NMIL Newmil Bancorp

The Board of Directors of NewMil Bancorp, Inc. (NASDAQ/NM:NMIL) today announced results of its fourth quarter and fiscal year ended December 31, 2005. Diluted earnings per share increased 8% to a record level of $2.10 for the twelve-month period ended December 31, 2005, compared to $1.95 for the 2004 period. Net income increased 6% to $8.9 million for the twelve months ended December 31, 2005 from $8.4 million in the comparable 2004 period. NewMil improved its net interest income, primarily due to an increase of $90.9 million in average earning assets, which more than offset the 39 basis point decrease in the net interest margin to 3.52%, compared with 3.91% at December 31, 2004. Non-interest income increased primarily from a non-recurring asset sale gain and an OREO sale. Non-interest expense increased 1.4% to $17.7 million when compared to the 2004 period. The efficiency ratio was 59% for the twelve-month period. Diluted earnings per share increased 6% to $0.54 for the fourth quarter ended December 31, 2005 from $0.51 for the fourth quarter ended December 31, 2004. Net income increased 0.5% to $2.23 million for the fourth quarter of 2005, when compared to the prior year quarter. Non-interest income increased primarily due to a gain on sale of assets, and higher gains on sale of mortgage loans. Non-interest expense increased $0.4 million in the three month period ended December 31, 2005, primarily related to compensation and to a lesser degree for occupancy, equipment and professional fees. NewMil's assets increased to $873 million, up $128 million since December 31, 2004. Total gross loans were $498 million at December 31, 2005 an increase of $16 million, or 3.3%, since December 31, 2004. Credit quality remains strong, as evidenced by nonperforming assets at 18 basis points of total assets at December 31, 2005. Deposits increased $29 million to $616 million from $587 million at December 31, 2004. At December 31, 2005, book value and tangible book value per common share were $12.98 and $10.99, respectively, and tier 1 leverage and total risk-based capital ratios were 6.81% and 13.09%, respectively. Return on average shareholder's equity was 17% for the fourth quarter of 2005 versus 16% for the fourth quarter of 2004 and averaged 16.4% for all of 2005 versus 15.6% for the 2004 fiscal year. Francis J. Wiatr, NewMil's Chairman, President and CEO noted, "Given the continued difficulty of the yield curve, we are pleased with our results for the quarter. Our record earnings for the entire year were achieved in an environment that tested the industry as a whole. Our commercial lending business remained strong for the year and our programs for small business continue to rank us as one of the top originators of SBA Loans in the State according to Small Business Administration statistics as of September 30, 2005. "Our deposit programs are strong and we continue to enjoy a nearly two thirds low cost core deposit structure within our total deposit mix. One of our most popular accounts, Security Plus Checking, was enhanced in 2005 to provide identity theft restoration services, an added benefit that is highly valued by our customers. Also, our highly competitive Health Savings Account (HSA) product, introduced in 2005, is attracting many new accounts to the Bank. "We are extremely pleased with our new branch in Shelton which opened September 1, 2005. By December 31, 2005 it had already surpassed our objectives for growth for the first year and we are well on our way to having one of the most successful branches in our system. "We are well positioned for 2006 to take advantage of our very strong position in Litchfield and Fairfield Counties. The year will have its challenges as the pressure on deposit rates backs up against the yield curve and the industry's ability to deploy funds at the appropriate margin. However, we will further build our market share as people appreciate the difference dealing with a highly responsive community bank. "We look forward to increasing market share in the high growth markets we serve and to improving the Bank's overall franchise as we pursue our continued growth plans." The Board of Directors also announced a quarterly dividend increase of 10% to $0.22 from $0.20 per common share, payable on February 17, 2006 to shareholders of record on February 1, 2006. This marks the 11th consecutive increase in the company's dividend and the 46th consecutive quarterly dividend payment since the corporation reinstituted its dividend policy in 1994, and reflects not only on the quality of past performance, but also in the confidence of the Board's future outlook. 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) Three month Twelve month period ended period ended December 31 December 31 STATEMENT OF INCOME 2005 2004 2005 2004 Interest and dividend income $ 10,907 $ 9,009 $40,236 $35,418 Interest expense 4,485 2,503 14,324 9,515 Net interest income 6,422 6,506 25,912 25,903 Provision for loan losses - - (135) - Non-interest income Service fees on deposit accounts 746 764 2,972 2,968 Gains on sales of mortgage loans 83 39 187 185 Gains on sale of OREO - - 65 - Gain on sale of real estate property 334 - 334 - Other non-interest income 187 182 762 790 Total non-interest income 1,350 985 4,320 3,943 Non-interest expense Compensation 2,763 2,291 9,958 9,544 Occupancy and equipment 812 754 3,173 2,951 Postage and telecommunication 136 147 558 591 Professional services, collection & OREO 220 191 796 919 Printing and office supplies 113 110 465 416 Marketing 88 141 296 550 Service bureau EDP 97 87 384 366 Amortization of intangible assets 37 49 147 196 Other 414 493 1,955 1,957 Total non-interest expense 4,680 4,263 17,732 17,490 Income before income taxes 3,092 3,228 12,635 12,356 Provision for income taxes 862 1,010 3,718 3,909 Net income $ 2,230 $ 2,218 $ 8,917 $ 8,447 Per common share Diluted earnings $ 0.54 $ 0.51 $ 2.10 $ 1.95 Basic earnings 0.54 0.53 2.14 2.01 Cash dividends 0.20 0.17 0.80 0.66 Statistical data Net interest margin, (fully tax equivalent) 3.31% 3.83% 3.52% 3.91% Efficiency ratio 60.22 56.91 58.65 58.60 Return on average assets 1.05 1.21 1.11 1.18 Return on average common shareholders' equity 16.90 16.01 16.40 15.59 Weighted average equivalent common shares outstanding, diluted 4,163 4,320 4,238 4,327 NewMil Bancorp, Inc. SELECTED CONSOLIDATED FINANCIAL DATA (in thousands except ratios and per share amounts) December 31, December 31, FINANCIAL CONDITION 2005 2004 Total assets $ 872,975 $ 744,599 Loans, net 492,763 476,660 Allowance for loan losses 4,949 5,048 Securities 322,343 216,558 Cash and cash equivalents 22,564 18,493 Intangible assets 8,093 8,240 Deposits 615,995 587,010 Federal Home Loan Bank advances 174,266 75,654 Repurchase agreements 15,491 13,147 Long term debt 9,866 9,806 Shareholders' equity 53,016 55,613 Non-performing assets 1,590 922 Deposits Demand (non-interest bearing) $ 77,383 $ 66,895 NOW accounts 82,400 85,889 Money market 146,007 147,375 Savings and other 88,142 85,829 Certificates of deposit 222,063 201,022 Total deposits 615,995 587,010 Per common share Book value $ 12.98 $ 13.25 Tangible book value 10.99 11.29 Statistical data Non-performing assets to total assets 0.18% 0.12% Allowance for loan losses to total loans 0.99 1.05 Allowance for loan losses to non- performing loans 311.26 547.51 Common shareholders' equity to assets 6.07 7.47 Tangible common shareholders' equity to assets 5.15 6.36 Tier 1 leverage capital 6.81 7.79 Total risk-based capital 13.09 14.40 Common shares outstanding, net (period end) 4,086 4,197 *T