NMIL Newmil Bancorp

The Board of Directors of NewMil Bancorp, Inc. (NASDAQ/NM:NMIL) today announced results of its third quarter ended September 30, 2005. Diluted earnings per share increased 6% to $0.53 for the third quarter ended September 30, 2005 from $0.50 for the third quarter ended September 30, 2004. Net income increased 2.8% to $2.2 million for the third quarter of 2005, compared with $2.1 million for the third quarter of 2004. These results were attributable to increases in net interest income and a negative provision, which was attributable to a recovery of a previously charged-off loan. Net interest income increased primarily due to an increase of $85.9 million in average earning assets, which more than offset the 46 basis point decrease in the net interest margin to 3.42%, compared with 3.88% at September 30, 2004. Non-interest income decreased primarily due to lower gains on sale of mortgage loans and lower commission and other deposit fees. Non-interest expense was also lower in the nine month period ended September 30, 2005, contributing to an efficiency ratio of 58% for this period. NewMil's assets increased to $857 million, up $112 million since December 31, 2004. Total gross loans were $501 million at September 30, 2005, which increased $19 million, or 3.9%, since December 31, 2004. Credit quality remains strong, as evidenced by nonperforming assets at 16 basis points of total assets at September 30, 2005. Deposits increased $14 million to $601 million from $587 million at December 31, 2004. At September 30, 2005, book value and tangible book value per common share were $13.04 and $11.06, respectively, and tier 1 leverage and total risk-based capital ratios were 7.00% and 13.13%, respectively. Return on average shareholder's equity was 16% for the third quarter of 2005. Francis J. Wiatr, NewMil's Chairman, President and CEO noted, "Given the very difficult yield curve, we are pleased with our results for the quarter. Our commercial lending business had an excellent quarter and is substantially ahead of last year. Our lending programs for small business are contributing to our growth, as activity in the markets we serve remains healthy. Recently, the statistics released from the U.S. Small Business Administration rank us second in the state among all financial institutions for SBA 504 Loans for the SBA's fiscal year ending September 30, 2005. "Our competitive deposit product programs and excellent customer service are continuing to attract many new business and personal household accounts to the Bank. We have announced a new checking program with identity theft features that we feel will further strengthen our deposit base over time. We continue to build market share as people appreciate the difference dealing with a community bank who can deliver excellent and timely service. "Over the next several months we feel the Fed will be nearing a point where the increases in short term interest rates that have been put in place will be enough to strike a balance between a growing economy and an acceptable inflation level. As a result, quality lending projects will likely proceed at a level to sustain a nice pace of growth in our region. "Our 20th branch office located in Shelton opened this past quarter. We have been enthusiastically received by the community and look forward to our expansion in that area. "We remain optimistic about the overall growth potential in the markets we serve, our participation in that growth, as well as the strategic value of the Bank's franchise." The Board of Directors also announced a quarterly dividend of 20 cents per common share, payable on November 15, 2005 to shareholders of record on October 28, 2005. NewMil Bancorp is the parent company of NewMil Bank, which has served western Connecticut since 1858, and operates 20 full-service banking offices. Financial highlights are attached. Statements in this news release concerning future results, performance, expectations or intentions are forward-looking statements. Actual results, performance or developments may differ materially from forward-looking statements as a result of known or unknown risks, uncertainties, and other factors, including those identified from time to time in the Company's other filings with the Securities and Exchange Commission, press releases and other communications. -0- *T NewMil Bancorp, Inc SELECTED CONSOLIDATED FINANCIAL DATA (in thousands except ratios and per share amounts) (unaudited) Three month Nine month period ended period ended September 30 September 30 STATEMENT OF INCOME 2005 2004 2005 2004 ---- ---- ---- ---- Interest and dividend income $10,214 $8,881 $29,329 $26,409 Interest expense 3,835 2,390 9,839 7,012 Net interest income 6,379 6,491 19,490 19,397 Provision for loan losses (135) - (135) - Non-interest income Service fees on deposit accounts 783 774 2,226 2,204 Gains on sales of mortgage loans 13 38 104 146 Gains on sale of OREO - - 65 - Other non-interest income 186 217 575 608 Total non-interest income 982 1,029 2,970 2,958 Non-interest expense Compensation 2,442 2,368 7,195 7,253 Occupancy and equipment 791 726 2,361 2,197 Postage and telecommunication 144 156 422 444 Professional services, collection & OREO 162 214 576 728 Printing and office supplies 135 92 352 306 Marketing 60 188 208 409 Service bureau EDP 97 87 287 279 Amortization of intangible assets 37 49 110 147 Other 509 496 1,541 1,464 Total non-interest expense 4,377 4,376 13,052 13,227 Income before income taxes 3,119 3,144 9,543 9,128 Provision for income taxes 916 1,000 2,856 2,899 Net income $ 2,203 $2,144 $ 6,687 $ 6,229 Per common share Diluted earnings $ 0.53 $ 0.50 $ 1.57 $ 1.44 Basic earnings 0.53 0.51 1.60 1.48 Cash dividends 0.20 0.17 0.60 0.49 Statistical data Net interest margin, (fully tax equivalent) 3.42% 3.88% 3.59% 3.93% Efficiency ratio 59.46 58.19 58.11 59.17 Return on average assets 1.07 1.19 1.13 1.17 Return on average common shareholders' equity 16.28 15.87 16.24 15.44 Weighted average equivalent common shares outstanding, diluted 4,192 4,321 4,262 4,330 *T -0- *T NewMil Bancorp, Inc. SELECTED CONSOLIDATED FINANCIAL DATA (in thousands except ratios and per share amounts) Sept. 30, Sept. 30, December 31, FINANCIAL CONDITION 2005 2004 2004 ---- ---- ---- Unaudited Unaudited Total assets $ 857,246 $ 730,410 $ 744,599 Loans, net 496,386 480,447 476,660 Allowance for loan losses 4,986 5,146 5,048 Securities 305,268 196,087 216,558 Cash and cash equivalents 20,522 21,430 18,493 Intangible assets 8,130 8,289 8,240 Deposits 601,103 586,047 587,010 Federal Home Loan Bank advances 162,751 63,070 75,654 Repurchase agreements 15,018 12,491 13,147 Long term debt 9,851 9,791 9,806 Shareholders' equity 53,722 55,049 55,613 Non-performing assets 1,401 1,181 922 Deposits Demand (non-interest bearing) $ 75,586 $ 66,846 $ 66,895 NOW accounts 81,107 82,386 85,889 Money market 146,302 155,514 147,375 Savings and other 79,254 85,858 85,829 Certificates of deposit 218,854 195,443 201,022 Total deposits 601,103 586,047 587,010 Per common share Book value $ 13.04 $ 13.11 $ 13.25 Tangible book value 11.06 11.13 11.29 Statistical data Non-performing assets to total assets 0.16% 0.16% 0.12% Allowance for loan losses to total loans 0.99 1.06 1.05 Allowance for loan losses to non- performing loans 355.89 435.73 547.51 Common shareholders' equity to assets 6.27 7.54 7.47 Tangible common shareholders' equity to assets 5.32 6.40 6.36 Tier 1 leverage capital 7.00 7.70 7.79 Total risk-based capital 13.13 14.19 14.40 Common shares outstanding, net (period end) 4,121 4,200 4,197 *T