Table          of Contents*

**NOTE      5 - EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS**

*“Share-Based      Payment,”*

*“Fair      Value Measurement.”*

*“Accounting      for Uncertainty in Income Taxes” *

----

*Table          of Contents*

*“Accounting      for Deferred Compensation and Postretirement Benefit Aspects of Endorsement      Split-Dollar Life Insurance Arrangements (“EITF 06-4”).”*

*“Accounting      for Purchases of Life Insurance-Determining the Amount That Could Be Realized      in      Accordance with FASB Technical Bulleting No. 85-4, Accounting for Purchases      of      Life Insurance.”*

**NOTE      6 - COMMITMENTS**

**Item      2.**
**Management’s      Discussion and Analysis of Financial Condition and Results of      Operations**

**General**

----

*Table          of Contents*

**Forward-Looking      Statements**

**Critical      Accounting Policies**

***Allowance      for Loan Losses***

***Income      Taxes.***
* *

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*Table          of Contents*

**Comparison      of Financial Condition at September 30, 2006 and December 31,      2005**

** **

**Comparison      of Operating Results for the Three and Nine Months Ended September 30, 2006      and      2005**

***General.***

----

*Table          of Contents*

***Net      Interest Income***
**.      **

|                                                             |   | **Three                Months****Ended                September** |   |     |   |
|------------------------------------------------------------------|--------|-------------------------------------------------------------------|--------|----------|--------|
|                                                             |   | **2006**                                                          |   | **2005** |   | **%                Change** |   |
|                                                             |   | **(Dollars                in thousands)**                         |   |     |   |
| **Interest                and dividend income:**                 |   |                                                              |   |     |   |   |   |   |   |   |
| Loans                receivable                             |   | $                                                                 | 3,933  |     | $      | 3,348 |   |   | 17.5 | % |
| Securities                                                  |   |                                                              | 99     |     |   | 78 |   |   | 26.9 |   |
| Other                earning assets                         |   |                                                              | 213    |     |   | 93 |   |   | 129.0 |   |
| Total                interest and dividend** **income  |   |                                                              | 4,245  |     |   | 3,519 |   |   | 20.6 |   |
| **Interest                expense:**                             |   |                                                              |   |     |   |   |   |   |   |   |
| Deposits                                                    |   |                                                              | 969    |     |   | 694 |   |   | 39.6 |   |
| Borrowings                                                       |   |                                                              | 429    |     |   | 612 |   |   | (29.9 | ) |
| Total                interest expense                       |   |                                                              | 1,398  |     |   | 1,306 |   |   | 7.0 |   |
| Net                interest income                          |   | $                                                                 | 2,847  |     | $      | 2,213 |   |   | 28.6 |   |

|                                                             |   | **Nine                Months****Ended                September** |   |     |   |
|------------------------------------------------------------------|--------|------------------------------------------------------------------|--------|----------|--------|
|                                                             |   | **2006**                                                         |   | **2005** |   | **%                Change** |   |
|                                                             |   | **(Dollars                in thousands)**                        |   |     |   |
| **Interest                and dividend income:**                 |   |                                                             |   |     |   |   |   |   |   |   |
| Loans                receivable                             |   | $                                                                | 11,277 |     | $      | 9,879 |   |   | 14.2 | % |
| Securities                                                  |   |                                                             | 281    |     |   | 223 |   |   | 26.0 |   |
| Other                earning assets                         |   |                                                             | 351    |     |   | 233 |   |   | 50.6 |   |
| Total                interest and dividend** **income  |   |                                                             | 11,909 |     |   | 10,335 |   |   | 15.2 |   |
| **Interest                expense:**                             |   |                                                             |   |     |   |   |   |   |   |   |
| Deposits                                                    |   |                                                             | 2,766  |     |   | 1,801 |   |   | 53.6 |   |
| Borrowings                                                  |   |                                                             | 1,931  |     |   | 1,945 |   |   | (0.7 | ) |
| Total                interest expense                       |   |                                                             | 4,697  |     |   | 3,746 |   |   | 25.4 |   |
| Net                interest income                          |   | $                                                                | 7,212  |     | $      | 6,589 |   |   | 9.5 |   |

----

*Table            of Contents*

----

*Table          of Contents*

|                                                                                                        |   | **Three                Months Ended September 30,** |    |
|-------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|---------|
|                                                                                                        |   | **2006**                                            |    | **2005** |   |
|                                                                                                        |   | **Average****Balance**                              |    | **Interest****and****Dividends** |   | **Yield/****Cost** |   | **Average****Balance** |   | **Interest****and****Dividends** |   | **Yield/****Cost** |   |
|                                                                                                        |   | **(Dollars                in thousands)**           |    |
| **Assets:**                                                                                                 |   |                                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning                assets:                                                                     |   |                                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                                                                                                  |   | $                                                   | 254,003 |   | $ | 3,933 |   |   | 6.19 | % | $ | 224,790 |   | $ | 3,348 |   |   | 5.96 | % |
| Securities                                                                                             |   |                                                | 8,502   |   |   | 99 |   |   | 4.66 | % |   | 8,708 |   |   | 78 |   |   | 3.58 | % |
| Other                interest-earning assets                                                           |   |                                                | 16,272  |   |   | 213 |   |   | 5.24 | % |   | 15,481 |   |   | 93 |   |   | 2.40 | % |
| Total                interest-earning assets                                                           |   |                                                | 278,777 |   |   | 4,245 |   |   | 6.09 | % |   | 248,979 |   |   | 3,519 |   |   | 5.65 | % |
|                                                                                                        |   |                                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank-owned                life insurance                                                               |   |                                                | 1,851   |   |   |   |   |   |   |   |   | 1,771 |   |   |   |   |   |   |   |
| Noninterest-earnings                assets                                                             |   |                                                | 12,859  |   |   |   |   |   |   |   |   | 10,645 |   |   |   |   |   |   |   |
| Total                assets                                                                            |   | $                                                   | 293,487 |   |   |   |   |   |   |   | $ | 261,395 |   |   |   |   |   |   |   |
|                                                                                                        |   |                                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Liabilities                and equity:**                                                                  |   |                                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                liabilities:                                                                |   |                                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                demand deposits                                                        |   |                                                | 26,569  |   |   | 15 |   |   | 0.23 | % |   | 28,260 |   |   | 18 |   |   | 0.25 | % |
| Savings                accounts                                                                        |   |                                                | 33,009  |   |   | 27 |   |   | 0.33 | % |   | 42,325 |   |   | 46 |   |   | 1.43 | % |
| Money                market accounts                                                                   |   |                                                | 26,948  |   |   | 179 |   |   | 2.66 | % |   | 27,140 |   |   | 169 |   |   | 2.49 | % |
| Certificates                of deposit                                                                 |   |                                                | 77,681  |   |   | 748 |   |   | 3.85 | % |   | 62,195 |   |   | 461 |   |   | 2.96 | % |
| Total                interest-bearing deposits                                                         |   |                                                | 164,207 |   |   | 969 |   |   | 2.36 | % |   | 159,920 |   |   | 694 |   |   | 1.74 | % |
|                                                                                                        |   |                                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Borrowings                                                                                                  |   |                                                | 33,853  |   |   | 429 |   |   | 5.07 | % |   | 45,370 |   |   | 612 |   |   | 5.40 | % |
| Total                interest-bearing liabilities                                                      |   |                                                | 198,060 |   |   | 1,398 |   |   | 2.82 | % |   | 205,290 |   |   | 1,306 |   |   | 2.54 | % |
|                                                                                                        |   |                                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand                deposits                                                                         |   |                                                | 37,755  |   |   |   |   |   |   |   |   | 36,679 |   |   |   |   |   |   |   |
| Noninterest-bearing                liabilities                                                         |   |                                                | 1,117   |   |   |   |   |   |   |   |   | 1,372 |   |   |   |   |   |   |   |
| Total                liabilities                                                                       |   |                                                | 236,930 |   |   |   |   |   |   |   |   | 243,341 |   |   |   |   |   |   |   |
|                                                                                                        |   |                                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stockholders’                equity                                                                   |   |                                                | 56,555  |   |   |   |   |   |   |   |   | 18,054 |   |   |   |   |   |   |   |
| Total                liabilities and stockholders’ equity                                        |   | $                                                   | 293,487 |   |   |   |   |   |   |   | $ | 261,395 |   |   |   |   |   |   |   |
|                                                                                                        |   |                                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                interest income                                                                     |   |                                                |    |   | $ | 2,847 |   |   |   |   |   |   |   | $ | 2,213 |   |   |   |   |
| Interest                rate spread                                                                    |   |                                                |    |   |   |   |   |   | 3.27 | % |   |   |   |   |   |   |   | 3.11 | % |
| Net                interest margin                                                                     |   |                                                |    |   |   |   |   |   | 4.08 | % |   |   |   |   |   |   |   | 3.56 | % |
| Average                interest-earning assets to average                interest-bearing liabilities  |   |                                                |    |   |   |   |   |   | 140.75 | % |   |   |   |   |   |   |   | 121.28 | % |

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*Table          of Contents*

|                                                                                                        |   | **Nine                Months Ended September 30,** |    |
|-------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|---------|
|                                                                                                        |   | **2006**                                           |    | **2005** |   |
|                                                                                                        |   | **Average****Balance**                             |    | **Interest****and****Dividends** |   | **Yield/****Cost** |   | **Average****Balance** |   | **Interest****and****Dividends** |   | **Yield/****Cost** |   |
|                                                                                                        |   | **(Dollars                in thousands)**          |    |
| **Assets:**                                                                                                 |   |                                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning                assets:                                                                     |   |                                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                                                                                                  |   | $                                                  | 245,840 |   | $ | 11,277 |   |   | 6.12 | % | $ | 222,590 |   | $ | 9,879 |   |   | 5.92 | % |
| Securities                                                                                             |   |                                               | 8,551   |   |   | 281 |   |   | 4.38 | % |   | 8,818 |   |   | 223 |   |   | 3.37 | % |
| Other                interest-earning assets                                                           |   |                                               | 13,089  |   |   | 351 |   |   | 3.58 | % |   | 14,025 |   |   | 233 |   |   | 2.22 | % |
| Total                interest-earning assets                                                           |   |                                               | 267,480 |   |   | 11,909 |   |   | 5.94 | % |   | 245,433 |   |   | 10,335 |   |   | 5.61 | % |
|                                                                                                        |   |                                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank-owned                life insurance                                                               |   |                                               | 1,830   |   |   |   |   |   |   |   |   | 1,770 |   |   |   |   |   |   |   |
| Noninterest-earnings                assets                                                             |   |                                               | 11,074  |   |   |   |   |   |   |   |   | 10,512 |   |   |   |   |   |   |   |
| Total                assets                                                                            |   | $                                                  | 280,384 |   |   |   |   |   |   |   | $ | 257,715 |   |   |   |   |   |   |   |
|                                                                                                        |   |                                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Liabilities                and equity:**                                                                  |   |                                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                liabilities:                                                                |   |                                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                demand deposits                                                        |   |                                               | 26,625  |   |   | 41 |   |   | 0.21 | % |   | 28,767 |   |   | 48 |   |   | 0.22 | % |
| Savings                accounts                                                                        |   |                                               | 34,682  |   |   | 84 |   |   | 0.32 | % |   | 42,546 |   |   | 149 |   |   | 0.47 | % |
| Money                market accounts                                                                   |   |                                               | 24,019  |   |   | 465 |   |   | 2.58 | % |   | 26,204 |   |   | 415 |   |   | 2.11 | % |
| Certificates                of deposit                                                                 |   |                                               | 76,971  |   |   | 2,176 |   |   | 3.77 | % |   | 58,361 |   |   | 1,189 |   |   | 2.72 | % |
| Total                interest-bearing deposits                                                         |   |                                               | 162,297 |   |   | 2,766 |   |   | 2.27 | % |   | 155,878 |   |   | 1,801 |   |   | 1.54 | % |
|                                                                                                        |   |                                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Borrowings                                                                                             |   |                                               | 49,081  |   |   | 1,931 |   |   | 5.25 | % |   | 49,538 |   |   | 1,945 |   |   | 5.24 | % |
| Total                interest-bearing liabilities                                                      |   |                                               | 211,378 |   |   | 4,697 |   |   | 2.96 | % |   | 205,416 |   |   | 3,746 |   |   | 2.43 | % |
|                                                                                                        |   |                                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand                deposits                                                                         |   |                                               | 36,546  |   |   |   |   |   |   |   |   | 33,076 |   |   |   |   |   |   |   |
| Noninterest-bearing                liabilities                                                         |   |                                               | 1,314   |   |   |   |   |   |   |   |   | 1,384 |   |   |   |   |   |   |   |
| Total                liabilities                                                                       |   |                                               | 249,238 |   |   |   |   |   |   |   |   | 239,876 |   |   |   |   |   |   |   |
|                                                                                                        |   |                                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stockholders’                equity                                                              |   |                                               | 31,146  |   |   |   |   |   |   |   |   | 17,839 |   |   |   |   |   |   |   |
| Total                liabilities and stockholders’ equity                                             |   | $                                                  | 280,384 |   |   |   |   |   |   |   | $ | 257,715 |   |   |   |   |   |   |   |
|                                                                                                        |   |                                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                interest income                                                                     |   |                                               |    |   | $ | 7,212 |   |   |   |   |   |   |   | $ | 6,589 |   |   |   |   |
| Interest                rate spread                                                                    |   |                                               |    |   |   |   |   |   | 2.97 | % |   |   |   |   |   |   |   | 3.18 | % |
| Net                interest margin                                                                     |   |                                               |    |   |   |   |   |   | 3.60 | % |   |   |   |   |   |   |   | 3.58 | % |
| Average                interest-earning assets to average                interest-bearing liabilities  |   |                                               |    |   |   |   |   |   | 126.54 | % |   |   |   |   |   |   |   | 119.48 | % |

----

*Table          of Contents*

***Rate/Volume      Analysis.***
** **

|                                                |   | **For                  the Three Months Ended**                      |   |
|-----------------------------------------------------|--------|----------------------------------------------------------------------|--------|
|                                                |   | **September                  30, 2006 Compared to the Three Months** |   |
|                                                |   | **Ended                  September 30, 2005**                        |   |
|                                                |   | **Increase                  (Decrease**)**Due                  to**  |   |
|                                                |   |  (In                  thousands)                                |   |
| Interest                  Income:                   |   |  Volume                                                         |   |  Rate |   |  Net |   |
| Loans                  receivable                   |   | $                                                                    | 448    |   | $ | 137 |   | $ | 585 |   |
| Securities                                          |   |                                                                 | (15    | ) |   | 36 |   |   | 21 |   |
| Other                  earning assets               |   |                                                                 | (1     | ) |   | 121 |   |   | 120 |   |
| Total                  interest-earning assets      |   |                                                                 | 432    |   |   | 294 |   |   | 726 |   |
|                                                |   |                                                                 |   |   |   |   |   |   |   |   |
| Interest                  Expense:                  |   |                                                                 |   |   |   |   |   |   |   |   |
| Deposits                                            |   |                                                                 | (19    | ) |   | (256 | ) |   | (275 | ) |
| Borrowings.                                         |   |                                                                 | 148    |   |   | 35 |   |   | 183 |   |
| Total                  interest-bearing liabilities |   |                                                                 | 129    |   |   | (221 | ) |   | (92 | ) |
| Net                  change in interest income      |   | $                                                                    | 561    |   | $ | 73 |   | $ | 634 |   |

|                                                |   | **For                  the Nine Months Ended****September                  30, 2006 Compared****to                  the Nine Months****Ended                  September 30, 2005** |   |
|-----------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                |   | **Increase                  (Decrease**)**Due                  to**                                                                                                                |   |
|                                                |   |  (In                  thousands)                                                                                                                                              |   |
| Interest                  Income:                   |   |  Volume                                                                                                                                                                       |   |  Rate |   |  Net |   |
| Loans                  receivable                   |   | $                                                                                                                                                                                  | 1,058  |   | $ | 340 |   | $ | 1,398 |   |
| Securities                                          |   |                                                                                                                                                                               | (7     | ) |   | 65 |   |   | 58 |   |
| Other                  earning assets               |   |                                                                                                                                                                               | (14    | ) |   | 132 |   |   | 118 |   |
| Total                  interest-earning assets      |   |                                                                                                                                                                               | 1,037  |   |   | 537 |   |   | 1,574 |   |
|                                                |   |                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| Interest                  Expense:                  |   |                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| Deposits                                            |   |                                                                                                                                                                               | (77    | ) |   | (888 | ) |   | (965 | ) |
| Borrowings                                          |   |                                                                                                                                                                               | 18     |   |   | (4 | ) |   | 14 |   |
| Total                  interest-bearing liabilities |   |                                                                                                                                                                               | (59    | ) |   | (892 | ) |   | (951 | ) |
| Net                  change in interest income      |   | $                                                                                                                                                                                  | 978    |   | $ | (355 | ) | $ | 623 |   |

----

*Table            of Contents*

***Provision      for Loan Losses***
**.**

|                                           |   |                                                                  |   |                                                                 |   |     |   |     |   |
|------------------------------------------------|--------|-----------------------------------------------------------------------|--------|----------------------------------------------------------------------|--------|----------|--------|----------|--------|
|                                           |   | **Three                Months****Ended                September 30,** |   | **Nine                Months****Ended                September 30,** |   |
|                                           |   | **2006**                                                              |   | **2005**                                                             |   | **2006** |   | **2005** |   |
|                                           |   | **(In                thousands)**                                     |   |
|                                           |   |                                                                  |   |                                                                 |   |     |   |     |   |
| Balance                at beginning of period  |   | $                                                                     | 1,885  |                                                                 | $      | 1,787    |   | $        | 1,853  |   | $ | 1,655 |   |
| Provision                for loan losses  |   |                                                                  | 50     |                                                                 |   | 66       |   |     | 82     |   |   | 198 |   |
| Balance                at end of period   |   | $                                                                     | 1,935  |                                                                 | $      | 1,853    |   | $        | 1,935  |   | $ | 1,853 |   |

***Other      Income***
**.**
** **

|                                           |   | **Three                Months Ended****September                30,** |   |     |   | **Nine                Months Ended****September                30,** |   |     |   |
|------------------------------------------------|--------|-----------------------------------------------------------------------|--------|----------|--------|----------------------------------------------------------------------|--------|----------|--------|
|                                           |   | **2006**                                                              |   | **2005** |   | **%                Change**                                          |   | **2006** |   | **2005** |   | **%                Change** |   |
|                                           |   | **(Dollars                in thousands)**                             |   |
| Customer                service fees      |   | $                                                                     | 445    |     | $      | 355                                                                  |   |     | 25.4   | % | $ | 1,121 |   | $ | 1,027 |   |   | 9.2 | % |
| Gain                on sales of loans     |   |                                                                  | -      |     |   | 21                                                                   |   |     | (100.0 | )% |   | 14 |   |   | 93 |   |   | (84.9 | )% |
| FHLB                prepayment penalties  |   |                                                                  | (367   | )        |   | -                                                                    |   |     | 100.0  | % |   | (367 | ) |   | - |   |   | 100.0 | % |
| Miscellaneous                             |   |                                                                  | 47     |     |   | 47                                                                   |   |     | 0.0    | % |   | 152 |   |   | 140 |   |   | 8.6 | % |
| Total                                     |   | $                                                                     | 125    |     | $      | 423                                                                  |   |     | (70.4  | )% | $ | 920 |   | $ | 1,260 |   |   | (27.0 | )% |

----

*Table          of Contents*

***Operating      Expense***
**.**

|                                                                           |   | **Three                Months Ended****September                30,** |   |     |   | **Nine                Months Ended****September                30,** |   |     |   |
|--------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------|--------|----------|--------|----------------------------------------------------------------------|--------|----------|--------|
|                                                                           |   | **2006**                                                              |   | **2005** |   | **%                Change**                                          |   | **2006** |   | **2005** |   | **%                Change** |   |
|                                                                           |   | **(Dollars                in thousands)**                             |   |
| Salaries                and employee benefits                                  |   | $                                                                     | 1,387  |     | $      | 1,211                                                                |   |     | 14.5   | % | $ | 3,976 |   | $ | 3,509 |   |   | 13.3 | % |
| Occupancy                and equipment, net                                    |   |                                                                  | 305    |     |   | 281                                                                  |   |     | 8.5    | % |   | 920 |   |   | 862 |   |   | 6.7 | % |
| Data                processing                                            |   |                                                                  | 278    |     |   | 270                                                                  |   |     | 3.0    | % |   | 771 |   |   | 792 |   |   | (2.7 | )% |
| Professional                fees                                          |   |                                                                  | 118    |     |   | 201                                                                  |   |     | (41.3  | )% |   | 294 |   |   | 379 |   |   | (22.4 | )% |
| Marketing                                                                 |   |                                                                  | 241    |     |   | 199                                                                  |   |     | 21.1   | % |   | 716 |   |   | 517 |   |   | 38.5 | % |
| Contribution                to NewportFed Charitable                Foundation |   |                                                                  | 3,614  |     |   | -                                                                    |   |     | 100    | % |   | 3,614 |   |   | - |   |   | 100 | % |
| All                other                                                  |   |                                                                  | 180    |     |   | 277                                                                  |   |     | (35.0  | )% |   | 612 |   |   | 667 |   |   | (8.2 | )% |
| Total                                                                     |   | $                                                                     | 6,123  |     | $      | 2,439                                                                |   |     | 151.0  | % | $ | 10,903 |   | $ | 6,726 |   |   | 62.1 | % |

***Income      Taxes***
**.      **

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*Table          of Contents*

***Liquidity      Management***
**.**

|                                       |   |      |   |  **Payments                due by period** |   |
|--------------------------------------------|--------|-----------|--------|-------------------------------------------------|--------|
|                                       |   |      |   |                                            |   | **One                to** |   |   |   |   |   |
|                                       |   |      |   | **Less                than**                    |   | **Three** |   | **Three                to** |   | **More                Than** |   |
| **Contractual                Obligations** |   | **Total** |   | **One                Year**                     |   | **Years** |   | **Five                Years** |   | **5                Years** |   |
|                                       |   |      |   |                                            |   | **(In                thousands)** |   |   |   |   |   |
| Debt                obligations            |   | $         | 32,198 |                                            | $      | 2,196 |   | $ | 9,670 |   | $ | 5,171 |   | $ | 15,161 |   |
| Operating                lease obligations |   |      | 1,070  |                                            |   | 108 |   |   | 195 |   |   | 192 |   |   | 575 |   |
| Purchase                obligations        |   |      | 2,250  |                                            |   | 2,250 |   |   | - |   |   | - |   |   | - |   |
| Total                                      |   | $         | 35,518 |                                            | $      | 4,554 |   | $ | 9,865 |   | $ | 5,363 |   | $ | 15,736 |   |

***Capital        Management.***

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*Table          of Contents*

***Off-Balance      Sheet Arrangements***
**.**

**Item      3.**
**Quantitative      and Qualitative Disclosures About Market Risk.**

**Qualitative      Aspects of Market Risk. **

**Quantitative        Aspects of Market Risk. **

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*Table          of Contents*

|                                                                        |   | Net                Portfolio Value(Dollars                in thousands) |   | Net                Portfolio Value as % ofPortfolio                Value of Assets |
|-----------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------|
|                                                                        |   |
| Basic                Point (“bp”)Change                in Rates |   | Amount                                                                  |   | Change                                                                             |   | %                Change |   | NPV                Ratio |   | Change                (bp) |
|                                                                        |   |                                                                    |   |                                                                               |   |   |   |   |   |   |
| 300                                                                         |   | $13,856                                                       |   | $-15,454                                                                 |   | -53 |   | 4.75% |   | -465 |
| 200                                                                         |   | 18,554                                                                  |   | -10,756                                                                            |   | -37 |   | 6.23% |   | -317 |
| 100                                                                         |   | 23,418                                                                  |   |                  -5,892                                                       |   | -20 |   | 7.69% |   | -170 |
| 0                                                                           |   | 29,310                                                                  |   |                          0            |   |   |   | 9.40% |   |   |
| (100)                                                                       |   | 34,687                                                                  |   |                   5,377                                                  |   | 18 |   | 10.87%  |   | +148 |
| (200)                                                                       |   | 36,835                                                                  |   |                   7,525                                                  |   | 26 |   | 11.40%  |   | +200 |

**Item      4.**
**    Controls      and      Procedures**

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*Table          of Contents*

**PART      II.**
**OTHER      INFORMATION**

**Item      1.**
**Legal      Proceedings**

**Item      1A.           **
**Risk      Factors**

**Item      2.**
**Unregistered      Sales of Equity Securities and Use of Proceeds**

|   | a. | The                  effective date of the Registration Statement on Form S-1 (File                  No.                  333-132582) was May 15, 2006. Sandler O’Neill & Partners, L.P. acted                  as marketing agent for the                  offering. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | b. | The                  class of securities registered was common stock, par value $0.01                  per                  share. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------|

|   | c. | The                  offering was consummated on July 6, 2006. Of the 4,959,375 shares                  registered for issuance, 4,592,013 shares (or $45,920,130) were                  registered                  for sale in the offering, and 367,362 shares were registered for                  contribution to the NewportFed Charitable Foundation. Of the 4,959,375                  shares registered, 4,878,349 shares were issued, including 4,516,990                  shares (or $45,169,900) sold in the offering, and 361,359 shares                  contributed to the NewportFed Charitable                  Foundation. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | d. | The                  expenses incurred to date in connection with the stock offering                  were $1.6                  million, including expenses paid to and for underwriters of $392,325                  and                  other expenses of $1.2 million. The net proceeds resulting from                  the                  offering after deducting expenses was $43.6                  million. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | e. | The                  net proceeds have been invested in loans and cash and cash                  equivalents. |
|--------|----|---------------------------------------------------------------------------------------------------------------|

**Item      3.**
**Defaults      Upon Senior Securities**

**Item      4.**
**Submission      Of Matters to a Vote of Security Holders**

**Item      5.**
**Other      Information**

**Item      6.**
**Exhibits**

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*Table          of Contents*

**Signatures**

|                                   | Newport                Bancorp, Inc. |
|----------------------------------------|--------------------------------------|
|                                   |                                 |   |
|                                   |                                 |   |
|                                   |                                 |   |
| Date:                November 14, 2006 | By:                                  | /s/                Kevin M. McCarthy |
|                                   |                                 | Kevin                M. McCarthy |
|                                   |                                 | President                and Chief Executive Officer |
|                                   |                                 |   |
|                                   |                                 |   |
|                                   |                                 |   |
| Date:                November 14, 2006 | By:                                  | /s/                Bruce A. Walsh |
|                                   |                                 | Bruce                A. Walsh |
|                                   |                                 | Senior                Vice President and Chief Financial                Officer |