NMIL Newmil Bancorp

The Board of Directors of NewMil Bancorp, Inc. (NASDAQ/GS:NMIL) today announced results of its second quarter ended June 30, 2006. Diluted earnings were $0.45 for the second quarter ended June 30, 2006 versus $0.53 for the second quarter ended June 30, 2005. Net income for the quarter was $1.9 million versus $2.2 million for second quarter of 2005. NewMil's results for the second quarter of 2006 reflect a change in investment portfolio strategy in preparation for the previously announced merger with Webster Financial Corporation ("Webster"), the absence of any Federal Home Loan Bank of Boston ("FHLBB") dividend income for the quarter, the challenging interest rate environment affecting the entire banking industry, and from charges incurred in connection with the pending merger with Webster. Merger expenses amounted to $369,000, or $0.06 per share, net of taxes, for the period. Positively impacting the period was a gain of $364,000 arising from the termination of post retirement health care and life insurance benefits. During the quarter the FHLBB changed its policy for dividend declarations such that the dividend based on net income for the second quarter of 2006 is not expected to be declared until the third quarter of 2006. In the first quarter NewMil recognized dividend income of $132,000, or $0.03 per share, net of taxes, based on average FHLBB shares outstanding of $10.2 million for the quarter. NewMil had average FHLBB shares of $10.6 million for the second quarter. Net interest income was $6.1 million for the quarter as compared with $6.3 million in the first quarter of 2006 and $6.6 million in the second quarter of 2005. Taxable equivalent net interest income was $6.3 million for the quarter compared with $6.6 million in the first quarter of 2006 and $6.8 million in the second quarter of 2005. The net interest margin was 3.08% for the quarter compared to 3.19% in the first quarter of 2006 and 3.61% in the second quarter of 2005. The compression in net interest margin was mostly due to the rise in short term rates and the prolonged flatness of the yield curve. NewMil has sought to offset this effect by growing earning assets. During the quarter average earning assets were up $15.1 million over the fourth quarter of 2005 and up $72.3 million over the second quarter of 2005. Non-interest income was $0.9 million for the quarter, as compared with $1.0 million for the second quarter of 2005 which included a gain of $65,000 from the sale of OREO. Non-interest expense was $4.4 million for the quarter and was substantially unchanged when compared with the prior year period. During the quarter NewMil incurred $369,000 of expenses related to the merger with Webster Bank. The efficiency ratio was 61.5% for the second quarter of 2006. NewMil's gross loans increased $17.1 million during the first six months to $514.8 million at June 30, 2006. Asset quality remains strong, as evidenced by nonperforming assets at 18 basis points of total assets at June 30, 2006. Deposits grew $6.5 million during the period to $622.5 million at June 30, 2006. At June 30, 2006, book value and tangible book value per common share were $12.80 and $10.84, respectively, and tier 1 leverage and total risk-based capital ratios were 7.02% and 13.71%, respectively. Return on average shareholders' equity was 14.4% for the second quarter of 2006 versus 16.3% for the second quarter of 2005. Francis J. Wiatr, NewMil's Chairman, President and CEO noted, "We have made substantial progress during the quarter with our transition plans for the upcoming merger (subject to regulatory and shareholder approval) with Webster, while at the same time continuing to grow our core franchise as evidenced by the increase in both loans and deposits. Our commercial lending business was solid during the quarter and we continued to build market share with this important segment of our business. Recently released statistics by the U.S. Small Business Administration rank NewMil Bank as one of the top originators in the State of Connecticut for 504 loans. "To support the company's future growth plan in the greater Danbury area, we opened our drive-up ATM in the "Reserve" (located at One Reserve Road, Danbury, Connecticut), which will be the future home of a branch office as development there proceeds." The Board of Directors also announced a quarterly dividend of $0.22 per common share, payable on August 15, 2006 to shareholders of record on July 28, 2006. NewMil Bancorp is the parent company of NewMil Bank, which has served western Connecticut since 1858, and operates 20 full-service banking offices. Please also refer to Webster Financial Corporation's (NYSE: WBS) press release of April 25, 2006, which announced that the Board of Directors of NewMil has entered into a definitive agreement with Webster for Webster to acquire NewMil. 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 Six month period ended period ended June 30 June 30 STATEMENT OF INCOME 2006 2005 2006 2005 ---- ---- ---- ------ Interest and dividend income $11,464 $9,836 $22,720 $19,115 Interest expense 5,368 3,285 10,340 6,004 Net interest income 6,096 6,551 12,380 13,111 Provision for loan losses - - - - Non-interest income Service fees on deposit accounts 695 741 1,351 1,443 Gains on sales of mortgage loans 47 39 58 91 Gain on sale of OREO - 65 200 65 Other non-interest income 206 196 404 389 Total non-interest income 948 1,041 2,013 1,988 Non-interest expense Compensation 2,059 2,441 4,478 4,753 Occupancy and equipment 842 783 1,633 1,570 Postage and telecommunication 162 145 307 278 Professional services, collection & OREO 188 188 370 414 Printing and office supplies 93 113 190 217 Marketing 72 81 139 148 Service bureau EDP 96 97 188 190 Amortization of intangible assets 24 36 49 73 Merger Expense 369 - 369 - Other 511 536 1,000 1,032 Total non-interest expense 4,416 4,420 8,723 8,675 Income before income taxes 2,762 3,172 5,804 6,424 Provision for income taxes 735 923 1,559 1,940 Net income $ 1,893 $ 2,249 $ 4,111 $ 4,484 Per common share Diluted earnings $ 0.45 $ 0.53 $ 0.99 $ 1.04 Basic earnings 0.46 0.53 1.01 1.07 Cash dividends 0.22 0.20 0.44 0.40 Statistical data Net interest margin, (fully tax equivalent) 3.08% 3.61% 3.13% 3.68% Efficiency ratio 62.69 58.22 60.61 57.45 Return on average assets 0.88 1.13 0.95 1.16 Return on average common shareholders' equity 14.38 16.34 15.60 16.21 Weighted average equivalent common shares outstanding, diluted 4,177 4,275 4,163 4,298 NewMil Bancorp, Inc. SELECTED CONSOLIDATED FINANCIAL DATA (in thousands except ratios and per share amounts) June 30, June 30, December 31, 2006 2005 2005 ---- ---- ---- Unaudited Unaudited FINANCIAL CONDITION Total assets $864,060 $812,312 $872,991 Loans, net 509,895 490,255 492,763 Allowance for loan losses 4,900 4,981 4,949 Securities 289,256 264,162 322,343 Cash and cash equivalents 27,036 24,091 22,564 Intangible assets 8,044 8,167 8,093 Deposits 622,514 603,577 615,995 Federal Home Loan Bank advances 165,988 128,836 174,266 Repurchase agreements 10,265 12,416 15,491 Long term debt 9,896 9,836 9,866 Shareholders' equity 52,494 54,541 53,016 Non-performing assets 1,571 280 1,590 Deposits Demand (non-interest bearing) $ 79,677 $ 76,549 $ 77,383 NOW accounts 77,036 79,316 82,400 Money market 114,505 146,571 146,007 Savings and other 95,266 84,903 88,142 Certificates of deposit 256,030 216,238 222,063 Total deposits 622,514 603,577 615,995 Per common share Book value $ 12.80 $ 13.18 $ 12.98 Tangible book value 10.84 11.21 10.99 Statistical data Non-performing assets to total assets 0.18% 0.03% 0.18% Allowance for loan losses to total loans 0.95 1.01 0.99 Allowance for loan losses to non-performing loans 311.90 1778.93 311.26 Common shareholders' equity to assets 6.08 6.71 6.07 Tangible common shareholders' equity to assets 5.14 5.71 5.15 Tier 1 leverage capital 7.02 7.14 6.81 Total risk-based capital 13.71 13.12 13.09 Common shares outstanding, net (period end) 4,101 4,138 4,086 *T