New Milford, CT—(April 20, 2005) The Board of Directors of NewMil Bancorp, Inc. (NASDAQ/NM:NMIL) today announced results of its first quarter ended March 31, 2005.

Diluted earnings per share increased 11% to $0.52 for the first quarter ended March 31, 2005 from $0.47 for the first quarter ended March 31, 2004.

Net income increased 10.5% to $2.2 million for the first quarter of 2005, compared with $2.0 million for the first quarter of 2004. The strong results were attributable to increases in net interest income, non-interest income and lower non-interest expense. Net interest income increased primarily due to an increase of $58.7 million in average earning assets, which more than offset the 30 basis point decrease in the net interest margin to 3.71%, compared with 4.01% at March 31, 2004. Non-interest income increased due to higher service fees collected as well as higher gains on sales of residential loans. Non-interest expense decreased $0.2 million, or 5% for the first quarter of 2005, primarily due to lower compensation, marketing and advertising costs as well as lower professional service expenses.

NewMil’s assets increased to $790 million, up $45 million since December 31, 2004. Total gross loans were $482 million at March 31, 2005, which increased slightly since December 31, 2004. Credit quality remains strong, as evidenced by nonperforming assets at 6 basis points of total assets at March 31, 2005. Deposits increased $17 million to $604 million from $587 million at December 31, 2004. At March 31, 2005, book value and tangible book value per common share were $12.96 and $11.01, respectively, and tier 1 leverage and total risk-based capital ratios were 7.75% and 14.23%, respectively. Return on average shareholder’s equity was 16% for the first quarter of 2005. NewMil’s efficiency ratio was under 57% for the quarter ending March 31, 2005.

Francis J. Wiatr, NewMil’s Chairman, President and CEO noted, “We are very pleased with our results for the quarter. Our commercial lending business had an excellent quarter, while our residential business softened as expected due to higher interest rates.

Our competitive deposit product programs and excellent customer service are continuing to attract many new business and personal household accounts to the Bank. While our market place is competitive, we are continuing to build market share as people appreciate the difference dealing with a local bank who can deliver excellent and timely service.

The economy in the markets we serve is strong. However, there is a confused outlook as to the threat of inflation at the national level over the next few quarters. Consequently, we are expecting a continued rise in interest rates in the near term. While this could soften things a bit, there is enough momentum for quality projects that we expect continued strong loan demand.

 

With prudent consideration for the uncertainty that accompanies changing economic scenarios, we are optimistic about our growth prospects as we move forward into the year. We are in the process of opening two additional Fairfield County locations this year and are confident in our overall outlook for 2005.”

The Board of Directors also announced a quarterly dividend of 20 cents per common share, payable on May 17, 2005 to shareholders of record on May 3, 2005.

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

Financial highlights are attached.

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(in thousands except ratios and per share amounts)

(unaudited)

 

(in thousands except ratios and per share amounts)

 

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