1 EXHIBIT 99.1 CONNECTICUT BANCSHARES, INC. REPORTS 32% INCREASE IN NET INCOME FOR THE FIRST QUARTER AND DECLARES QUARTERLY DIVIDEND OF $0.18 PER SHARE MANCHESTER, Conn. - April 22, 2003 - Connecticut Bancshares, Inc. (the "Company") (NASDAQ: SBMC), the holding company for The Savings Bank of Manchester (the "Bank"), reported net income of $7.34 million for the first quarter of 2003, compared to net income of $5.57 million for the first quarter of 2002, representing a 31.78% increase. Earnings per diluted share for the quarter ended March 31, 2003 were $0.68 based on 10.86 million weighted average shares outstanding, compared to earnings per diluted share for the quarter ended March 31, 2002 of $0.52 based on 10.74 million weighted average shares outstanding. Additionally, the Company 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 May 27, 2003 to stockholders of record as of the close of business on May 12, 2003. Company President and CEO, Richard P. Meduski, stated, "We are reporting another strong quarter of earnings. Our earnings have increased significantly from last year and our loan growth has been strong. Our nonperforming assets continue to decline. The Bank continues its strategic focus on customer service and leading edge technology." Net interest income for the first quarter of 2003 was $20.87 million, a $1.95 million, or 10.31%, increase from $18.92 million for the first quarter of 2002. Average interest-earning assets were $2.39 billion for the quarter ended March 31, 2003 compared to $2.32 billion for the prior year period. The Company's net interest margin was 3.51% for the quarter ended March 31, 2003 compared to 3.28% for the quarter ended March 31, 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 3.14% for the quarter ended March 31, 2002 to 2.44% for the quarter ended March 31, 2003. The reduction was primarily due to a lower interest rate environment. Average gross loans increased $134.95 million or 9.25% from $1.46 billion for the quarter ended March 31, 2002 to $1.59 billion for the quarter ended March 31, 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 quarter ended March 31, 2002 to 5.68% for the quarter ended March 31, 2003. Loan yields declined from 6.85% for the quarter ended March 31, 2002 to 6.23% for the quarter ended March 31, 2003. Investment yields declined from 4.82% for the quarter ended March 31, 2002 to 4.58% for the quarter ended March 31, 2003. The reductions in yield were primarily due to a lower interest rate environment. Noninterest income for the first quarter of 2003 was $5.01 million, a $289,000, or 6.12%, increase from $4.72 million for the first quarter of 2002. The increase in noninterest income over the prior year period was primarily due to an increase in service charges and fees and an increase in gains on sales of securities, partially offset by a charge for other than temporary impairment of investment securities. Service charges and fees increased $592,000 as compared to the prior year period primarily due to increases in checking account and merchant services fees. Gains on sales of securities increased $161,000 from the prior year period as certain debt and equity securities were sold during the 2003 quarter. During the first quarter of 2003, a charge for other than temporary impairment totaling $359,000 for two investments was recorded. 2 Noninterest expense for the first quarter of 2003 was $14.54 million, a $486,000, or 3.23%, decrease from $15.03 million for the first quarter of 2002. The decrease in noninterest expense from the prior year period was primarily due to decreases in amortization of other intangible assets, fees and services, furniture and equipment and other operating expenses. These decreases were partially offset by an increase in employee benefits. 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. Fees and services decreased as the Bank reduced expenses for outside consultants and loans serviced by others. Furniture and equipment expenses decreased as certain assets became fully depreciated. Other operating expenses decreased mainly due to decreases in office supply costs. Partially offsetting these decreases, employee benefits increased primarily due to increased restricted stock, pension and ESOP expenses. Established in 1905, The Savings Bank of Manchester is one of Connecticut's oldest and largest independent banks. The Bank is headquartered in Manchester, Connecticut, with 28 branch offices serving 22 communities throughout central and eastern Connecticut. The Bank is committed to operating as an independent bank, delivering quality customer service and a broad array of competitively priced retail and commercial products to customers. 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 3 CONNECTICUT BANCSHARES, INC. AND SUBSIDIARY Consolidated Statements of Condition (dollars in thousands) March 31, March 31, December 31, 2003 2002 2002 ------------------ ------------------- ------------------- (unaudited) (unaudited) (unaudited) ASSETS Cash and due from banks: Non-interest-bearing deposits and cash $ 29,399 $ 10,356 $ 16,346 Short-term investments 52,858 73,819 8,918 ------------------ ------------------- ------------------- Cash and cash equivalents 82,257 84,175 25,264 Securities available for sale, at fair value 741,296 771,532 841,622 Loans held for sale 120 219 - Loans: One- to four-family residential mortgages 940,109 857,461 907,188 Construction mortgages 68,273 81,591 64,182 Commercial and multi-family mortgages 283,977 244,537 275,818 Commercial business 182,162 170,118 180,612 Installment 133,835 119,885 128,939 ------------------ ------------------- ------------------- Total loans, gross 1,608,356 1,473,592 1,556,739 Allowance for loan losses 16,314 15,270 16,172 ------------------ ------------------- ------------------- Total loans, net 1,592,042 1,458,322 1,540,567 ------------------ ------------------- ------------------- Federal Home Loan Bank Stock, at cost 30,783 30,783 30,783 Premises and equipment, net 17,218 18,525 17,793 Accrued interest receivable 12,163 12,960 12,613 Other real estate owned - - - Cash surrender value of life insurance 44,392 41,982 43,803 Current and deferred income taxes - 1,254 58 Goodwill 19,488 19,970 19,488 Other intangible assets 9,204 11,656 9,598 Other assets 5,597 6,811 5,953 ------------------ ------------------- ------------------- Total assets $ 2,554,560 $ 2,458,189 $ 2,547,542 ================== =================== =================== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Savings and money market $ 598,870 $ 561,304 $ 592,386 Certificates of deposit 625,828 719,135 643,201 NOW accounts 232,686 218,000 230,293 Demand deposits 126,352 110,082 130,099 ------------------ ------------------- ------------------- Total deposits 1,583,736 1,608,521 1,595,979 Short-term borrowed funds 115,777 102,779 121,052 Mortgagors' escrow accounts 12,161 8,512 15,097 Advances from Federal Home Loan Bank 551,108 474,460 533,890 Current and deferred income taxes 407 - - Accrued benefits and other liabilities 35,788 23,479 29,964 ------------------ ------------------- ------------------- Total liabilities 2,298,977 2,217,751 2,295,982 ------------------ ------------------- ------------------- Stockholders' equity: Common stock 113 113 113 Additional paid-in capital 111,540 109,346 110,345 Retained earnings 155,030 133,659 149,554 ESOP unearned compensation (7,289) (7,910) (7,444) Restricted stock unearned compensation (10,164) (5,996) (10,880) Less: Treasury stock, at cost (6,310) (232) (5,522) Accumulated other comprehensive income 12,663 11,458 15,394 ------------------ ------------------- ------------------- Total stockholders' equity 255,583 240,438 251,560 ------------------ ------------------- ------------------- Total liabilities and stockholders' equity $ 2,554,560 $ 2,458,189 $ 2,547,542 ================== =================== =================== 4 CONNECTICUT BANCSHARES, INC. AND SUBSIDIARY Consolidated Statements of Operations (dollars in thousands, except earnings per share) FOR THE THREE MONTHS ENDED MARCH 31, ----------------------------------------- 2003 2002 ------------------- ----------------- (UNAUDITED) Interest and dividend income: Interest income on loans $ 24,769 $ 24,937 Interest and dividends on investment securities 8,851 10,096 ------------------- ----------------- Total interest and dividend income 33,620 35,033 ------------------- ----------------- Interest expense: Interest on deposits and escrow 6,370 9,711 Interest on short-term borrowed funds 208 456 Interest on advances from Federal Home Loan Bank 6,176 5,943 ------------------- ----------------- Total interest expense 12,754 16,110 ------------------- ----------------- Net interest income 20,866 18,923 Provision for loan losses 375 375 ------------------- ----------------- Net interest income after provision for loan losses 20,491 18,548 ------------------- ----------------- Noninterest income: Service charges and fees 3,437 2,845 Income from cash surrender value of life insurance 589 585 Brokerage commission income 289 360 Gains on sales of securities, net 844 683 Other than temporary impairment of investment securities (359) - Gains on mortgage loan sales, net 42 88 Other 167 159 ------------------- ----------------- Total noninterest income 5,009 4,720 ------------------- ----------------- Noninterest expense: Salaries 4,714 4,611 Employee benefits 3,897 3,044 Fees and services 1,645 1,851 Occupancy, net 1,051 1,076 Furniture and equipment 838 963 Marketing 418 475 Amortization of other intangible assets 394 1,271 Foreclosed real estate expense 30 64 Net gains on sales of repossessed assets (4) (24) Other operating expenses 1,559 1,697 ------------------- ----------------- Total noninterest expense 14,542 15,028 ------------------- ----------------- Income before provision for income taxes 10,958 8,240 Provision for income taxes 3,616 2,670 ------------------- ----------------- Net income $ 7,342 $ 5,570 =================== ================= Earnings per share: Basic $ 0.74 $ 0.55 Diluted $ 0.68 $ 0.52 Weighted average shares outstanding: Basic 9,953,080 10,115,457 Diluted 10,863,235 10,744,499 5 CONNECTICUT BANCSHARES, INC. AND SUBSIDIARY Selected Financial Data (dollars in thousands, except per share amounts) FOR THE THREE MONTHS ENDED MARCH 31, ------------------------------------------------- 2003 2002 ------------------ ----------------- (UNAUDITED) Operating ratios: Return on average assets 1.18% 0.92% Return on average stockholders' equity 11.67% 9.36% Average stockholders' equity to average assets 10.10% 9.86% Yields (1): Net interest rate spread 3.24% 2.96% Net interest margin 3.51% 3.28% Gross loans 6.23% 6.85% Securities and short term investments 4.58% 4.82% Total interest-earning assets 5.68% 6.10% Interest-bearing deposits and escrow 1.77% 2.65% Short-term borrowed funds 0.72% 1.65% Advances from Federal Home Loan Bank 4.54% 5.01% Total interest-bearing liabilities 2.44% 3.14% Allowance for loan losses summary: Allowance for loan losses, beginning of period $ 16,172 $ 15,228 Provision for loan losses 375 375 Loans charged off 285 381 Recoveries of loans previously charged off (52) (48) ------------------ ----------------- Net charge offs 233 333 ------------------ ----------------- Allowance for loan losses, end of period $ 16,314 $ 15,270 ================== ================= Net charge offs to average gross loans (annualized) 0.06% 0.09% Allowance for loan losses to: Total gross loans 1.01% 1.04% Total nonperforming loans 608.96% 172.84% 6 AT MARCH 31, AT DECEMBER 31, ---------------------------------- --------------------- 2003 2002 2002 ---------------------------------- --------------------- (UNAUDITED) (UNAUDITED) Other selected data: Loans past due 90 days and still accruing: One- to four family mortgages $ 424 $ 1,020 $ 527 Commercial and multifamily mortgages - - 395 Commercial business 77 154 313 Installment 108 290 108 ---------------- ---------------- --------------------- Total loans past due 90 days and still accruing 609 1,464 1,343 ---------------- ---------------- --------------------- Loans on nonaccrual: One- to four family mortgages 298 534 306 Construction mortgages - 3,056 - Commercial and multifamily mortgages 393 - 393 Commercial business 984 3,745 852 Installment - 36 - ---------------- ---------------- --------------------- Total loans on nonaccrual 1,675 7,371 1,551 ---------------- ---------------- --------------------- Troubled debt restructurings: Commercial and multifamily mortgages 395 - - ---------------- ---------------- --------------------- Total troubled debt restructurings 395 - - ---------------- ---------------- --------------------- Total nonperforming loans 2,679 8,835 2,894 Other real estate owned - - - ---------------- ---------------- --------------------- Total nonperforming assets $ 2,679 $ 8,835 $ 2,894 ================ ================ ===================== Total nonperforming loans as a percentage of total gross loans 0.17% 0.60% 0.19% Total nonperforming assets as a percentage of total assets 0.10% 0.36% 0.11% Shares outstanding (excludes treasury stock) 11,088,527 11,249,826 11,105,546 Book value per share $ 23.05 $ 21.37 $ 22.65 Tangible book value per share $ 20.46 $ 18.56 $ 20.03 Market value per share $ 41.53 $ 27.49 $ 38.45 (1) Yields are calculated on a fully taxable-equivalent basis assuming a 35% Federal income tax rate. Security yields are calculated on amortized cost and exclude the impact of unrealized gains and losses on available for sale securities.