----

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**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      DC 20549**

**FORM      10-Q**

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

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

|  **Newport                Bancorp, Inc.**                                             |
|--------------------------------------------------------------------------------------------|
|  (Exact                name of registrant as specified in its                charter) |

| **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**                                         |   |
|--------|---------------------------------------------------------------------------|--------|
|   | (Registrant’s                telephone number, including area code) |   |

|   | **N/A**                                                                                                          |   |
|--------|------------------------------------------------------------------------------------------------------------------|--------|
|   | (Former                name, former address and former fiscal year, if changed since last                report) |   |

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**NEWPORT      BANCORP, INC.**

**Table      of Contents**

|                                                              |   |                                                                                                                                                 |   | **Page                No.** |
|-------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|
| **Part                I.   Financial Information** |
|                                                              |   |                                                                                                                                                 |   |                        |
| Item                1.                                            |   | Consolidated                Financial Statements (Unaudited)                                                                                         |   | 1                           |
|                                                              |   |                                                                                                                                                 |   |                        |
|                                                              |   | Consolidated                Balance Sheets at September 30, 2007 and December 31, 2006                                                               |   | 1                           |
|                                                              |   |                                                                                                                                                 |   |                        |
|                                                              |   | Consolidated                Statements of Operations for the Three and Nine Months Ended September                30,                2007 and 2006   |   | 2                           |
|                                                              |   |                                                                                                                                                 |   |                        |
|                                                              |   | Consolidated                Statements of Changes in Stockholders’ Equity for the Nine Months Ended                September 30, 2007 and 2006 |   | 3                           |
|                                                              |   |                                                                                                                                                 |   |                        |
|                                                              |   | Consolidated                Statements of Cash Flows for the Nine Months Ended September 30,                2007 and                2006             |   | 4                           |
|                                                              |   |                                                                                                                                                 |   |                        |
|                                                              |   | Notes                to Unaudited Consolidated Financial Statements                                                                                  |   | 5-6                         |
|                                                              |   |                                                                                                                                                 |   |                        |
| Item                2.                                            |   | Management’s                Discussion and Analysis of Financial Condition and Results of                Operations                            |   | 7-17                        |
|                                                              |   |                                                                                                                                                 |   |                        |
| Item                3.                                            |   | Quantitative                and Qualitative Disclosures about Market Risk                                                                            |   | 17-18                       |
|                                                              |   |                                                                                                                                                 |   |                        |
| Item                4.                                            |   | Controls                and Procedures                                                                                                               |   | 18                          |
|                                                              |   |                                                                                                                                                 |   |                        |
| **Part                II.   Other Information**    |
|                                                              |   |                                                                                                                                                 |   |                        |
| Item                1.                                            |   | Legal                Proceedings                                                                                                                     |   | 18                          |
|                                                              |   |                                                                                                                                                 |   |                        |
| Item                1A.                                           |   | Risk                Factors                                                                                                                          |   | 19                          |
|                                                              |   |                                                                                                                                                 |   |                        |
| Item                2.                                            |   | Unregistered                Sales of Equity Securities and Use of Proceeds                                                                           |   | 19                          |
|                                                              |   |                                                                                                                                                 |   |                        |
| Item                3.                                            |   | Defaults                Upon Senior Securities                                                                                                       |   | 19                          |
|                                                              |   |                                                                                                                                                 |   |                        |
| Item                4.                                            |   | Submission                of Matters to a Vote of Security Holders                                                                                   |   | 19                          |
|                                                              |   |                                                                                                                                                 |   |                        |
| Item                5.                                            |   | Other                Information                                                                                                                     |   | 20                          |
|                                                              |   |                                                                                                                                                 |   |                        |
| Item                6.                                            |   | Exhibits                                                                                                                                             |   | 20                          |
|                                                              |   |                                                                                                                                                 |   |                        |
|                                                              |   | Signatures                                                                                                                                           |   | 21                          |

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**PART      I.                 FINANCIAL      INFORMATION**

| **Item                1.** | **Financial                Statements** |
|----------------------------|-----------------------------------------|

**CONSOLIDATED      BALANCE SHEETS**

|                                                                                                                                                                                                                                                  |   | **September                  30,****2007** |    |   | **December                31,**** 2006** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|---------|--------|-----------------------------------------------|--------|
|                                                                                                                                                                                                                                                  |   | **(Unaudited)**                            |    |
|                                                                                                                                                                                                                                                  |   | **(Dollars                in thousands)**  |    |
|                                                                                                                                                                                                                                                  |   |                                       |    |   |                                          |   |
| **ASSETS**                                                                                                                                                                                                                                            |
|                                                                                                                                                                                                                                                  |   |                                       |    |   |                                          |   |
| Cash                and due from banks                                                                                                                                                                                                                |   | $                                          | 3,980   |   |                                          | $      | 3,705 |   |
| Short-term                investments                                                                                                                                                                                                                 |   |                                       | 3,533   |   |                                          |   | 3,567 |   |
| Cash                and cash equivalents                                                                                                                                                                                                              |   |                                       | 7,513   |   |                                          |   | 7,272 |   |
|                                                                                                                                                                                                                                                  |   |                                       |    |   |                                          |   |   |   |
| Securities                available for sale, at fair value                                                                                                                                                                                           |   |                                       | 6,862   |   |                                          |   | 6,614 |   |
| Securities                held to maturity, at amortized cost                                                                                                                                                                                         |   |                                       | 1,717   |   |                                          |   | 1,922 |   |
| Federal                Home Loan Bank stock, at cost                                                                                                                                                                                                  |   |                                       | 3,496   |   |                                          |   | 2,390 |   |
| Loans                                                                                                                                                                                                                                                 |   |                                       | 284,602 |   |                                          |   | 258,739 |   |
| Allowance                for loan losses                                                                                                                                                                                                              |   |                                       | (2,259  | )      |                                          |   | (1,973 | ) |
| Loans,                net                                                                                                                                                                                                                             |   |                                       | 282,343 |   |                                          |   | 256,766 |   |
| Premises                and equipment, net                                                                                                                                                                                                            |   |                                       | 5,918   |   |                                          |   | 6,099 |   |
| Accrued                interest receivable                                                                                                                                                                                                            |   |                                       | 1,197   |   |                                          |   | 1,027 |   |
| Deferred                income taxes                                                                                                                                                                                                                  |   |                                       | 1,975   |   |                                          |   | 1,851 |   |
| Bank-owned                life insurance                                                                                                                                                                                                              |   |                                       | 9,177   |   |                                          |   | 5,382 |   |
| Other                assets                                                                                                                                                                                                                           |   |                                       | 803     |   |                                          |   | 1,121 |   |
| Total                assets                                                                                                                                                                                                                           |   | $                                          | 321,001 |   |                                          | $      | 290,444 |   |
|                                                                                                                                                                                                                                                  |   |                                       |    |   |                                          |   |   |   |
| **LIABILITIES                AND STOCKHOLDERS’ EQUITY**                                                                                                                                                                                         |
|                                                                                                                                                                                                                                                  |   |                                       |    |   |                                          |   |   |   |
| Deposits                                                                                                                                                                                                                                              |   | $                                          | 195,371 |   |                                          | $      | 192,974 |   |
| Short-term                borrowings                                                                                                                                                                                                                  |   |                                       | 512     |   |                                          |   | 2,500 |   |
| Long-term                borrowings                                                                                                                                                                                                                   |   |                                       | 63,214  |   |                                          |   | 31,950 |   |
| Accrued                expenses and other liabilities                                                                                                                                                                                                 |   |                                       | 2,527   |   |                                          |   | 3,040 |   |
| Total                liabilities                                                                                                                                                                                                                      |   |                                       | 261,624 |   |                                          |   | 230,464 |   |
|                                                                                                                                                                                                                                                  |   |                                       |    |   |                                          |   |   |   |
| 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, 4,745,989 and 4,878,349 shares outstanding at September 30,                2007                and December 31, 2006, respectively |   |                                       | 49      |   |                                          |   | 49 |   |
| Additional                paid in capital                                                                                                                                                                                                             |   |                                       | 47,323  |   |                                          |   | 47,258 |   |
| Retained                earnings                                                                                                                                                                                                                      |   |                                       | 17,281  |   |                                          |   | 16,477 |   |
| Unearned                compensation - ESOP                                                                                                                                                                                                           |   |                                       | (3,447  | )      |                                          |   | (3,643 | ) |
| Treasury                stock, at cost (132,360 shares at September 30, 2007)                                                                                                                                                                         |   |                                       | (1,660  | )      |                                          |   | - |   |
| Accumulated                other comprehensive loss                                                                                                                                                                                                   |   |                                       | (169    | )      |                                          |   | (161 | ) |
| Total                stockholders’ equity                                                                                                                                                                                                       |   |                                       | 59,377  |   |                                          |   | 59,980 |   |
| Total                liabilities and stockholders’ equity                                                                                                                                                                                       |   | $                                          | 321,001 |   |                                          | $      | 290,444 |   |

----

**CONSOLIDATED      STATEMENTS OF OPERATIONS**

|                                                                |   | **Three                Months Ended****September                30,**           |      |   | **Nine                Months Ended****September                30,** |   |
|---------------------------------------------------------------------|--------|---------------------------------------------------------------------------------|-----------|--------|----------------------------------------------------------------------|--------|
|                                                                |   | **2007**                                                                        |      |   | **2006**                                                             |   |   | **2007** |   |   | **2006** |   |
|                                                                |   | **(Unaudited)****(Dollars                in thousands, except per share data)** |      |
|                                                                |   |                                                                            |      |   |                                                                 |   |   |   |   |   |   |   |
| Interest                and dividend income:                        |   |                                                                            |      |   |                                                                 |   |   |   |   |   |   |   |
| Interest                and fees on loans                           |   | $                                                                               | 4,360     |   |                                                                 | $      | 3,933 |   |   | $ | 12,641 |   |   | $ | 11,277 |   |
| Interest                and dividends on securities                 |   |                                                                            | 107       |   |                                                                 |   | 99 |   |   |   | 316 |   |   |   | 281 |   |
| Dividends                on Federal Home Loan Bank stock            |   |                                                                            | 45        |   |                                                                 |   | 99 |   |   |   | 126 |   |   |   | 178 |   |
| Interest                on certificates of deposit                  |   |                                                                            | -         |   |                                                                 |   | 1 |   |   |   | - |   |   |   | 13 |   |
| Interest                on short-term investments                   |   |                                                                            | 24        |   |                                                                 |   | 113 |   |   |   | 41 |   |   |   | 160 |   |
| Total                interest and dividend income                   |   |                                                                            | 4,536     |   |                                                                 |   | 4,245 |   |   |   | 13,124 |   |   |   | 11,909 |   |
|                                                                |   |                                                                            |      |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Interest                expense:                                    |   |                                                                            |      |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Interest                on deposits                                 |   |                                                                            | 1,218     |   |                                                                 |   | 969 |   |   |   | 3,639 |   |   |   | 2,766 |   |
| Interest                on short-term borrowings                    |   |                                                                            | 34        |   |                                                                 |   | - |   |   |   | 314 |   |   |   | 369 |   |
| Interest                on long-term borrowings                     |   |                                                                            | 678       |   |                                                                 |   | 429 |   |   |   | 1,538 |   |   |   | 1,562 |   |
| Total                interest expense                               |   |                                                                            | 1,930     |   |                                                                 |   | 1,398 |   |   |   | 5,491 |   |   |   | 4,697 |   |
|                                                                |   |                                                                            |      |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Net                interest income                                  |   |                                                                            | 2,606     |   |                                                                 |   | 2,847 |   |   |   | 7,633 |   |   |   | 7,212 |   |
| Provision                for loan losses                            |   |                                                                            | 126       |   |                                                                 |   | 50 |   |   |   | 286 |   |   |   | 82 |   |
|                                                                |   |                                                                            |      |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Net                interest income, after provision for loan losses |   |                                                                            | 2,480     |   |                                                                 |   | 2,797 |   |   |   | 7,347 |   |   |   | 7,130 |   |
|                                                                |   |                                                                            |      |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Other                income (charges):                              |   |                                                                            |      |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Customer                service fees                                |   |                                                                            | 461       |   |                                                                 |   | 445 |   |   |   | 1,376 |   |   |   | 1,121 |   |
| Gain                on sales of loans                               |   |                                                                            | -         |   |                                                                 |   | - |   |   |   | - |   |   |   | 14 |   |
| FHLB                prepayment penalties                            |   |                                                                            | -         |   |                                                                 |   | (367 | ) |   |   | - |   |   |   | (367 | ) |
| Bank-owned                life insurance                            |   |                                                                            | 97        |   |                                                                 |   | 19 |   |   |   | 288 |   |   |   | 57 |   |
| Miscellaneous                                                       |   |                                                                            | 26        |   |                                                                 |   | 28 |   |   |   | 73 |   |   |   | 95 |   |
| Total                other income                                   |   |                                                                            | 584       |   |                                                                 |   | 125 |   |   |   | 1,737 |   |   |   | 920 |   |
|                                                                |   |                                                                            |      |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Operating                expenses:                                  |   |                                                                            |      |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Salaries                and employee benefits                       |   |                                                                            | 1,414     |   |                                                                 |   | 1,387 |   |   |   | 4,236 |   |   |   | 3,976 |   |
| Occupancy                and equipment, net                         |   |                                                                            | 323       |   |                                                                 |   | 305 |   |   |   | 948 |   |   |   | 920 |   |
| Data                processing                                      |   |                                                                            | 255       |   |                                                                 |   | 278 |   |   |   | 762 |   |   |   | 771 |   |
| Professional                fees                                    |   |                                                                            | 143       |   |                                                                 |   | 118 |   |   |   | 408 |   |   |   | 294 |   |
| Marketing                                                           |   |                                                                            | 321       |   |                                                                 |   | 241 |   |   |   | 862 |   |   |   | 716 |   |
| Contribution                to NewportFed Charitable Foundation     |   |                                                                            | -         |   |                                                                 |   | 3,614 |   |   |   | - |   |   |   | 3,614 |   |
| Other                general and administrative                     |   |                                                                            | 171       |   |                                                                 |   | 180 |   |   |   | 522 |   |   |   | 612 |   |
| Total                operating expenses                             |   |                                                                            | 2,627     |   |                                                                 |   | 6,123 |   |   |   | 7,738 |   |   |   | 10,903 |   |
|                                                                |   |                                                                            |      |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Income                (loss) before income taxes                    |   |                                                                            | 437       |   |                                                                 |   | (3,201 | ) |   |   | 1,346 |   |   |   | (2,853 | ) |
|                                                                |   |                                                                            |      |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Provision                (benefit) for income taxes                 |   |                                                                            | 176       |   |                                                                 |   | (855 | ) |   |   | 542 |   |   |   | (729 | ) |
|                                                                |   |                                                                            |      |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Net                income (loss)                                    |   | $                                                                               | 261       |   |                                                                 | $      | (2,346 | ) |   | $ | 804 |   |   | $ | (2,124 | ) |
|                                                                |   |                                                                            |      |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Weighted-average                shares outstanding:                 |   |                                                                            |      |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                               |   |                                                                            | 4,513,336 |   |                                                                 |   | n/a |   |   |   | 4,517,506 |   |   |   | n/a |   |
| Diluted                                                             |   |                                                                            | 4,513,336 |   |                                                                 |   | n/a |   |   |   | 4,517,506 |   |   |   | n/a |   |
|                                                                |   |                                                                            |      |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Earnings                per share:                                  |   |                                                                            |      |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                               |   | $                                                                               | .06       |   |                                                                 |   | n/a |   |   | $ | .18 |   |   |   | n/a |   |
| Diluted                                                             |   | $                                                                               | .06       |   |                                                                 |   | n/a |   |   | $ | .18 |   |   |   | n/a |   |

----

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

**(Unaudited)**

**(Dollars      in thousands)**

|                                                                                                                                     |   |                            |      |   |        |   |   |           |   |   |             |   |   |         |   |   |              |   |   | **Accumulated**         |   |   |       |   |
|------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|-----------|--------|-------------|--------|--------|----------------|--------|--------|------------------|--------|--------|--------------|--------|--------|-------------------|--------|--------|-------------------------|--------|--------|------------|--------|
|                                                                                                                                     |   |                            |      |   |        |   |   | **Additional** |   |   |             |   |   | **Unearned** |   |   |              |   |   | **Other**               |   |   | **Total**  |   |
|                                                                                                                                     |   | **Common                Stock** |      |   | **Paid-in** |   |   | **Retained**   |   |   | **Compensation** |   |   | **Treasury** |   |   | **Comprehensive** |   |   | **Stockholders’** |   |
|                                                                                                                                     |   | **Shares**                      |      |   | **Amount**  |   |   | **Capital**    |   |   | **Earnings**     |   |   | **ESOP**     |   |   | **Stock**         |   |   | **Loss**                |   |   | **Equity** |   |
|                                                                                                                                     |   |                            |      |   |        |   |   |           |   |   |             |   |   |         |   |   |              |   |   |                    |   |   |       |   |
| 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 for initial public stock offering, net of expenses                of $1.6                million |   |                            | 4,516,990 |   |        |   | 45     |           |   |   | 43,552           |   |   |         | -      |   |              |   | -      |                    |   |   | -          |   |   |   | - |   |   |   | 43,597 |   |
| Issuance                of common stock to NewportFed Charitable Foundation                                                              |   |                            | 361,359   |   |        |   | 4      |           |   |   | 3,610            |   |   |         | -      |   |              |   | -      |                    |   |   | -          |   |   |   | - |   |   |   | 3,614 |   |
| Stock                purchased for ESOP                                                                                                  |   |                            | -         |   |        |   | -      |           |   |   | -                |   |   |         | -      |   |              |   | (3,903 | )                       |   |   |       |   |   |   | - |   |   |   | (3,903 | ) |
| ESOP                shares committed to be released (6,604 shares)                                                                       |   |                            | -         |   |        |   | -      |           |   |   | 22               |   |   |         | -      |   |              |   | 66     |                    |   |   |       |   |   |   | - |   |   |   | 88 |   |
| Balance                at September 30, 2006                                                                                        |   |                            | 4,878,349 |   |        | $      | 49     |           |   | $      | 47,184           |   |   | $            | 16,009 |   |              | $      | (3,837 | )                       |   | $      | -          |   |   | $ | (150 | ) |   | $ | 59,255 |   |
|                                                                                                                                     |   |                            |      |   |        |   |   |           |   |   |             |   |   |         |   |   |              |   |   |                    |   |   |       |   |   |   |   |   |   |   |   |   |
| Balance                at December 31, 2006                                                                                         |   |                            | 4,878,349 |   |        | $      | 49     |           |   | $      | 47,258           |   |   | $            | 16,477 |   |              | $      | (3,643 | )                       |   | $      | -          |   |   | $ | (161 | ) |   | $ | 59,980 |   |
| Comprehensive                income:                                                                                                     |   |                            |      |   |        |   |   |           |   |   |             |   |   |         |   |   |              |   |   |                    |   |   |       |   |   |   |   |   |   |   |   |   |
| Net                income                                                                                                                |   |                            | -         |   |        |   | -      |           |   |   | -                |   |   |         | 804    |   |              |   | -      |                    |   |   | -          |   |   |   | - |   |   |   | 804 |   |
| Net                unrealized loss on securities available for sale                                                                      |   |                            | -         |   |        |   | -      |           |   |   | -                |   |   |         | -      |   |              |   | -      |                    |   |   | -          |   |   |   | (8 | ) |   |   | (8 | ) |
| Total                comprehensive income                                                                                                |   |                            | -         |   |        |   | -      |           |   |   | -                |   |   |         | -      |   |              |   | -      |                    |   |   | -          |   |   |   | - |   |   |   | 796 |   |
| Treasury                stock purchased                                                                                                  |   |                            | (132,360  | )      |        |   | -      |           |   |   | -                |   |   |         | -      |   |              |   | -      |                    |   |   | (1,660     | )      |   |   | - |   |   |   | (1,660 | ) |
| ESOP                shares committed to be released (19,513 shares)                                                                      |   |                            | -         |   |        |   | -      |           |   |   | 65               |   |   |         | -      |   |              |   | 196    |                    |   |   | -          |   |   |   | - |   |   |   | 261 |   |
| Balance                at September 30, 2007                                                                                        |   |                            | 4,745,989 |   |        | $      | 49     |           |   | $      | 47,323           |   |   | $            | 17,281 |   |              | $      | (3,447 | )                       |   | $      | (1,660     | )      |   | $ | (169 | ) |   | $ | 59,377 |   |

----

| **CONSOLIDATED                STATEMENTS OF CASH FLOWS**                                                          |   | **Nine                Months Ended****September                30,** |    |
|------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------|---------|
|                                                                                                                   |   | **2007**                                                             |    |   | **2006** |   |
|                                                                                                                   |   | **(Unaudited)****(Dollars                in thousands)**             |    |
| Cash                flows from operating activities:                                                                   |   |                                                                 |    |   |   |   |
| Net                income (loss)                                                                                       |   | $                                                                    | 804     |   |   | $ | (2,124 | ) |
| Adjustments                to reconcile net income (loss) to net cash provided by operating                activities: |   |                                                                 |    |   |   |   |   |   |
| Provision                for loan losses                                                                               |   |                                                                 | 286     |   |   |   | 82 |   |
| Net                accretion of securities                                                                             |   |                                                                 | (11     | ) |   |   | (13 | ) |
| Amortization                of net deferred loan fees                                                                  |   |                                                                 | (115    | ) |   |   | (93 | ) |
| Depreciation                and amortization of premises and equipment                                                 |   |                                                                 | 463     |   |   |   | 449 |   |
| Amortization                of unearned compensation                                                                   |   |                                                                 | 261     |   |   |   | 88 |   |
| Deferred                income tax benefit                                                                             |   |                                                                 | (124    | ) |   |   | (1,068 | ) |
| Income                on bank-owned life insurance                                                                     |   |                                                                 | (295    | ) |   |   | (56 | ) |
| Net                change in:                                                                                          |   |                                                                 |    |   |   |   |   |   |
| Accrued                interest receivable                                                                             |   |                                                                 | (170    | ) |   |   | (156 | ) |
| Other                assets                                                                                            |   |                                                                 | 318     |   |   |   | 99 |   |
| Accrued                expenses and other liabilities                                                                  |   |                                                                 | (513    | ) |   |   | 864 |   |
| Contribution                to NewportFed Charitable Foundation                                                        |   |                                                                 | -       |   |   |   | 3,614 |   |
| Net                cash provided by operating activities                                                               |   |                                                                 | 904     |   |   |   | 1,686 |   |
|                                                                                                                   |   |                                                                 |    |   |   |   |   |   |
| Cash                flows from investing activities:                                                                   |   |                                                                 |    |   |   |   |   |   |
| Proceeds                from maturities of certificates of deposit                                                     |   |                                                                 | -       |   |   |   | 3,000 |   |
| Reinvested                dividends of securities available for sale                                                   |   |                                                                 | (256    | ) |   |   | (210 | ) |
| Principal                payments received on securities held to maturity                                              |   |                                                                 | 216     |   |   |   | 318 |   |
| Purchase                of bank-owned life insurance                                                                   |   |                                                                 | (3,500  | ) |   |   | - |   |
| Redemption                (purchase) of Federal Home Loan Bank stock                                                   |   |                                                                 | (1,106  | ) |   |   | 571 |   |
| Loan                originations, net of principal payments                                                            |   |                                                                 | (25,748 | ) |   |   | (21,243 | ) |
| Additions                to premises and equipment                                                                     |   |                                                                 | (282    | ) |   |   | (492 | ) |
| Net                cash used by investing activities                                                                   |   |                                                                 | (30,676 | ) |   |   | (18,056 | ) |
|                                                                                                                   |   |                                                                 |    |   |   |   |   |   |
| Cash                flows from financing activities:                                                                   |   |                                                                 |    |   |   |   |   |   |
| Net                increase in deposits                                                                                |   |                                                                 | 2,397   |   |   |   | 6,132 |   |
| Net                decrease in borrowings with maturities of three months or                less                       |   |                                                                 | (1,988  | ) |   |   | (5,000 | ) |
| Proceeds                from borrowings with maturities in excess of three months                                      |   |                                                                 | 34,000  |   |   | ** ** | **-** |   |
| Repayment                of borrowings with maturities in excess of three months                                       |   |                                                                 | (2,736  | ) |   |   | (12,925 | ) |
| Net                proceeds from offering common stock                                                                 |   |                                                                 | -       |   |   |   | 43,597 |   |
| Treasury                stock repurchased                                                                              |   |                                                                 | (1,660  | ) |   | ** ** | **-** |   |
| Stock                purchased for ESOP                                                                                |   |                                                                 | -       |   |   |   | (3,903 | ) |
| Net                cash provided by financing activities                                                               |   |                                                                 | 30,013  |   |   |   | 27,901 |   |
|                                                                                                                   |   |                                                                 |    |   |   |   |   |   |
| Net                change in cash and cash equivalents                                                                 |   |                                                                 | 241     |   |   |   | 11,531 |   |
| Cash                and cash equivalents at beginning of period                                                        |   |                                                                 | 7,272   |   |   |   | 4,914 |   |
| Cash                and cash equivalents at end of period                                                              |   | $                                                                    | 7,513   |   |   | $ | 16,445 |   |
|                                                                                                                   |   |                                                                 |    |   |   |   |   |   |
| Supplementary                information:                                                                              |   |                                                                 |    |   |   |   |   |   |
| Interest                paid on deposit accounts                                                                       |   | $                                                                    | 3,961   |   |   | $ | 2,191 |   |
| Interest                paid on short-term borrowings                                                                  |   |                                                                 | 315     |   |   |   | 374 |   |
| Interest                paid on long-term borrowings                                                                   |   |                                                                 | 1,422   |   |   |   | 1,631 |   |
| Income                taxes paid                                                                                       |   |                                                                 | 779     |   |   |   | 760 |   |

----

**NEWPORT      BANCORP, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

**NOTE      1 – BASIS OF PRESENTATION**

**NOTE      2 – EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS**

*,*

**NOTE      3 – COMMITMENTS**

----

**NOTE      4 – EARNINGS PER SHARE**

**NOTE      5 – STOCK REPURCHASE PLAN**

**NOTE      6 – 2007 EQUITY INCENTIVE PLAN**

----

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

**Forward-Looking      Statements**

**Critical      Accounting Policies**

**Comparison      of Financial Condition at September 30, 2007 and December 31,      2006**

----

**Comparison      of Operating Results for the Three and Nine Months Ended September 30, 2007      and      2006**

***General.  ***

----

***Net      Interest      Income***

***.*  **

|                                                       |   | **Three                Months****Ended                September 30,** |   |
|------------------------------------------------------------|--------|-----------------------------------------------------------------------|--------|
|                                                       |   | **2007**                                                              |   |   | **2006** |   |
|                                                       |   | **(Dollars                in thousands)**                             |   |
| **Interest                and dividend income:**           |   |                                                                  |   |   |   |   |
| Loans                                                      |   | $                                                                     | 4,360  |   |   | $ | 3,933 |   |
| Securities                                                 |   |                                                                  | 107    |   |   |   | 99 |   |
| Other                interest-earning assets               |   |                                                                  | 69     |   |   |   | 213 |   |
| Total                interest and dividend** **income |   |                                                                  | 4,536  |   |   |   | 4,245 |   |
| **Interest                expense:**                       |   |                                                                  |   |   |   |   |   |   |
| Deposits                                                   |   |                                                                  | 1,218  |   |   |   | 969 |   |
| Borrowings                                                 |   |                                                                  | 712    |   |   |   | 429 |   |
| Total                interest expense                      |   |                                                                  | 1,930  |   |   |   | 1,398 |   |
| Net                interest income                         |   | $                                                                     | 2,606  |   |   | $ | 2,847 |   |

----

|                                                       |   | **Nine                Months****Ended                September 30,** |   |
|------------------------------------------------------------|--------|----------------------------------------------------------------------|--------|
|                                                       |   | **2007**                                                             |   |   | **2006** |   |
|                                                       |   | **(Dollars                in thousands)**                            |   |
| **Interest                and dividend income:**           |   |                                                                 |   |   |   |   |
| Loans                                                      |   | $                                                                    | 12,641 |   |   | $ | 11,277 |   |
| Securities                                                 |   |                                                                 | 316    |   |   |   | 281 |   |
| Other                interest-earning assets               |   |                                                                 | 167    |   |   |   | 351 |   |
| Total                interest and dividend** **income |   |                                                                 | 13,124 |   |   |   | 11,909 |   |
| **Interest                expense:**                       |   |                                                                 |   |   |   |   |   |   |
| Deposits                                                   |   |                                                                 | 3,639  |   |   |   | 2,766 |   |
| Borrowings                                                 |   |                                                                 | 1,852  |   |   |   | 1,931 |   |
| Total                interest expense                      |   |                                                                 | 5,491  |   |   |   | 4,697 |   |
| Net                interest income                         |   | $                                                                    | 7,633  |   |   | $ | 7,212 |   |

----

|                                                                                                  |   | **Three                Months Ended September 30,** |    |
|-------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|---------|
|                                                                                                  |   | **2007**                                            |    |   | **2006** |   |
|                                                                                                  |   | **Average****Balance**                              |    |   | **Interest****and                Dividends** |   |   | **Yield/****Cost** |   |   | **Average****Balance** |   |   | **Interest****and                Dividends** |   |   | **Yield/****Cost** |   |
|                                                                                                  |   | **(Dollars                in thousands)**           |    |
| **Assets:**                                                                                           |   |                                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning                assets:                                                               |   |                                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                                                                                                 |   | $                                                   | 275,181 |   |   | $ | 4,360 |   |   |   | 6.34 | % |   | $ | 254,003 |   |   | $ | 3,933 |   |   |   | 6.19 | % |
| Securities                                                                                            |   |                                                | 8,538   |   |   |   | 107 |   |   |   | 5.01 |   |   |   | 8,502 |   |   |   | 99 |   |   |   | 4.66 |   |
| Other                interest-earning assets                                                          |   |                                                | 6,137   |   |   |   | 69 |   |   |   | 4.50 |   |   |   | 16,272 |   |   |   | 213 |   |   |   | 5.24 |   |
| Total                interest-earning assets                                                          |   |                                                | 289,856 |   |   |   | 4,536 |   |   |   | 6.26 |   |   |   | 278,777 |   |   |   | 4,245 |   |   |   | 6.09 |   |
|                                                                                                  |   |                                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank-owned                life insurance                                                              |   |                                                | 9,110   |   |   |   |   |   |   |   |   |   |   |   | 1,851 |   |   |   |   |   |   |   |   |   |
| Non-interest-earnings                assets                                                           |   |                                                | 15,624  |   |   |   |   |   |   |   |   |   |   |   | 12,859 |   |   |   |   |   |   |   |   |   |
| Total                assets                                                                           |   | $                                                   | 314,590 |   |   |   |   |   |   |   |   |   |   | $ | 293,487 |   |   |   |   |   |   |   |   |   |
|                                                                                                  |   |                                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Liabilities                and equity:**                                                            |   |                                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                liabilities:                                                          |   |                                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                demand deposits                                                       |   | $                                                   | 25,745  |   |   |   | 19 |   |   |   | 0.30 |   |   | $ | 26,569 |   |   |   | 15 |   |   |   | 0.23 |   |
| Savings                accounts                                                                       |   |                                                | 29,083  |   |   |   | 24 |   |   |   | 0.33 |   |   |   | 33,009 |   |   |   | 27 |   |   |   | 0.33 |   |
| Money                market accounts                                                                  |   |                                                | 24,243  |   |   |   | 261 |   |   |   | 4.31 |   |   |   | 26,948 |   |   |   | 179 |   |   |   | 2.66 |   |
| Certificates                of deposit                                                                |   |                                                | 82,107  |   |   |   | 914 |   |   |   | 4.45 |   |   |   | 77,681 |   |   |   | 748 |   |   |   | 3.85 |   |
| Total                interest-bearing deposits                                                        |   |                                                | 161,178 |   |   |   | 1,218 |   |   |   | 3.02 |   |   |   | 164,207 |   |   |   | 969 |   |   |   | 2.36 |   |
|                                                                                                  |   |                                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Borrowings                                                                                            |   |                                                | 55,680  |   |   |   | 712 |   |   |   | 5.11 |   |   |   | 33,853 |   |   |   | 429 |   |   |   | 5.07 |   |
| Total                interest-bearing liabilities                                                     |   |                                                | 216,858 |   |   |   | 1,930 |   |   |   | 3.56 |   |   |   | 198,060 |   |   |   | 1,398 |   |   |   | 2.82 |   |
|                                                                                                  |   |                                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand                deposits                                                                        |   |                                                | 34,851  |   |   |   |   |   |   |   |   |   |   |   | 37,755 |   |   |   |   |   |   |   |   |   |
| Non-interest-bearing                liabilities                                                       |   |                                                | 1,961   |   |   |   |   |   |   |   |   |   |   |   | 1,117 |   |   |   |   |   |   |   |   |   |
| Total                liabilities                                                                      |   |                                                | 253,670 |   |   |   |   |   |   |   |   |   |   |   | 236,932 |   |   |   |   |   |   |   |   |   |
|                                                                                                  |   |                                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stockholders’                equity                                                             |   |                                                | 60,920  |   |   |   |   |   |   |   |   |   |   |   | 56,555 |   |   |   |   |   |   |   |   |   |
| Total                liabilities and stockholders’ equity                                       |   | $                                                   | 314,590 |   |   |   |   |   |   |   |   |   |   | $ | 293,487 |   |   |   |   |   |   |   |   |   |
|                                                                                                  |   |                                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                interest income                                                                    |   |                                                |    |   |   | $ | 2,606 |   |   |   |   |   |   |   |   |   |   | $ | 2,847 |   |   |   |   |   |
| Interest                rate spread                                                                   |   |                                                |    |   |   |   |   |   |   |   | 2.70 | % |   |   |   |   |   |   |   |   |   |   | 3.27 | % |
| Net                interest margin                                                                    |   |                                                |    |   |   |   |   |   |   |   | 3.60 | % |   |   |   |   |   |   |   |   |   |   | 4.08 | % |
| Average                interest-earning assets to average                interest-bearing liabilities |   |                                                |    |   |   |   |   |   |   |   | 133.66 | % |   |   |   |   |   |   |   |   |   |   | 140.75 | % |

----

|                                                                                                  |   | **Nine                Months Ended September 30,** |    |
|-------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|---------|
|                                                                                                  |   | **2007**                                           |    |   | **2006** |   |
|                                                                                                  |   | **Average****Balance**                             |    |   | **Interest****and                Dividends** |   |   | **Yield/****Cost** |   |   | **Average****Balance** |   |   | **Interest****and                Dividends** |   |   | **Yield/****Cost** |   |
|                                                                                                  |   | **(Dollars                in thousands)**          |    |
| **Assets:**                                                                                           |   |                                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning                assets:                                                               |   |                                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                                                                                                 |   | $                                                  | 267,646 |   |   | $ | 12,641 |   |   |   | 6.30 | % |   | $ | 245,840 |   |   | $ | 11,277 |   |   |   | 6.12 | % |
| Securities                                                                                            |   |                                               | 8,534   |   |   |   | 316 |   |   |   | 4.94 |   |   |   | 8,551 |   |   |   | 281 |   |   |   | 4.38 |   |
| Other                interest-earning assets                                                          |   |                                               | 6,380   |   |   |   | 167 |   |   |   | 3.49 |   |   |   | 13,089 |   |   |   | 351 |   |   |   | 3.58 |   |
| Total                interest-earning assets                                                          |   |                                               | 282,560 |   |   |   | 13,124 |   |   |   | 6.19 |   |   |   | 267,480 |   |   |   | 11,909 |   |   |   | 5.94 |   |
|                                                                                                  |   |                                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank-owned                life insurance                                                              |   |                                               | 8,962   |   |   |   |   |   |   |   |   |   |   |   | 1,830 |   |   |   |   |   |   |   |   |   |
| Non-interest-earnings                assets                                                           |   |                                               | 14,037  |   |   |   |   |   |   |   |   |   |   |   | 11,074 |   |   |   |   |   |   |   |   |   |
| Total                assets                                                                           |   | $                                                  | 305,559 |   |   |   |   |   |   |   |   |   |   | $ | 280,384 |   |   |   |   |   |   |   |   |   |
|                                                                                                  |   |                                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Liabilities                and equity:**                                                            |   |                                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                liabilities:                                                          |   |                                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                demand deposits                                                       |   | $                                                  | 26,008  |   |   |   | 56 |   |   |   | 0.29 |   |   | $ | 26,625 |   |   |   | 41 |   |   |   | 0.21 |   |
| Savings                accounts                                                                       |   |                                               | 29,837  |   |   |   | 72 |   |   |   | 0.32 |   |   |   | 34,682 |   |   |   | 84 |   |   |   | 0.32 |   |
| Money                market accounts                                                                  |   |                                               | 21,632  |   |   |   | 612 |   |   |   | 3.77 |   |   |   | 24,019 |   |   |   | 465 |   |   |   | 2.58 |   |
| Certificates                of deposit                                                                |   |                                               | 84,899  |   |   |   | 2,899 |   |   |   | 4.55 |   |   |   | 76,971 |   |   |   | 2,176 |   |   |   | 3.77 |   |
| Total                interest-bearing deposits                                                        |   |                                               | 162,376 |   |   |   | 3,639 |   |   |   | 2.99 |   |   |   | 162,297 |   |   |   | 2,766 |   |   |   | 2.27 |   |
|                                                                                                  |   |                                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Borrowings                                                                                            |   |                                               | 48,198  |   |   |   | 1,852 |   |   |   | 5.12 |   |   |   | 49,081 |   |   |   | 1,931 |   |   |   | 5.25 |   |
| Total                interest-bearing liabilities                                                     |   |                                               | 210,574 |   |   |   | 5,491 |   |   |   | 3.48 |   |   |   | 211,378 |   |   |   | 4,697 |   |   |   | 2.96 |   |
|                                                                                                  |   |                                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand                deposits                                                                        |   |                                               | 32,229  |   |   |   |   |   |   |   |   |   |   |   | 36,546 |   |   |   |   |   |   |   |   |   |
| Non-interest-bearing                liabilities                                                       |   |                                               | 2,085   |   |   |   |   |   |   |   |   |   |   |   | 1,314 |   |   |   |   |   |   |   |   |   |
| Total                liabilities                                                                      |   |                                               | 244,888 |   |   |   |   |   |   |   |   |   |   |   | 249,238 |   |   |   |   |   |   |   |   |   |
|                                                                                                  |   |                                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stockholders’                equity                                                             |   |                                               | 60,671  |   |   |   |   |   |   |   |   |   |   |   | 31,146 |   |   |   |   |   |   |   |   |   |
| Total                liabilities and stockholder’s equity                                       |   | $                                                  | 305,559 |   |   |   |   |   |   |   |   |   |   | $ | 280,384 |   |   |   |   |   |   |   |   |   |
|                                                                                                  |   |                                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                interest income                                                                    |   |                                               |    |   |   | $ | 7,633 |   |   |   |   |   |   |   |   |   |   | $ | 7,212 |   |   |   |   |   |
| Interest                rate spread                                                                   |   |                                               |    |   |   |   |   |   |   |   | 2.72 | % |   |   |   |   |   |   |   |   |   |   | 2.97 | % |
| Net                interest margin                                                                    |   |                                               |    |   |   |   |   |   |   |   | 3.60 | % |   |   |   |   |   |   |   |   |   |   | 3.60 | % |
| Average                interest-earning assets to average interest-bearing                liabilities |   |                                               |    |   |   |   |   |   |   |   | 134.19 | % |   |   |   |   |   |   |   |   |   |   | 126.54 | % |

----

***Rate/Volume      Analysis***

**. **

|                                                |   | **For                  the Three Months Ended**                      |   |
|-----------------------------------------------------|--------|----------------------------------------------------------------------|--------|
|                                                |   | **September                  30, 2007 Compared to the Three Months** |   |
|                                                |   | **Ended                  September 30, 2006**                        |   |
|                                                |   | **Increase                  (Decrease**)                             |   |
|                                                |   | **Due                  to**                                          |   |
|                                                |   | **(Dollars                  in thousands)**                          |   |
|                                                |   |                                                                 |   |   |   |   |   |   |   |
| Interest                  Income:                   |   | Volume                                                               |   |   | Rate |   |   | Net |   |
| Loans                                               |   | $                                                                    | 334    |   |   | $ | 93 |   |   | $ | 427 |   |
| Securities                                          |   |                                                                 | -      |   |   |   | 8 |   |   |   | 8 |   |
| Other                  interest-earning assets      |   |                                                                 | (117   | ) |   |   | (27 | ) |   |   | (144 | ) |
| Total                  interest-earning assets      |   |                                                                 | 217    |   |   |   | 74 |   |   |   | 291 |   |
|                                                |   |                                                                 |   |   |   |   |   |   |   |   |   |   |
| Interest                  Expense:                  |   |                                                                 |   |   |   |   |   |   |   |   |   |   |
| Deposits                                            |   |                                                                 | 18     |   |   |   | (267 | ) |   |   | (249 | ) |
| Borrowings                                          |   |                                                                 | (279   | ) |   |   | (4 | ) |   |   | (283 | ) |
| Total                  interest-bearing liabilities |   |                                                                 | (261   | ) |   |   | (271 | ) |   |   | (532 | ) |
| Net                  change in interest income      |   | $                                                                    | (44    | ) |   | $ | (197 | ) |   | $ | (241 | ) |

|                                                |   | **For                  the Nine Months Ended**                                          |   |
|-----------------------------------------------------|--------|-----------------------------------------------------------------------------------------|--------|
|                                                |   | **September                  30, 2007 Compared to the****Nine                  Months** |   |
|                                                |   | **Ended                  September 30, 2006**                                           |   |
|                                                |   | **Increase                  (Decrease**)                                                |   |
|                                                |   | **Due                  to**                                                             |   |
|                                                |   | **(Dollars                  in thousands)**                                             |   |
|                                                |   |                                                                                    |   |   |   |   |   |   |   |
| Interest                  Income:                   |   | Volume                                                                                  |   |   | Rate |   |   | Net |   |
| Loans                                               |   | $                                                                                       | 1,022  |   |   | $ | 342 |   |   | $ | 1,364 |   |
| Securities                                          |   |                                                                                    | (1     | ) |   |   | 36 |   |   |   | 35 |   |
| Other                  interest-earning assets      |   |                                                                                    | (176   | ) |   |   | (8 | ) |   |   | (184 | ) |
| Total                  interest-earning assets      |   |                                                                                    | 845    |   |   |   | 370 |   |   |   | 1,215 |   |
|                                                |   |                                                                                    |   |   |   |   |   |   |   |   |   |   |
| Interest                  Expense:                  |   |                                                                                    |   |   |   |   |   |   |   |   |   |   |
| Deposits                                            |   |                                                                                    | (1     | ) |   |   | (872 | ) |   |   | (873 | ) |
| Borrowings                                          |   |                                                                                    | 34     |   |   |   | 45 |   |   |   | 79 |   |
| Total                  interest-bearing liabilities |   |                                                                                    | 33     |   |   |   | (827 | ) |   |   | (794 | ) |
| Net                  change in interest income      |   | $                                                                                       | 878    |   |   | $ | (457 | ) |   | $ | 421 |   |

----

***Provision      for      Loan Losses***

**.**

|                                          |   | **Three                Months****Ended                September 30,** |    |   | **Nine                Months****Ended                September 30,** |   |
|-----------------------------------------------|--------|-----------------------------------------------------------------------|---------|--------|----------------------------------------------------------------------|--------|
|                                          |   | **2007**                                                              |    |   | **2006**                                                             |   |   | **2007** |   |   | **2006** |   |
|                                          |   | **(Dollars                in thousands)**                             |    |
|                                          |   |                                                                  |    |   |                                                                 |   |   |   |   |   |   |   |
| Balance                at beginning of period |   | $                                                                     | 2,133   |   |                                                                 | $      | 1,885 |   |   | $ | 1,973 |   |   | $ | 1,853 |   |
| Provision                for loan losses      |   |                                                                  | 126     |   |                                                                 |   | 50 |   |   |   | 286 |   |   |   | 82 |   |
| Total                charge-offs              |   |                                                                  | – |   |                                                                 |   | – |   |   |   | – |   |   |   | – |   |
| Total                recoveries               |   |                                                                  | – |   |                                                                 |   | – |   |   |   | – |   |   |   | – |   |
| Balance                at end of period       |   | $                                                                     | 2,259   |   |                                                                 | $      | 1,935 |   |   | $ | 2,259 |   |   | $ | 1,935 |   |

|                                                       |   | **At                September 30,**       |   |   | **At                December31,** |   |
|------------------------------------------------------------|--------|-------------------------------------------|--------|--------|-----------------------------------|--------|
|                                                       |   | **2007**                                  |   |   | **2006**                          |   |
|                                                       |   | **(Dollars                in thousands)** |   |
|                                                       |   |                                      |   |   |                              |   |
| Nonaccrual                loans:                           |   |                                      |   |   |                              |   |
| Commercial                mortgage                         |   | $                                         | 283    |   |                              | $      | – |   |
| Construction                loan                           |   |                                      | 625    |   |                              |   | – |   |
| Total                nonperforming assets                  |   | $                                         | 908    |   |                              | $      | – |   |
| Total                non-performing loans to total loans   |   |                                      | 0.32   | %      |                              |   | – | % |
| Total                non-performing loans to total assets  |   |                                      | 0.28   |   |                              |   | – |   |
| Total                non-performing assets to total assets |   |                                      | 0.28   |   |                              |   | – |   |

----

***Other      Income***

**.**

** **

|                                     |   | **Three                Months Ended****September 30,** |   |   |     |   |   | **Nine                Months Ended****September 30,** |   |   |     |   |
|------------------------------------------|--------|-------------------------------------------------------------|--------|--------|----------|--------|--------|------------------------------------------------------------|--------|--------|----------|--------|
|                                     |   | **2007**                                                    |   |   | **2006** |   |   | **%                Change**                                |   |   | **2007** |   |   | **2006** |   |   | **%                Change** |   |
|                                     |   | **(Dollars                in thousands)**                   |   |
| Customer                service fees     |   | $                                                           | 461    |   |     | $      | 445    |                                                       |   |   | 3.6      | %      |   | $ | 1,376 |   |   | $ | 1,121 |   |   |   | 22.7 | % |
| Gain                on sales of loans    |   |                                                        | -      |   |     |   | -      |                                                       |   |   | -        |   |   |   | - |   |   |   | 14 |   |   |   | (100.0 | ) |
| FHLB                prepayment penalties |   |                                                        | -      |   |     |   | (367   | )                                                          |   |   | 100.0    |   |   |   | - |   |   |   | (367 | ) |   |   | 100.0 |   |
| Bank-owned                life insurance |   |                                                        | 97     |   |     |   | 19     |                                                       |   |   | 410.5    |   |   |   | 288 |   |   |   | 57 |   |   |   | 405.3 |   |
| Miscellaneous                            |   |                                                        | 26     |   |     |   | 28     |                                                       |   |   | (7.1     | )      |   |   | 73 |   |   |   | 95 |   |   |   | (23.2 | ) |
| Total                                    |   | $                                                           | 584    |   |     | $      | 125    |                                                       |   |   | 367.2    | %      |   | $ | 1,737 |   |   | $ | 920 |   |   |   | 88.8 | % |

***Operating      Expense***

**.**

|                                                                       |   | **Three                Months Ended****September 30,** |   |   |     |   |   | **Nine                Months Ended****September 30,** |   |   |     |   |
|----------------------------------------------------------------------------|--------|-------------------------------------------------------------|--------|--------|----------|--------|--------|------------------------------------------------------------|--------|--------|----------|--------|
|                                                                       |   | **2007**                                                    |   |   | **2006** |   |   | **%                Change**                                |   |   | **2007** |   |   | **2006** |   |   | **%                Change** |   |
|                                                                       |   | **(Dollars                in thousands)**                   |   |
| Salaries                and employee benefits                              |   | $                                                           | 1,414  |   |     | $      | 1,387  |                                                       |   |   | 1.9      | %      |   | $ | 4,236 |   |   | $ | 3,976 |   |   |   | 6.5 | % |
| Occupancy                and equipment, net                                |   |                                                        | 323    |   |     |   | 305    |                                                       |   |   | 5.9      |   |   |   | 948 |   |   |   | 920 |   |   |   | 3.0 |   |
| Data                processing                                             |   |                                                        | 255    |   |     |   | 278    |                                                       |   |   | (8.3     | )      |   |   | 762 |   |   |   | 771 |   |   |   | (1.2 | ) |
| Professional                fees                                           |   |                                                        | 143    |   |     |   | 118    |                                                       |   |   | 21.2     |   |   |   | 408 |   |   |   | 294 |   |   |   | 38.8 |   |
| Marketing                                                                  |   |                                                        | 321    |   |     |   | 241    |                                                       |   |   | 33.2     |   |   |   | 862 |   |   |   | 716 |   |   |   | 20.4 |   |
| Contribution                to NewportFed  Charitable Foundation |   |                                                        | -      |   |     |   | 3,614  |                                                       |   |   | (100.0   | )      |   |   | - |   |   |   | 3,614 |   |   |   | (100.0 | ) |
| Other                                                                      |   |                                                        | 171    |   |     |   | 180    |                                                       |   |   | (5.0     | )      |   |   | 522 |   |   |   | 612 |   |   |   | (14.7 | ) |
| Total                                                                      |   | $                                                           | 2,627  |   |     | $      | 6,123  |                                                       |   |   | (57.1    | )%     |   | $ | 7,738 |   |   | $ | 10,903 |   |   |   | (29.0 | )% |

***Income      Taxes***

**.  **

----

***Liquidity      Management***

**.**

***Capital      Management.***

----

***Off-Balance      Sheet Arrangements***

**.**

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

**Qualitative      Aspects of Market Risk.  **

**Quantitative      Aspects of Market Risk.   **

----

|                                                                              |   | Net                Portfolio Value(Dollars                in thousands) |   | Net                Portfolio Value as % of Portfolio                Value of Assets |
|-----------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------|
|  Basis                Point (“bp”)Change                in Rates |   | Amount                                                                  |   | Change                                                                              |   | %                Change |   | NPV                Ratio |   | Change                (bp) |
|                                                                              |   |                                                                    |   |                                                                                |   |   |   |   |   |   |
| 300                                                                               |   | 28,084                                                                  |   | -18,392                                                                             |   | -40 |   |  9.52% |   | -513 |
| 200                                                                               |   | 34,198                                                                  |   | -12,278                                                                             |   | -26 |   | 11.32% |   | -334 |
| 100                                                                               |   | 40,362                                                                  |   |                  -6,115                                                        |   | -13 |   | 13.04% |   | -162 |
| 0                                                                                 |   | 46,477                                                                  |   |  -                                                                             |   |   - |   | 14.66% |   | - |
| (100)                                                                             |   | 51,771                                                                  |   |                   5,295                                                   |   | +11 |   | 15.98% |   | +133  |
| (200)                                                                             |   | 55,281                                                                  |   |                   8,804                                                   |   | +19  |   | 16.80% |   | +214  |

| **Item                4.** | **Controls                and Procedures** |
|----------------------------|--------------------------------------------|

| **PART                II.** | **OTHER                INFORMATION** |
|-----------------------------|--------------------------------------|

| **Item                1.** | **Legal                Proceedings** |
|----------------------------|--------------------------------------|

----

| **Item                1A.** | **Risk                Factors** |
|-----------------------------|---------------------------------|

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

|   | a) | Not                applicable |
|--------|----|-------------------------------|

|   | b) | Not                applicable |
|--------|----|-------------------------------|

|   | c) | The                following table presents a summary of the Company’s share repurchases                during the quarter ended September 30,                2007. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Period                        |   | Total                number of shares purchased |   | Average                price paid per share                  |   | Total                number of shares purchased as part of publicly announced program                (1) |   | Maximum                number of shares that may yet be purchased under the program                (1) |
|-------------------------------|--------|-------------------------------------------------|--------|--------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------|
| July                2007      |   | -                                               |   | $                    -    |   | -                                                                                                        |   | 243,917                                                                                                |
| August                2007    |   |                  22,900                    |   |                   12.08                            |   |                  22,900                                                                             |   | 221,017                                                                                                |
| September                2007 |   | 109,460                                         |   |                   12.37                            |   | 109,460                                                                                                  |   | 111,557                                                                                                |
| Total                         |   | 132,360                                         |   | $                12.25                                       |   | 132,360                                                                                                  |   |                                                                                                   |

| (1) | On                July 16, 2007, Newport Bancorp, Inc. announced that it is commencing                a                stock repurchase program to acquire up to 243,917 shares, or 5%,                of the                Company’s outstanding common stock.  Repurchases, which will be                conducted through open market purchases or privately negotiated                transactions, will be made from time to time depending on market                conditions and other                factors.   |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

|                             | FOR       |   | WITHHELD |
|----------------------------------|-----------|--------|----------|
| John                N. Conti     | 4,575,840 |   | 84,700   |
| William                R. Harvey | 4,592,968 |   | 67,572   |
| Kevin                M. McCarthy | 4,593,266 |   | 67,274   |
| Alicia                S. Quirk   | 4,592,968 |   | 67,572   |
| Robert                S. Lazar   | 4,586,073 |   | 74,467   |

|                            | 2007                Equity Incentive Plan |   | Ratification                of Wolf & Co., Inc.                 |
|---------------------------------|-------------------------------------------|--------|---------------------------------------------------------------------|
| For                             | 2,771,835                                 |   | 4,610,275                                                           |
| Against                         |                   387,981       |   |                     27,610                      |
| Abstentions                     |                  157,686             |   |                     22,655                      |
| Broker                Non-Votes | 1,343,038                                 |   |                         N/A |

----

| **Item                5.** | **Other                Information** |
|----------------------------|--------------------------------------|

| **Item                6.** | **Exhibits** |
|----------------------------|--------------|

|   | 31.1 | Rule                13a-14(a)/15d-14(c) Certification of Chief Executive                Officer |
|--------|------|-------------------------------------------------------------------------------------------------|

|   | 31.2 | Rule                13a-14(a)/15d-14(c) Certification of Chief Financial                Officer |
|--------|------|-------------------------------------------------------------------------------------------------|

|   | 32.0 | Section                1350 Certifications |
|--------|------|--------------------------------------------|

----

**Signatures**

|                                              | Newport                Bancorp, Inc. |
|---------------------------------------------------|--------------------------------------|
|                                              |                                 |   |
|                                              |                                 |   |
|                                              |                                 |   |
| Date:  November                14, 2007 | By:                                  | /s/              Kevin              M. McCarthy  |
|                                              |                                 | Kevin                M. McCarthy |
|                                              |                                 | President                and Chief Executive Officer |
|                                              |                                 |   |
|                                              |                                 |   |
|                                              |                                 |   |
| Date:  November                14, 2007 | By:                                  | /s/              Bruce              A. Walsh  |
|                                              |                                 | Bruce                A. Walsh |
|                                              |                                 | Senior                Vice President and Chief Financial                Officer |

----