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 March 31, 2003

or

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 x

No o

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

Yes x

No o

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 10,991,927 of common stock, par value $0.01 per share, outstanding as of May 8, 2003.

CONNECTICUT BANCSHARES, INC.
FORM 10-Q

INDEX

		Page

PART I: FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)

	Condensed Consolidated Statements of Condition as of March 31, 2003 and December 31, 2002	2

	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2003 and 2002	3

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2003 and 2002	4

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2003 and 2002	5

	Notes to Condensed Consolidated Financial Statements	6

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

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24

Item 4.	Controls and Procedures	26

PART II:	OTHER INFORMATION

Item 1.	Legal Proceedings	27
Item 2.	Changes in Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Submission of Matters to a Vote of Security Holders	27
Item 5.	Other Information	27
Item 6.	Exhibits and Reports on Form 8-K	27

SIGNATURES		28

CERTIFICATIONS		29

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

CONNECTICUT BANCSHARES, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Condition
(Dollars in thousands)

	March 31, 2003			December 31, 2002

	(unaudited)
ASSETS
Cash and cash equivalents	$	82,257		$	25,264
Securities available for sale, at fair value		741,296			841,622
Loans held for sale		120			—
Loans, net		1,592,042			1,540,567
Federal Home Loan Bank Stock, at cost		30,783			30,783
Premises and equipment, net		17,218			17,793
Accrued interest receivable		12,163			12,613
Other real estate owned		—			—
Cash surrender value of life insurance		44,392			43,803
Current and deferred income taxes		—			58
Goodwill		19,488			19,488
Other intangible assets, net		9,204			9,598
Other assets		5,597			5,953

Total assets	$	2,554,560		$	2,547,542

LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits	$	1,583,736		$	1,595,979
Short-term borrowed funds		115,777			121,052
Mortgagors’ escrow accounts		12,161			15,097
Advances from Federal Home Loan Bank		551,108			533,890
Current and deferred income taxes		407			—
Accrued benefits and other liabilities		35,788			29,964

Total liabilities		2,298,977			2,295,982

Stockholders’ equity:
Common stock ($.01 par value; 45,000,000 shares authorized; 11,274,168 and 11,270,968 shares issued at March 31, 2003 and December 31, 2002, respectively)		113			113
Additional paid-in capital		111,540			110,345
Retained earnings		155,030			149,554
ESOP unearned compensation		(7,289	)		(7,444	)
Restricted stock unearned compensation		(10,164	)		(10,880	)
Treasury stock, at cost (185,641 and 165,422 shares at March 31, 2003 and December 31, 2002, respectively)		(6,310	)		(5,522	)
Accumulated other comprehensive income		12,663			15,394

Total stockholders’ equity		255,583			251,560

Total liabilities and stockholders’ equity	$	2,554,560		$	2,547,542

See notes to 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

	March 31, 2003			March 31, 2002

	(unaudited)
Interest and dividend income:
Interest income on loans	$	24,769		$	24,937
Interest and dividends on investment securities		8,851			10,096

Total interest and dividend income		33,620			35,033

Interest expense:
Interest on deposits and escrow		6,370			9,711
Interest on short-term borrowed funds		208			456
Interest on advances from Federal Home Loan Bank		6,176			5,943

Total interest expense		12,754			16,110

Net interest income		20,866			18,923
Provision for loan losses		375			375

Net interest income after provision for loan losses		20,491			18,548

Noninterest income:
Service charges and fees		3,437			2,845
Income from cash surrender value of life insurance		589			585
Brokerage commission income		289			360
Gains on sales of securities, net		844			683
Other than temporary impairment of investment securities		(359	)		—
Gains on mortgage loan sales, net		42			88
Other		167			159

Total noninterest income		5,009			4,720

Noninterest expense:
Salaries		4,714			4,611
Employee benefits		3,897			3,044
Fees and services		1,645			1,851
Occupancy, net		1,051			1,076
Furniture and equipment		838			963
Marketing		418			475
Amortization of other intangible assets		394			1,271
Foreclosed real estate expense		30			64
Net gains on sales of repossessed assets		(4	)		(24	)
Other operating expenses		1,559			1,697

Total noninterest expense		14,542			15,028

Income before provision for income taxes		10,958			8,240
Provision for income taxes		3,616			2,670

Net income	$	7,342		$	5,570

Earnings per share:
Basic	$	0.74		$	0.55
Diluted	$	0.68		$	0.52
Weighted average shares outstanding:
Basic		9,953,080			10,115,457
Diluted		10,863,235			10,744,499

See notes to condensed consolidated financial statements.

CONNECTICUT BANCSHARES, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Changes in Stockholders’ Equity
For the Three Months Ended March 31, 2003 and 2002 (unaudited)
(Dollars in thousands)

	Common Stock				Additional Paid-In Capital		Retained Earnings		ESOP Unearned Compensation			Restricted Stock Unearned Compensation			Treasury Stock			Accumulated Other Comprehensive Income		Total

	Shares			Amount

BALANCE, January 1, 2003		11,105,546	$	113	$	110,345	$	149,554	$	(7,444	)	$	(10,880	)	$	(5,522	)	$	15,394	$	251,560
Change in ESOP unearned compensation		—		—		460		—		155			—			—			—		615
Exercise of stock options, including tax benefits		3,200		— &nbs

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