New Milford, CT—(October 20, 2004) The Board of Directors of NewMil Bancorp, Inc. (NASDAQ/NM:NMIL) today announced results of its third quarter ended September 30, 2004.

Diluted earnings per share increased 11% to $0.50 for the third quarter ended September 30, 2004 from $0.45 for the third quarter ended September 30, 2003. For the nine-month period, ending September 30, 2004, diluted earnings per share increased 13% to $1.44 from $1.28 for the nine-months ending September 30, 2003.

Net income increased $0.2 million to $2.1 million for the third quarter of 2004, compared with $1.9 million for the third quarter of 2003. A number of factors contributed to the strong results, the most important of which was a $0.3 million, or 5%, increase in net interest income. This was attributed to a $47.3 million increase in average earning assets, which more than offset the 8 basis point decrease in the net interest margin to 3.84%, compared with 3.92% at September 30, 2003. Non-interest expense increased slightly for the third quarter of 2004, primarily due to higher marketing and advertising costs as well as higher professional services expenses. Credit quality remains strong, as evidenced by nonperforming assets at 16 basis points of total assets at September 30, 2004. The return on average shareholder’s equity was 16% for the third quarter.

Francis J. Wiatr, NewMil’s Chairman, President and CEO, noted, “This was another excellent quarter for us. Our net interest margin remained strong primarily due to the stability of our commercial lending business. We continue to develop relationships with businesses all across Western Connecticut and Fairfield County. This is possible despite a competitive market because of our broad commercial service offerings and excellent response times to business needs. We are also improving market share in our branch system as evidenced by increases in total deposits as well as an improving mix of low cost deposits associated with our commercial lending business previously mentioned. We are constantly evaluating our service delivery to insure that customers are able to distinguish the higher levels of service that we constantly strive to offer. This will position us for further increases in market share. We are optimistic about our future earnings prospects and our strong positions in Connecticut’s Litchfield and Fairfield Counties.”

At September 30, 2004 NewMil had total assets of $730 million, up $26 million since December 31, 2003. For the nine-month period, deposits increased $28 million to $586 million from $558 million at December 31, 2003. At September 30, 2004, book value and tangible book value per common share were $13.11 and $11.13, respectively, and tier 1 leverage and total risk-based capital ratios were 7.70% and 14.19%, respectively.

The Board of Directors also announced a quarterly dividend of 17 cents per common share, payable on November 19, 2004 to shareholders of record on November 5, 2004.

NewMil Bancorp is the parent company of NewMil Bank, which has served western Connecticut since 1858, and operates 19 full-service banking offices and one special needs branch.

Financial highlights are attached.

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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.

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