CONNECTICUT BANCSHARES INC/DE - 10-Q Quarterly Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2002

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

Commission File Number 0-28389

CONNECTICUT BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

Delaware		06-1564613

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

923 Main Street, Manchester, Connecticut		06040

(Address of principal executive offices)		(Zip Code)

(860) 646-1700

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: the Issuer had 11,103,542 shares of common stock, par value $0.01 per share, outstanding as of November 12, 2002.

CONNECTICUT BANCSHARES, INC.
FORM 10-Q

INDEX

		Page

PART I: FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)

	Condensed Consolidated Statements of Condition as of September 30, 2002 and December 31, 2001	2

	Condensed Consolidated Statements of Operations for the Three Months Ended September 30, 2002 and 2001	3

	Condensed Consolidated Statements of Operations for the Nine Months Ended September 30, 2002 and 2001	4

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2002 and 2001	5

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2002 and 2001	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31

Item 4.	Controls and Procedures	32

PART II: OTHER INFORMATION

Item 1.	Legal Proceedings	33
Item 2.	Changes in Securities and Use of Proceeds	33
Item 3.	Defaults Upon Senior Securities	33
Item 4.	Submission of Matters to a Vote of Security Holders	33
Item 5.	Other Information	33
Item 6.	Exhibits and Reports on Form 8-K	33

SIGNATURES		34

CERTIFICATIONS		35

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

CONNECTICUT BANCSHARES, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Condition
(Dollars in thousands)

				September 30, 2002			December 31, 2001

				(unaudited)
ASSETS
Cash and cash equivalents				$	81,661		$	122,624
Securities available for sale, at fair value					759,393			758,534
Loans held for sale					35			746
Loans, net					1,519,998			1,421,143
Federal Home Loan Bank Stock, at cost					30,783			30,783
Premises and equipment, net					18,181			19,348
Accrued interest receivable					12,828			12,933
Other real estate owned					—			84
Cash surrender value of life insurance					43,204			41,396
Current and deferred income taxes					—			1,686
Goodwill					19,488			19,970
Other intangible assets					9,693			12,927
Other assets					6,409			4,250

		Total assets		$	2,501,673		$	2,446,424

LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits				$	1,590,657		$	1,590,938
Short-term borrowed funds					119,532			117,180
Mortgagors’ escrow accounts					7,862			10,580
Advances from Federal Home Loan Bank					472,681			465,355
Current and deferred income taxes					38			—
Accrued benefits and other liabilities					57,397			26,997

		Total liabilities			2,248,167			2,211,050

Commitments and Contingencies
Stockholders’ equity:
	Common stock ($.01 par value; 45,000,000 shares authorized; 11,267,364 and 11,235,608 shares issued at September 30, 2002 and December 31, 2001, respectively)				113			112
	Additional paid-in capital				110,217			108,354
	Retained earnings				143,693			127,737
	ESOP unearned compensation				(7,599	)		(8,065	)
	Restricted stock unearned compensation				(5,196	)		(6,395	)
	Treasury stock, at cost (165,422 shares at September 30, 2002)				(5,522	)		—
	Accumulated other comprehensive income				17,800			13,631

			Total stockholders’ equity		253,506			235,374

			Total liabilities and stockholders’ equity	$	2,501,673		$	2,446,424

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CONNECTICUT BANCSHARES, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Operations
(Dollars in thousands, except for per share data)

					For the Three Months Ended

					September 30, 2002			September 30, 2001

					(unaudited)
Interest and dividend income:
	Interest income on loans				$	25,354		$	21,870
	Interest and dividends on investment securities					9,754			7,665

		Total interest and dividend income				35,108			29,535

Interest expense:
	Interest on deposits					8,452			9,090
	Interest on short-term borrowed funds					442			750
	Interest on Advances from Federal Home Loan Bank					5,856			3,375

		Total interest expense				14,750			13,215

Net interest income						20,358			16,320
Provision for loan losses						375			875

Net interest income after provision for loan losses						19,983			15,445

Noninterest income:
	Service charges and fees					3,302			2,430
	Income from cash surrender value of life insurance					616			384
	Brokerage commission income					468			273
	Gains (losses) on sales of securities, net					619			(230	)
	Other than temporary impairment of investment securities					(410	)		(3,916	)
	Gains on mortgage loan sales, net					41			76
	Other					119			104

			Total noninterest income (loss)			4,755			(879	)

Noninterest expense:
	Salaries					5,342			4,444
	Employee benefits					2,745			2,217
	Fees and services					1,732			1,336
	Amortization of other intangible assets					985			503
	Occupancy, net					961			815
	Furniture and equipment					942			784
	Marketing					475			440
	Foreclosed real estate expense					88			44
	Net gains on sales of repossessed assets					(8	)		(21	)
	Director and employee retirement expenses					—			1,419
	Relocation and branch closing costs					—			872
	Other operating expenses					1,417			1,671

				Total noninterest expense		14,679			14,524

Income before provision for income taxes						10,059			42
Provision for income taxes						3,320			—

				Net income	$	6,739		$	42

Earnings per share:
	Basic				$	0.66		$	—
	Diluted				$	0.62		$	—
Weighted average shares outstanding:
	Basic					10,134,565			10,031,410
	Diluted					10,814,817			10,647,938

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CONNECTICUT BANCSHARES, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Operations
(Dollars in thousands, except for per share data)

			For the Nine Months Ended

			September 30, 2002		September 30, 2001

			(unaudited)
Interest and dividend income:
	Interest income on loans		$	75,541	$	61,599
	Interest and dividends on investment securities			30,020		18,023

		Total interest and dividend income		105,561		79,622

Interest expense:

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