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EXHIBIT 99.1
CONNECTICUT BANCSHARES, INC. REPORTS INCREASE IN NET INCOME FOR 2003
MANCHESTER, Conn. - January 26, 2004 - Connecticut Bancshares, Inc. (the
"Company") (NASDAQ: SBMC), the holding company for The Savings Bank of
Manchester (the "Bank"), reported net income of $27.43 million for the year
ended December 31, 2003, as compared to net income of $25.95 million for the
year ended December 31, 2002, representing a 5.70% increase. Earnings per
diluted share were $2.54 based on 10.81 million weighted average shares
outstanding for the year ended December 31, 2003, compared to earnings per
diluted share of $2.40 based on 10.79 million weighted average shares
outstanding for the year ended December 31, 2002. Net income for the year ended
December 31, 2003 included gains on sales of securities of $5.67 million
partially offset by merger related expenses of $4.11 million and other than
temporary impairment of investment securities of $359,000. Net income for the
year ended December 31, 2002 included gains on sales of securities of $2.70
million partially offset by other than temporary impairment of investment
securities of $1.49 million.
Net income was $4.10 million for the fourth quarter of 2003, compared to net
income of $7.52 million for the fourth quarter of 2002. Earnings per diluted
share were $0.38 based on 10.86 million weighted average shares outstanding for
the quarter ended December 31, 2003, compared to earnings per diluted share of
$0.69 based on 10.84 million weighted average shares outstanding for the quarter
ended December 31, 2002. Net income for the three months ended December 31, 2003
included gains on sales of securities of $208,000 offset by merger related
expenses of $2.39 million. Net income for the three months ended December 31,
2002 included gains on sales of securities of $1.03 million partially offset by
other than temporary impairment of investment securities of $813,000.
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 fourth quarter of 2003 was $19.57 million, a $1.55
million, or 7.34%, decrease from $21.12 million for the fourth quarter of 2002.
Average interest-earning assets were $2.44 billion for the quarter ended
December 31, 2003 compared to $2.38 billion for the prior year quarter. The
Company's net interest margin was 3.24% for the quarter ended December 31, 2003
compared to 3.59% for the quarter ended December 31, 2002.
The decrease in net interest income from the prior year quarter was primarily
due to lower yields on loans and investments and lower volume of 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 5.90%
for the quarter ended December 31, 2002 to 5.10% for the quarter ended December
31, 2003. Loan yields declined from 6.59% for the quarter ended December 31,
2002 to 5.61% for the quarter ended December 31, 2003. Investment yields
declined from 4.65% for the quarter ended December 31, 2002 to 3.94% for the
quarter ended December 31, 2003. The reductions in yield were primarily due to a
lower interest rate environment. The cost of funds decreased from 2.61% for the
quarter ended December 31, 2002 to 2.12% for the quarter ended
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December 31, 2003. The reduction was primarily due to a lower interest rate
environment. Average gross loans increased $146.58 million, or 9.49%, from $1.54
billion for the quarter ended December 31, 2002 to $1.69 billion for the quarter
ended December 30, 2003. The increase in average gross loans was primarily in
residential and commercial real estate loans. Total average invested funds
decreased $86.92 million, or 10.36%, from $839.00 million for the quarter ended
December 31, 2002 to $752.08 million for the quarter ended December 31, 2003.
The Bank's loan portfolio growth was partly funded by the reduction in
securities due to prepayments and security sales.
Noninterest income for the fourth quarter of 2003 was $5.33 million, a $275,000,
or 5.45%, increase from $5.05 million for the fourth quarter of 2002. The
increase in noninterest income over the prior year quarter was primarily due to
an increase in service charges and fees. Service charges and fees increased
$316,000 as compared to the prior year quarter primarily due to increases in
checking and merchant services fees.
Noninterest expense for the fourth quarter of 2003 was $17.62 million, a $3.06
million, or 21.02%, increase from $14.56 million for the fourth 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 and salaries
partially offset by decreases in marketing, fees and services, furniture and
equipment and other operating expenses. The Company incurred $2.39 million in
expenses in the quarter ended December 31, 2003, primarily professional fees and
a charge for the accelerated vesting of restricted stock relating to the merger
with NHSB. Employee benefits increased primarily due to increased restricted
stock, pension, ESOP and payroll tax expenses. Salary expense increased
primarily due to employee bonuses. Marketing expense decreased due to reduced
image advertising. Fees and services decreased primarily due to lower
examination and legal fees. Furniture and equipment expenses decreased primarily
due to lower depreciation. Other operating expenses decreased primarily due to
lower merchant services expenses, lower postage and lower supplies expense.
The provision for income taxes for the fourth quarter of 2003 was $2.88 million,
an $826,000 decrease from $3.71 million for the fourth quarter of 2002. The
effective tax rate for the fourth quarter of 2003 was 41.28% as compared to an
effective tax rate of 33.00% for the fourth quarter of 2002. The effective tax
rate for the year 2003 was 34.53% as compared to an effective tax rate of 32.73%
for the year 2002. The Bank increased its provision for income taxes in the
fourth quarter of 2003 due to the potential nondeductibility of certain
merger-related expenses.
Net interest income for the year ended December 31, 2003 was $80.70 million, a
$44,000, or 0.05%, increase from $80.66 million for the year ended December 31,
2002. Average interest-earning assets were $2.42 billion for the year ended
December 31, 2003 compared to $2.34 billion for the prior year. The Company's
net interest margin was 3.36% for the year ended December 31, 2003 compared to
3.49% for the year ended December 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 2.88% for the year ended December 31, 2002 to 2.24% for the
year ended December 31, 2003. The reduction was primarily due to a lower
interest rate environment. Average gross loans increased $146.02 million, or
9.69%, from $1.51 billion for the year ended December 31, 2002 to $1.65 billion
for the year ended December 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 6.05% for the year ended December 31, 2002
to 5.35% for the year ended December 31, 2003. Loan yields declined from
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6.70% for the year ended December 31, 2002 to 5.91% for the year ended December
31, 2003. Investment yields declined from 4.86% for the year ended December 31,
2002 to 4.16% for the year ended December 31, 2003. The reductions in yield were
primarily due to a lower interest rate environment.
Noninterest income for 2003 was $25.30 million, a $6.27 million, or 32.95%,
increase from $19.03 million for 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 $2.97 million from the prior year primarily due to the sale of
substantially all of the Company's marketable equity securities during the third
quarter of 2003. Service charges and fees increased $2.52 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 2003 was $62.83 million, a $3.22 million, or 5.40%,
increase from $59.61 million for 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, furniture and equipment and marketing
expenses. The Company incurred $4.11 million in expenses during the year ended
December 31, 2003, primarily professional fees and a charge for the accelerated
vesting of restricted stock relating to the merger with NHSB. 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. 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.
Nonperforming assets totaled $6.55 million at December 31, 2003 compared to
$2.89 million at December 31, 2002, representing a increase of $3.66 million, or
126.64%. Nonperforming commercial business loans increased $3.85 million, due to
four loans totaling $4.22 million to one borrower that were placed on nonaccrual
status during December 2003. A forbearance agreement has been executed which
requires scheduled loan paydowns through June 2004. No specific allocations have
been made to the allowance for loan losses for these loans as the collateral
value exceeds the principal balance of the loans.
The Company did not repurchase any shares of its common stock during the fourth
quarter of 2003, and has repurchased a total of 558,641 shares of its common
stock at a weighted average price of $38.92 per share since its initial public
offering on March 2, 2000.
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
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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
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CONNECTICUT BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Condition
(unaudited)
(dollars in thousands)
DECEMBER 31, DECEMBER 31,
2003 2002
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ASSETS
Cash and due from banks:
Non-interest-bearing deposits and cash $ 34,946 $ 16,346
Short-term investments 14,162 8,918
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Cash and cash equivalents 49,108 25,264
Securities available for sale, at fair value 724,569 841,622
Loans:
One- to four-family residential mortgages 981,023 907,188
Construction mortgages 73,657 64,182
Commercial and multi-family mortgages 304,632 275,818
Commercial business 187,905 180,612
Installment 140,054 128,939
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Total loans, gross 1,687,271 1,556,739
Allowance for loan losses 16,543 16,172
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Total loans, net 1,670,728 1,540,567
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Federal Home Loan Bank Stock, at cost 27,037 30,783
Premises and equipment, net 15,480 17,793
Accrued interest receivable 10,413 12,613
Other real estate owned 112 -
Cash surrender value of life insurance 46,150 43,803
Current and deferred income taxes 12,976 58
Goodwill 19,488 19,488
Other intangible assets 7,760 9,598
Other assets 3,985 5,953
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Total assets $ 2,587,806 $ 2,547,542
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LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Savings and money market $ 632,762 $ 592,386
Certificates of deposit 583,291 643,201
NOW accounts 237,919 230,293
Demand deposits 152,320 130,099
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Total deposits 1,606,292 1,595,979
Short-term borrowed funds 123,049 121,052
Mortgagors' escrow accounts 19,665 15,097
Advances from Federal Home Loan Bank 543,335 533,890
Accrued benefits and other liabilities 31,632 29,964
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Total liabilities 2,323,973 2,295,982
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Stockholders' equity:
Common stock 117 113
Additional paid-in capital 126,632 110,345
Retained earnings 169,577 149,554
ESOP unearned compensation (6,824) (7,444)
Restricted stock unearned compensation (6,636) (10,880)
Treasury stock, at cost (21,744) (5,522)
Accumulated other comprehensive income 2,711 15,394
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Total stockholders' equity 263,833 251,560
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Total liabilities and stockholders' equity $ 2,587,806 $ 2,547,542
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CONNECTICUT BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Operations
(dollars in thousands, except earnings per share)
FOR THE THREE MONTHS ENDED DECEMBER 31,
---------------------------------------------
2003 2002
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(UNAUDITED)
Interest and dividend income:
Interest income on loans $ 23,732 $ 25,436
Interest and dividends on investment securities 7,283 9,568
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Total interest and dividend income 31,015 35,004
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Interest expense:
Interest on deposits and escrow 5,418 7,454
Interest on short-term borrowed funds 201 339
Interest on advances from Federal Home Loan Bank 5,827 6,095
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Total interest expense 11,446 13,888
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Net interest income 19,569 21,116
Provision for loan losses 300 375
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Net interest income after provision for loan losses 19,269 20,741
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Noninterest income:
Service charges and fees 4,007 3,691
Income from cash surrender value of life insurance 563 599
Brokerage commission income 391 357
Gains on sales of securities, net 208 1,032
Other than temporary impairment of investment securities - (813)
Gains on mortgage loan sales, net 73 13
Other 85 173
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Total noninterest income 5,327 5,052
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Noninterest expense:
Salaries 6,103 5,436
Employee benefits 3,830 2,957
Fees and services 1,409 1,614
Occupancy, net 982 978
Furniture and equipment 796 938
Amortization of other intangible assets 394 393
Marketing 261 475
Foreclosed real estate expense 33 64
Net (gains) losses on sales of repossessed assets (17) 3
Merger expenses 2,389 -
Other operating expenses 1,440 1,705
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Total noninterest expense 17,620 14,563
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Income before provision for income taxes 6,976 11,230
Provision for income taxes 2,880 3,706
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Net income $ 4,096 $ 7,524
=================== ====================
Earnings per share:
Basic $ 0.41 $ 0.75
Diluted $ 0.38 $ 0.69
Weighted average shares outstanding:
Basic 10,052,374 9,998,507
Diluted 10,856,988 10,844,093
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CONNECTICUT BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Operations
(dollars in thousands, except earnings per share)
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------
2003 2002
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(UNAUDITED)
Interest and dividend income:
Interest income on loans $ 97,609 $ 100,978
Interest and dividends on investment securities 31,201 39,588
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Total interest and dividend income 128,810 140,566
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Interest expense:
Interest on deposits and escrow 23,002 34,461
Interest on short-term borrowed funds 783 1,644
Interest on advances from Federal Home Loan Bank 24,323 23,803
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Total interest expense 48,108 59,908
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Net interest income 80,702 80,658
Provision for loan losses 1,275 1,500
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Net interest income after provision for loan losses 79,427 79,158
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Noninterest income:
Service charges and fees 15,422 12,902
Income from cash surrender value of life insurance 2,347 2,407
Brokerage commission income 1,511 1,643
Gains on sales of securities, net 5,666 2,703
Other than temporary impairment of investment securities (359) (1,493)
Gains on mortgage loan sales, net 197 203
Other 518 661
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Total noninterest income 25,302 19,026
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Noninterest expense:
Salaries 20,688 20,452
Employee benefits 15,153 11,493
Fees and services 6,266 7,191
Occupancy, net 3,944 3,956
Furniture and equipment 3,308 3,852
Amortization of other intangible assets 1,575 3,928
Marketing 1,481 2,042
Foreclosed real estate expense 115 243
Net gains on sales of repossessed assets (59) (13)
Merger expenses 4,111 -
Other operating expenses 6,249 6,465
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Total noninterest expense 62,831 59,609
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Income before provision for income taxes 41,898 38,575
Provision for income taxes 14,468 12,626
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Net income $ 27,430 $ 25,949
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Earnings per share:
Basic $ 2.76 $ 2.57
Diluted $ 2.54 $ 2.40
Weighted average shares outstanding:
Basic 9,927,804 10,102,444
Diluted 10,810,286 10,794,497
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CONNECTICUT BANCSHARES, INC. AND SUBSIDIARY
Selected Financial Data
(dollars in thousands, except per share amounts)
FOR THE THREE MONTHS ENDED DECEMBER 31, FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------- --------------------------------
2003 2002 2003 2002
---------------------- -------------- -------------- -------------
(UNAUDITED) (UNAUDITED)
Operating ratios:
Return on average assets 0.63% 1.19% 1.07% 1.05%
Return on average stockholders' equity 6.23% 11.78% 10.72% 10.43%
Average stockholders' equity to
average assets 10.12% 10.06% 9.99% 10.06%
Yields (1):
Net interest rate spread 2.98% 3.29% 3.11% 3.17%
Net interest margin 3.24% 3.59% 3.36% 3.49%
Gross loans 5.61% 6.59% 5.91% 6.70%
Securities and short term investments 3.94% 4.65% 4.16% 4.86%
Total interest-earning assets 5.10% 5.90% 5.35% 6.05%
Interest-bearing deposits and escrow 1.46% 2.00% 1.57% 2.32%
Short-term borrowed funds 0.64% 1.08% 0.66% 1.41%
Advances from Federal Home Loan Bank 4.24% 4.75% 4.35% 4.92%
Total interest-bearing liabilities 2.12% 2.61% 2.24% 2.88%
Allowance for loan losses summary:
Allowance for loan losses, beginning of period $ 16,487 $ 15,344 $ 16,172 $ 15,228
Provision for loan losses 300 375 1,275 1,500
Loans charged off 335 520 1,235 1,781
Recoveries of loans previously charged off (91) (973) (331) (1,225)
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Net charge offs 244 (453) 904 556
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Allowance for loan losses, end of period $ 16,543 $ 16,172 $ 16,543 $ 16,172
============= =========== =========== ============
Net charge offs (recoveries) to average gross loans (annualized) 0.06% (0.12%) 0.05% 0.04%
Allowance for loan losses to:
Total gross loans 0.98% 1.04% 0.98% 1.04%
Total nonperforming loans 257.16% 558.81% 257.16% 558.81%
AT DECEMBER 31,
-----------------------------------
2003 2002
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Other selected data: (UNAUDITED)
Loans past due 90 days and still accruing:
One- to four family mortgages $ 291 $ 527
Commercial and multifamily mortgages 778 395
Commercial business 42 313
Installment 174 108
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Total loans past due 90 days and still accruing 1,285 1,343
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Loans on nonaccrual:
One- to four family mortgages 113 306
Commercial and multifamily mortgages - 393
Commercial business 4,973 852
Installment 62 -
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Total loans on nonaccrual 5,148 1,551
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Total nonperforming loans 6,433 2,894
Other real estate owned 112 -
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Total nonperforming assets $ 6,545 $ 2,894
================= ===============
Total nonperforming loans as a percentage
of total gross loans 0.38% 0.19%
Total nonperforming assets as a percentage
of total assets 0.25% 0.11%
Shares outstanding (excludes treasury stock) 11,134,933 11,105,546
Book value per share $ 23.69 $ 22.65
Tangible book value per share $ 21.25 $ 20.03
Market value per share $ 51.54 $ 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.