EX-99 3 connecticut8kexh99.txt 1 CONNECTICUT BANCSHARES, INC. REPORTS 26% INCREASE IN NET INCOME FOR THE THIRD QUARTER AND DECLARES QUARTERLY DIVIDEND OF $0.18 PER SHARE MANCHESTER, Conn. - October 27, 2003 - Connecticut Bancshares, Inc. (the "Company") (NASDAQ: SBMC), the holding company for The Savings Bank of Manchester (the "Bank"), reported net income of $8.51 million for the third quarter of 2003, compared to net income of $6.74 million for the third quarter of 2002, representing a 26.26% increase. Earnings per diluted share for the quarter ended September 30, 2003 were $0.79 based on 10.75 million weighted average shares outstanding, compared to earnings per diluted share for the quarter ended September 30, 2002 of $0.62 based on 10.81 million weighted average shares outstanding. Net income for the nine months ended September 30, 2003 was $23.33 million, as compared to net income of $18.43 million for the nine months ended September 30, 2002, representing a 26.59% increase. Earnings per diluted share for the nine months ended September 30, 2003 were $2.16 based on 10.79 million weighted average shares outstanding, compared to earnings per diluted share for the nine months ended September 30, 2002 of $1.71 based on 10.80 million weighted average shares outstanding. The Company also declared a quarterly cash dividend of $0.18 per share on the outstanding shares of its common stock. The dividend will be paid on or about November 24, 2003 to stockholders of record as of the close of business on November 10, 2003. On July 16, 2003, the Company announced it entered into an Agreement and Plan of Merger with The New Haven Savings Bank ("NHSB"). The Company's stockholders will receive $52.00 in cash in exchange for each share of the Company's common stock held. If the transaction closes after March 31, 2004, the merger price is subject to increase based on the Company's earnings less dividends paid from that date to the end of the month preceding the closing date of the merger. As a condition precedent to the merger, NHSB will convert from a Connecticut-chartered mutual savings bank to a Connecticut-chartered stock savings bank and simultaneously form a holding company. Net interest income for the third quarter of 2003 was $19.75 million, a $612,000, or 3.00%, decrease from $20.36 million for the third quarter of 2002. Average interest-earning assets were $2.43 billion for the quarter ended September 30, 2003 compared to $2.33 billion for the prior year quarter. The Company's net interest margin was 3.30% for the quarter ended September 30, 2003 compared to 3.55% for the quarter ended September 30, 2002. The decrease in net interest income from the prior year quarter was primarily due to lower yields on loans and investments partially offset by a lower cost of funds on interest-bearing liabilities and a higher volume of loans. The yield on interest-earning assets declined from 6.06% for the quarter ended September 30, 2002 to 5.22% for the quarter ended September 30, 2003. Loan yields declined from 6.64% for the quarter ended September 30, 2002 to 5.78% for the quarter ended September 30, 2003. Investment yields declined from 4.95% for the quarter ended September 30, 2002 to 3.94% for the quarter ended September 30, 2003. The reductions in yield were primarily due to a lower interest rate environment. The cost of funds decreased from 2.83% for the quarter ended September 30, 2002 to 2.17% for the quarter ended September 30, 2003. The reduction was primarily due to a lower interest rate environment. Average gross loans increased $160.22 million, or 10.50%, from $1.53 billion for the quarter ended September 30, 2002 to $1.69 billion for the quarter ended September 30, 2003. The increase in average gross loans was primarily in residential and commercial real estate loans. 2 Noninterest income for the third quarter of 2003 was $9.22 million, a $4.46 million, or 93.70%, increase from $4.76 million for the third quarter of 2002. The increase in noninterest income over the prior year quarter was primarily due to an increase in gains on sales of securities, an increase in service charges and fees and a decrease in charges for other than temporary impairment of investment securities. Gains on sales of securities increased $3.33 million from the prior year quarter as the Company sold $13.64 million of common and preferred stock, realizing a $3.95 million gain during the 2003 quarter. At September 30, 2003, the Company had $1.00 million (fair value) of preferred stock and no common stock remaining in its portfolio. Service charges and fees increased $854,000 as compared to the prior year quarter primarily due to increases in checking account and commercial real estate loan prepayment fees. During the third quarter of 2003 there were no charges recorded for other than temporary impairment, while in the prior year quarter a charge for other than temporary impairment totaling $410,000 was recorded for two equity securities. Noninterest expense for the third quarter of 2003 was $15.86 million, a $1.18 million, or 8.04%, increase from $14.68 million for the third quarter of 2002. The increase in noninterest expense from the prior year quarter was primarily due to merger expenses and an increase in employee benefits partially offset by decreases in amortization of other intangible assets and salaries. The Company incurred $1.24 million in expenses, primarily professional fees, relating to the merger with NHSB in the quarter ended September 30, 2003. Employee benefits increased primarily due to increased restricted stock, pension and ESOP expenses. In conjunction with the 2001 acquisition of First Federal Savings and Loan Association of East Hartford ("First Federal"), the Bank recorded an intangible asset for noncompete agreements with former First Federal executives. The agreements were amortized over their twelve-month term through the third quarter of 2002. Salary expense decreased primarily due to higher cost deferrals relating to the origination of residential mortgages. Net interest income for the nine months ended September 30, 2003 was $61.13 million, a $1.59 million, or 2.67%, increase from $59.54 million for the nine months ended September 30, 2002. Average interest-earning assets were $2.41 billion for the nine months ended September 30, 2003 compared to $2.32 billion for the prior year period. The Company's net interest margin was 3.41% for the nine months ended September 30, 2003 compared to 3.45% for the nine months ended September 30, 2002. The increase in net interest income from the prior year period was primarily due to a lower cost of funds on interest-bearing liabilities and a higher volume of loans partially offset by lower yields on loans and investments. The cost of funds decreased from 2.97% for the nine months ended September 30, 2002 to 2.29% for the nine months ended September 30, 2003. The reduction was primarily due to a lower interest rate environment. Average gross loans increased $145.85 million, or 9.76%, from $1.49 billion for the nine months ended September 30, 2002 to $1.64 billion for the nine months ended September 30, 2003. The increase in average gross loans was primarily in residential and commercial real estate loans. The yield on interest-earning assets declined from 6.10% for the nine months ended September 30, 2002 to 5.44% for the nine months ended September 30, 2003. Loan yields declined from 6.75% for the nine months ended September 30, 2002 to 6.01% for the nine months ended September 30, 2003. Investment yields declined from 4.93% for the nine months ended September 30, 2002 to 4.23% for the nine months ended September 30, 2003. The reductions in yield were primarily due to a lower interest rate environment. 3 Noninterest income for the first nine months of 2003 was $19.98 million, a $6.01 million, or 43.02%, increase from $13.97 million for the first nine months of 2002. The increase in noninterest income over the prior year was primarily due to an increase in gains on sales of securities and an increase in service charges and fees. Gains on sales of securities increased $3.79 million from the prior year as the Company sold $13.64 million of common and preferred stock, realizing a $3.95 million gain during the third quarter of 2003. Service charges and fees increased $2.21 million as compared to the prior year primarily due to increases in checking account, commercial real estate loan prepayment and merchant services fees. Noninterest expense for the first nine months of 2003 was $45.21 million, a $166,000, or 0.38%, increase from $45.05 million for the first nine months of 2002. The increase in noninterest expense from the prior year period was primarily due to merger expenses and an increase in employee benefits, partially offset by decreases in amortization of other intangible assets, fees and services, salaries, furniture and equipment and marketing expenses. The Company incurred $1.72 million in expenses, primarily professional fees, relating to the merger with NHSB in the nine months ended September 30, 2003. Employee benefits increased primarily due to increased restricted stock, pension and ESOP expenses. In conjunction with the 2001 acquisition of First Federal, the Bank recorded an intangible asset for noncompete agreements with former First Federal executives. The agreements were amortized over their twelve-month term through the third quarter of 2002. Fees and services decreased primarily due to lower consulting fees for information technology and investments. Salary expense decreased primarily due to higher cost deferrals relating to the origination of residential mortgages. Furniture and equipment expenses decreased as certain assets became fully depreciated. Marketing expenses decreased as the Bank reduced its expense related to various media advertising. The Company did not repurchase any shares of its common stock during the third quarter of 2003, and has repurchased a total of 558,641 shares of its common stock since it's initial public offering on March 2, 2000 at a weighted average price of $38.92 per share. Established in 1905, The Savings Bank of Manchester is one of Connecticut's oldest and largest banks. The Bank is headquartered in Manchester, Connecticut, with 28 branch offices serving 22 communities throughout central and eastern Connecticut. Statements contained in this news release, which are not historical facts, are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, factors discussed in documents filed by the Company with the Securities and Exchange Commission from time to time. Subject to applicable laws and regulations, the Company does not undertake - and specifically disclaims any obligation - to publicly release the results of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. Contact: Connecticut Bancshares, Inc. Michael J. Hartl Senior Vice President and Chief Financial Officer (860) 646-1700 4

CONNECTICUT BANCSHARES INC/DE 8-K