##### Table of Contents

---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



---



FORM 10-QSB



---



(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, 2003



or



| ̈ | 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 0-49711



---



NEW ENGLAND BANCSHARES, INC.

(Exact name of small business issuer as specified in its charter)



---



|United States                                                  |  | 04-3693643                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|660 Enfield Street, Enfield, Connecticut                       |  | 06082                               
|(Address of principal executive offices)                       |  | (Zip Code)                          



(860) 253-5200

(Issuers telephone number)



Not Applicable

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



---



The Issuer had 2,086,296 shares of common stock, par value $0.01 per share,
outstanding as of October 31, 2003.



Transitional Small
Business Disclosure Format (Check one):    Yes ̈No  x



---



---

##### Table of Contents

NEW ENGLAND BANCSHARES, INC.

FORM 10-QSB



INDEX



|                              |  | Page                                                                                                                         
|----------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------
|PART I. FINANCIAL INFORMATION |  |                                                                                                                              
|                              |  |                                                                                                                              
|Item 1.                       |  | Condensed Consolidated Financial Statements                                                                                  
|                              |  |                                                                                                                              
|                              |  | Condensed Consolidated Balance Sheets at September 30, 2003 (Unaudited) and March 31, 2003                                   
|                              |  |                                                                                                                              
|                              |  | Condensed Consolidated Statements of Income for the Three Months and Six Months Ended September 30, 2003 and 2002 (Unaudited)
|                              |  |                                                                                                                              
|                              |  | Condensed Consolidated Statements of Cash Flows for the Six Months Ended September 30, 2003 and 2002 (Unaudited)             
|                              |  |                                                                                                                              
|                              |  | Notes to Condensed Consolidated Financial Statements (Unaudited)                                                             
|                              |  |                                                                                                                              
|Item 2.                       |  | Managements Discussion and Analysis or Plan of Operation                                                                    
|                              |  |                                                                                                                              
|Item 3.                       |  | Controls and Procedures.                                                                                                     
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                                                              
|                              |  |                                                                                                                              
|Item 1.                       |  | Legal Proceedings                                                                                                            
|Item 2.                       |  | Changes in Securities                                                                                                        
|Item 3.                       |  | Defaults Upon Senior Securities                                                                                              
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                                                          
|Item 5.                       |  | Other Information                                                                                                            
|Item 6.                       |  | Exhibits and Reports on Form 8-K                                                                                             
|                              | 
|SIGNATURES                    |  | 17                                                                                                                           



---

##### Table of Contents

Part I. FINANCIAL INFORMATION



|Item 1. |  | Financial Statements.
|------- |  | ---------------------



NEW ENGLAND BANCSHARES, INC. AND SUBSIDIARY

Condensed Consolidated Balance Sheets

(Dollars in Thousands)



|                                                                                                           |  | September 30,2003 |         |   | March 31, 2003 |  
|---------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | - | -------------- | -
|                                                                                                           |  | (Unaudited)       |         |   |                |  
|ASSETS:                                                                                                    |  |                   |         |   |                |  
|Cash and due from banks                                                                                    |  | $                 | 6,863   |   |                | $
|Interest-bearing demand deposits with other banks                                                          |  |                   | 323     |   |                |  
|Federal funds sold                                                                                         |  |                   | 1,500   |   |                |  
|Money market mutual funds                                                                                  |  |                   | 6,702   |   |                |  
|                                                                                                           |  |                   |         |   |                |  
|Total cash and cash equivalents                                                                            |  |                   | 15,388  |   |                |  
|Investments in available-for-sale securities (at fair value)                                               |  |                   | 42,579  |   |                |  
|Federal Home Loan Bank stock, at cost                                                                      |  |                   | 820     |   |                |  
|Loans, net of allowance for loan losses of $1,128 as of September 30, 2003 and $1,008 as of March 31, 2003 |  |                   | 97,712  |   |                |  
|Premises and equipment, net                                                                                |  |                   | 2,450   |   |                |  
|Accrued interest receivable                                                                                |  |                   | 588     |   |                |  
|Deferred income taxes                                                                                      |  |                   | 716     |   |                |  
|Cash surrender value of life insurance                                                                     |  |                   | 3,651   |   |                |  
|Other assets                                                                                               |  |                   | 561     |   |                |  
|                                                                                                           |  |                   |         |   |                |  
|Total assets                                                                                               |  | $                 | 164,465 |   |                | $
|                                                                                                           |  |                   |         |   |                |  
|LIABILITIES AND STOCKHOLDERS EQUITY:                                                                      |  |                   |         |   |                |  
|Deposits:                                                                                                  |  |                   |         |   |                |  
|Noninterest-bearing                                                                                        |  | $                 | 7,463   |   |                | $
|Interest-bearing                                                                                           |  |                   | 124,343 |   |                |  
|                                                                                                           |  |                   |         |   |                |  
|Total deposits                                                                                             |  |                   | 131,806 |   |                |  
|Advanced payments by borrowers for taxes and insurance                                                     |  |                   | 300     |   |                |  
|Federal Home Loan Bank advances                                                                            |  |                   | 7,541   |   |                |  
|Other liabilities                                                                                          |  |                   | 1,528   |   |                |  
|                                                                                                           |  |                   |         |   |                |  
|Total liabilities                                                                                          |  |                   | 141,175 |   |                |  
|                                                                                                           |  |                   |         |   |                |  
|Stockholders equity:                                                                                      |  |                   |         |   |                |  
|Common stock, par value $.01 per share: 10,000,000 shares authorized; 2,086,296 shares issued              |  |                   | 21      |   |                |  
|Paid-in-capital                                                                                            |  |                   | 9,075   |   |                |  
|Retained earnings                                                                                          |  |                   | 15,484  |   |                |  
|Accumulated other comprehensive (loss) income                                                              |  |                   | (137    | ) |                |  
|Unearned ESOP shares, 66,416 shares                                                                        |  |                   | (666    | ) |                |  
|Unearned shares, stock-based incentive plan, 36,421 shares                                                 |  |                   | (487    | ) |                |  
|                                                                                                           |  |                   |         |   |                |  
|Total stockholders equity                                                                                 |  |                   | 23,290  |   |                |  
|                                                                                                           |  |                   |         |   |                |  
|Total liabilities and stockholders equity                                                                 |  | $                 | 164,465 |   |                | $
|                                                                                                           |  |                   |         |   |                |  



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



3



---

##### Table of Contents

NEW ENGLAND BANCSHARES, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Income



For the Three Months Ended and Six Months Ended September 30, 2003

and September 30, 2002

(Unaudited)

(In thousands, except per
share amounts)



|                                                                                                        |  | Three Months Ended September 30, |       | Six Months Ended September 30,
|------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ----- | ------------------------------
|                                                                                                        |  | 2003                             |       | 2002                          
|Interest and dividend income:                                                                           |  |                                  |       |                               
|Interest and fees on loans                                                                              |  | $                                | 1,705 |                               
|Interest and dividends on securities:                                                                   |  |                                  |       |                               
|Taxable                                                                                                 |  |                                  | 275   |                               
|Tax-exempt                                                                                              |  |                                  | 27    |                               
|Dividends on Federal Home Loan Bank stock                                                               |  |                                  | 7     |                               
|Interest on federal funds sold, interest-bearing deposits and dividends on marketable equity securities |  |                                  | 19    |                               
|                                                                                                        |  |                                  |       |                               
|Total interest and dividend income                                                                      |  |                                  | 2,033 |                               
|                                                                                                        |  |                                  |       |                               
|Interest expense:                                                                                       |  |                                  |       |                               
|Interest on deposits                                                                                    |  |                                  | 611   |                               
|Interest on advanced payments by borrowers for taxes and insurance                                      |  |                                  |      |                               
|Interest on Federal Home Loan Bank advances                                                             |  |                                  | 78    |                               
|                                                                                                        |  |                                  |       |                               
|Total interest expense                                                                                  |  |                                  | 689   |                               
|                                                                                                        |  |                                  |       |                               
|Net interest and dividend income                                                                        |  |                                  | 1,344 |                               
|Provision for loan losses                                                                               |  |                                  | 60    |                               
|                                                                                                        |  |                                  |       |                               
|Net interest and dividend income after provision for loan losses                                        |  |                                  | 1,284 |                               
|                                                                                                        |  |                                  |       |                               
|Noninterest income:                                                                                     |  |                                  |       |                               
|Service charges on deposit accounts                                                                     |  |                                  | 54    |                               
|Gain on sales and calls of available-for-sale securities, net                                           |  |                                  | 1     |                               
|Increase in cash surrender value of life insurance policies                                             |  |                                  | 36    |                               
|Other income                                                                                            |  |                                  | 6     |                               
|                                                                                                        |  |                                  |       |                               
|Total noninterest income                                                                                |  |                                  | 97    |                               
|                                                                                                        |  |                                  |       |                               
|Noninterest expense:                                                                                    |  |                                  |       |                               
|Salaries and employee benefits                                                                          |  |                                  | 662   |                               
|Occupancy and equipment expense                                                                         |  |                                  | 165   |                               
|Advertising and promotion                                                                               |  |                                  | 28    |                               
|Professional fees                                                                                       |  |                                  | 39    |                               
|Data processing expense                                                                                 |  |                                  | 48    |                               
|Stationery and supplies                                                                                 |  |                                  | 12    |                               
|Other expense                                                                                           |  |                                  | 176   |                               
|                                                                                                        |  |                                  |       |                               
|Total noninterest expense                                                                               |  |                                  | 1,130 |                               
|                                                                                                        |  |                                  |       |                               
|Income before income taxes                                                                              |  |                                  | 251   |                               
|Income taxes                                                                                            |  |                                  | 78    |                               
|                                                                                                        |  |                                  |       |                               
|Net income                                                                                              |  | $                                | 173   |                               
|                                                                                                        |  |                                  |       |                               
|Basic and diluted earnings per share                                                                    |  | $                                | 0.09  |                               



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



4



---

##### Table of Contents

NEW ENGLAND BANCSHARES, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)



|                                                                                  |  | Six Months EndedSeptember 30, |        
|--------------------------------------------------------------------------------- |  | ----------------------------- | -------
|                                                                                  |  | 2003                          |        
|Cash flows from operating activities:                                             |  |                               |        
|Net income                                                                        |  | $                             | 316    
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                               |        
|Amortization of securities, net                                                   |  |                               | 223    
|Gain on sales and calls of available-for-sale securities, net                     |  |                               | (38    
|Provision for loan losses                                                         |  |                               | 120    
|Change in deferred loan origination fees                                          |  |                               | 9      
|Depreciation and amortization                                                     |  |                               | 143    
|Increase in accrued interest receivable                                           |  |                               | (99    
|Deferred income tax benefit                                                       |  |                               | (24    
|Increase in cash surrender value life insurance policies                          |  |                               | (79    
|Decrease (increase) in prepaid expenses and other assets                          |  |                               | 19     
|Increase in accrued expenses and other liabilities                                |  |                               | 100    
|Compensation cost for stock-based incentive plan                                  |  |                               | 56     
|                                                                                  |  |                               |        
|Net cash provided by operating activities                                         |  |                               | 746    
|                                                                                  |  |                               |        
|Cash flows from investing activities:                                             |  |                               |        
|Purchases of available-for-sale securities                                        |  |                               | (24,419
|Proceeds from sales of available-for-sale securities                              |  |                               | 3,302  
|Proceeds from maturities of available-for-sale securities                         |  |                               | 16,853 
|Loan originations and principal collections, net                                  |  |                               | (4,260 
|Loan to ESOP                                                                      |  |                               |       
|Capital expenditures - premises and equipment                                     |  |                               | (9     
|Investments in life insurance policies                                            |  |                               | (7     
|                                                                                  |  |                               |        
|Net cash used in investing activities                                             |  |                               | (8,540 
|                                                                                  |  |                               |        
|Cash flows from financing activities:                                             |  |                               |        
|Net increase in demand, NOW and savings accounts                                  |  |                               | 2,691  
|Net increase in time deposits                                                     |  |                               | 162    
|Net decrease in advanced payments by borrowers for taxes and insurance            |  |                               | (51    
|Proceeds from Federal Home Loan Bank long-term advances                           |  |                               |       
|Principal payments on Federal Home Loan Bank long-term advances                   |  |                               | (601   
|Proceeds from sale of common stock, net of costs                                  |  |                               |       
|Recovery of expenditure relating to initial public offering                       |  |                               | 18     
|                                                                                  |  |                               |        
|Net cash provided by financing activities                                         |  |                               | 2,219  
|                                                                                  |  |                               |        
|Net (decrease) increase in cash and cash equivalents                              |  |                               | (5,575 
|Cash and cash equivalents at beginning of period                                  |  |                               | 20,963 
|                                                                                  |  |                               |        
|Cash and cash equivalents at end of period                                        |  | $                             | 15,388 
|                                                                                  |  |                               |        
|Supplemental disclosures:                                                         |  |                               |        
|Interest paid                                                                     |  | $                             | 1,113  
|Income taxes paid                                                                 |  |                               | 317    



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



5



---

##### Table of Contents

NEW ENGLAND BANCSHARES, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)



NOTE 1  Organization



New England Bancshares, Inc. (the Company) is a federal
corporation formed on June 4, 2002 for the purpose of acquiring all of the common stock of Enfield Federal Savings and Loan Association (the Association) concurrent with its reorganization from a mutual savings institution to the mutual
holding company form of organization. The reorganization was consummated on June 4, 2002. In connection with the reorganization, the Company sold 922,444 shares of its common stock, par value $0.01 per share, in a subscription offering and sold
1,127,431 shares to Enfield Mutual Holding Company raising approximately $8.5 million, net of costs. Approximately $6.8 million of those proceeds were contributed to the Association. The Company is a majority owned subsidiary of Enfield Mutual
Holding Company.



The Association, a federally chartered
savings and loan association headquartered in Enfield, Connecticut, operates from its six full-service branch offices in Enfield, Manchester, Windsor Locks and Suffield, Connecticut. The Association provides banking products and services to
individuals and small businesses, including residential and commercial mortgages, commercial loans, consumer loans, and a variety of deposit instruments.



NOTE 2  Basis of Presentation



The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in
the United States of America for interim financial statements and the instructions to Form 10-QSB, and accordingly do not include all of the information and footnotes required by accounting principles generally accepted in the United States of
America for complete financial statements. In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments necessary, consisting of only normal recurring accruals, to present fairly the financial
position, results of operations and cash flows of the Company for the periods presented. In preparing the interim financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ significantly from those estimates. The interim results of operations are not necessarily indicative of the operating results to be
expected for the year ending March 31, 2004.



While management
believes that the disclosures presented are adequate so as not to make the information misleading, it is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes included in the
Companys Form 10-KSB for the year ended March 31, 2003.



The condensed consolidated balance sheet as of March 31, 2003 was derived from the audited financial statements of New England Bancshares, Inc., but does not include all the disclosures required by accounting principles generally accepted
in the United States of America.



6



---

##### Table of Contents

NOTE 3  Earnings Per Share



When presented, basic EPS is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common
stock or resulted in the issuance of common stock that then shared in the earnings of the entity. There were no dilutive securities for the quarter ended September 30, 2003.



NOTE 4  Recent Accounting Pronouncements



In June 2001, the FASB issued SFAS No. 141, Business
Combinations. This Statement addresses financial accounting and reporting for business combinations and supercedes APB Opinion No. 16, Business Combinations, and SFAS No. 38, Accounting for Preacquisition Contingencies of
Purchased Enterprises. Under Opinion 16, business combinations were accounted for using one of two methods, the pooling-of-interests method or the purchase method. All business combinations in the scope of SFAS No. 141 are to be accounted for
using the purchase method. The provisions of SFAS No. 141 apply to all business combinations initiated after June 30, 2001 and to all business combinations accounted for using the purchase method for which the date of acquisition is July 1, 2001, or
later.



If the Company consummates business combinations in the
future, any such combinations that would have been accounted for by the pooling-of-interests method under Opinion 16 will be accounted for under the purchase method.



In June 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible Assets. This Statement addresses
financial accounting and reporting for acquired goodwill and other intangible assets and supercedes APB Opinion No. 17, Intangible Assets. The initial recognition and measurement provisions of SFAS No. 142 apply to intangible assets that
are defined as assets (not including financial assets) that lack physical substance. The term intangible assets is used in SFAS No. 142 to refer to intangible assets other than goodwill. The accounting for a recognized intangible asset
is based on its useful life. An intangible asset with a finite useful life is amortized; an intangible asset with an indefinite useful life is not amortized. An intangible asset that is subject to amortization shall be reviewed for impairment in
accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.



SFAS No. 142 provides that goodwill shall not be amortized. Goodwill is defined as the excess of the cost of an acquired entity over the net of the
amounts assigned to assets acquired and liabilities assumed. SFAS No. 142 further provides that goodwill shall be tested for impairment at a level of reporting referred to as a reporting unit. Impairment is the condition that exists when the
carrying amount of goodwill exceeds its implied fair value.



SFAS No. 142 was effective as follows:



All of the
provisions of SFAS No. 142 were applied in fiscal years beginning after December 15, 2001 to all goodwill and intangible assets recognized in the Companys statement of financial position at the beginning of that fiscal year, regardless of when
those previously recognized assets were initially recognized.



7



---

##### Table of Contents

The adoption of SFAS No. 142 did not have a material effect on the Companys consolidated financial
statements.



In August 2001, the FASB issued SFAS No. 144
Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 supercedes SFAS No. 121 Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, but retains the basic recognition and measurement model for assets held for use and held for sale. The provisions of SFAS No. 144 are required to be adopted starting
with fiscal years beginning after December 15, 2001. This Statement did not have a material impact on the Companys consolidated financial statements.



In June 2002, the FASB issued SFAS No. 146 Accounting for Costs Associated with Exit or Disposal Activities. This Statement requires that a
liability for a cost associated with an exit or disposal activity be recognized and measured initially at fair value only when the liability is incurred. SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31,
2002. This Statement did not have a material impact on the Companys consolidated financial statements.



In October 2002, the FASB issued SFAS No. 147 Acquisitions of Certain Financial Institutions, an Amendment of SFAS Nos. 72 and 144 and FASB
Interpretation No. 9. SFAS No. 72 Accounting for Certain Acquisitions of Banking or Thrift Institutions and FASB Interpretation No. 9 Applying APB Opinions No. 16 and 17 When a Savings and Loan Association or a Similar Institution
Is Acquired in a Business Combination Accounted for by the Purchase Method provided interpretive guidance on the application of the purchase method to acquisitions of financial institutions. Except for transactions between two or more mutual
enterprises, SFAS Statement No. 147 removes acquisitions of financial institutions from the scope of both Statement 72 and Interpretation 9 and requires that those transactions be accounted for in accordance with SFAS Statements No. 141
Business Combinations and No. 142 Goodwill and Other Intangible Assets. Thus, the requirement in paragraph 5 of Statement 72 to recognize (and subsequently amortize) any excess of the fair value of liabilities assumed over
the fair value of tangible and identifiable intangible assets acquired as an unidentifiable intangible asset no longer applies to acquisitions within the scope of SFAS Statement No. 147. In addition, SFAS Statement No. 147 amends SFAS Statement No.
144 Accounting for the Impairment or Disposal of Long-Lived Assets to include in its scope long-term customer-relationship intangible assets of financial institutions such as depositor- and borrower-relationship intangible assets and
credit cardholder intangible assets. Consequently, those intangible assets are subject to the same undiscounted cash flow recoverability test and impairment loss recognition and measurement provisions that SFAS Statement No. 144 requires for other
long-lived assets that are held and used.



Paragraph 5 of SFAS
Statement No. 147, which relates to the application of the purchase method of accounting, is effective for acquisitions for which the date of acquisition is on or after October 1, 2002. The provisions in paragraph 6 related to accounting for the
impairment or disposal of certain long-term customerrelationship intangible assets are effective on October 1, 2002. Transition provisions for previously recognized unidentifiable intangible assets in paragraphs 8-14 are effective on October
1, 2002, with earlier application permitted. The Company does not expect that there will be any material impact on the Companys consolidated financial statements on adoption of this Statement.



8



---

##### Table of Contents

NOTE 5  Acquisition Agreement



On January 22, 2003 the Company signed an agreement to acquire Windsor Locks
Community Bank, FSL. The application is subject to approval by the Companys stockholders and Windsor Locks Community Banks members. The Companys application was approved by the Office of Thrift Supervision on August 20, 2003. The
merger is expected to be completed in the fourth quarter of the 2003 calendar year.



NOTE 6  Stock-Based Incentive Plan



The Company maintains a stock-based incentive plan. The Company accounts for the plan under the recognition and measurement principles of APB Opinion No.
25, Accounting for Stock Issued to Employees, and related Interpretations. Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, encourages all entities to adopt a fair value
based method of accounting for employee stock compensation plans, whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. However, it
also allows an entity to continue to measure compensation cost for those plans using the intrinsic value based method of accounting prescribed by Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to
Employees, whereby compensation cost is the excess, if any, of the quoted market price of the stock at the grant date (or other measurement date) over the amount an employee must pay to acquire the stock. Stock options issued under the
Companys stock-based incentive plan have no intrinsic value at the grant date, and under Opinion No. 25 no compensation cost is recognized for them. The compensation cost that has been charged against income for the granting of stock awards
under the plan was $28,000 for the three months ended September 30, 2003 and $56,000 for the six months ended September 30, 2003. The following table illustrates the effect on net income if the Company had applied the fair value recognition
provisions of SFAS No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation for the three and six months ended September 30, 2003 and 2002.



|                                                                                                                                            |  | (Amount in thousands, except per share data)
|------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------
|                                                                                                                                            |  | For the QuarterEnded September 30,          
|                                                                                                                                            |  | 2003                                        
|Net income, as reported                                                                                                                     |  | $                                           
|Deduct: Total Stock-based employee compensation expense determined under fair value based method for all awards, net of related
tax effects |  |                                             
|                                                                                                                                            |  |                                             
|Pro forma net income                                                                                                                        |  | $                                           
|                                                                                                                                            |  |                                             
|Earnings per share:                                                                                                                         |  |                                             
|Basic  as reported                                                                                                                         |  | $                                           
|Basic  pro forma                                                                                                                           |  |                                             



9



---

##### Table of Contents

|Item 2. |  | Managements Discussion and Analysis or Plan of Operation.
|------- |  | ----------------------------------------------------------



The following analysis discusses changes in the financial condition and results of operations at and for the three and six months ended September 30, 2003
and 2002, and should be read in conjunction with the Companys Condensed Consolidated Financial Statements and the notes thereto, appearing in Part I, Item 1 of this document.



Forward-Looking Statements



This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995,
and is including this statement for purposes of these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Company, are generally identified by use
of the words believe, expect, intend, anticipate, estimate, project, or similar expressions. The Companys ability to predict results or the actual effect of future plans
or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company and its subsidiary include, but are not limited to, changes in: interest rates, general economic conditions, legislation and
regulations, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows,
competition, demand for financial services in the Companys market area and accounting principles and guidelines. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be
placed on such statements. Further information concerning the Company and its business, including additional factors that could materially affect the Companys financial results, is included in the Companys filings with the Securities and
Exchange Commission.



Except as required by applicable law and
regulation, the Company does not undertake  and specifically disclaims any obligation  to publicly release the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date
of such statements or to reflect the occurrence of anticipated or unanticipated events.



Comparison of Financial Condition at September 30, 2003 and March 31, 2003



Assets



Total assets of the Company were $164.5 million at September 30, 2003, an increase of $3.3 million, or 2.0%, compared to $161.2 million at March 31, 2003, primarily due to increased loan and investment securities
balances. Net loans outstanding rose $4.1 million to $97.7 million at September 30, 2003 compared to $93.6 million at March 31, 2003. The growth was primarily in commercial loans, which reflects managements efforts to meet the borrowing needs
of that important segment of its market. Investments in available-for-sale securities increased $4.5 million, or 11.8%, to $42.6 million at September 30, 2003 compared to $38.1 million at March 31, 2003.



10



---

##### Table of Contents

Total cash and cash equivalents decreased 26.7%, or $5.6 million, from $21.0 million at March 31, 2003 to $15.4 million at September 30, 2003 as management
invested excess liquidity in securities and loans.



Allowance for Loan
Losses



The Company determines the adequacy of the
allowance for loan losses on a quarterly basis. The determination is based upon managements assessment of credit quality or risk rating of loans. Loans are risk weighted when they are originated. Other factors considered in
evaluating the adequacy of the allowance include previous loss experience, current economic conditions and their effect on borrowers and the market area in general, and the performance of individual credits in relation to the contract terms. The
table below indicates the relationships between the allowance for loan losses, total loans outstanding and nonperforming loans at September 30, 2003 and March 31, 2003, respectively.



(Dollars in thousands)



|                               |  | AtSeptember 30, 2003 |        |   | AtMarch 31, 2003 |  
|------------------------------ |  | -------------------- | ------ | - | ---------------- | -
|Allowance for loan losses      |  | $                    | 1,128  |   |                  | $
|Gross loans Outstanding        |  |                      | 98,840 |   |                  |  
|Nonperforming loans            |  |                      | 157    |   |                  |  
|Allowance/ Loans outstanding   |  |                      | 1.14   | % |                  |  
|Allowance/ Nonperforming loans |  |                      | 718.47 | % |                  |  



Past due and Nonperforming Loans



The following table sets forth information regarding past
due and non-accrual loans:



(In thousands)



|                                              |  | AtSeptember 30, 2003 |       | AtMarch 31, 2003
|--------------------------------------------- |  | -------------------- | ----- | ----------------
|Past due 30 days through 89 days and accruing |  | $                    | 1,028 |                 
|Past due 90 days or more and nonaccruing      |  |                      | 157   |                 



Liabilities



Total liabilities increased $3.2 million, or 2.3%, from $138.0 million at
March 31, 2003 to $141.2 million at September 30, 2003, primarily due to an increase in deposits. Deposits increased $2.8 million, or 2.2%, from $129.0 million at March 31, 2003 to $131.8 million at September 30, 2003. The funds were used to fund
loan growth.



Comparison of Operating Results



General



The Companys results of operations depend primarily on net interest and dividend income, which is the difference
between the interest and dividend income earned on its interest-earning assets, such as loans and securities, and the interest expense on its interest-bearing liabilities, such



11



---

##### Table of Contents

as deposits and borrowings. The Company also generates noninterest income, primarily from fees and service charges. Gains on sales of securities and cash
surrender value of life insurance policies are added sources of noninterest income. The Companys noninterest expenses primarily consist of employee compensation and benefits, occupancy expense, advertising, data processing, professional fees
and other operating expenses.



Comparison of Operating Results for the Three
Months Ended September 30, 2003 and 2002



Net Income



During the three months ended September 30, 2003, the Company reported net
income of $173,000. This was $28,000, or 13.9%, less than reported for the same period last year. Net interest and dividend income increased $73,000, or 5.7%, for the quarter ended September 30, 2003 compared to the quarter ended September 30, 2002.
Growth in earning assets partially offset by a decline in the net interest margin were primarily responsible for this result. Noninterest expense increased $114,000 or 11.2%.



Net Interest and Dividend Income



Net interest and dividend income for the three months ended September 30, 2003 totaled $1,344,000 compared to $1,271,000 for the same period in 2002. This
represented an increase of $73,000 or 5.7%. The change in net interest and dividend income was due to increased levels of average interest-earning assets and interest-bearing liabilities coupled with lower interest rates earned or paid on those
balances due to the lower interest rate environment.



Interest
and dividend income amounted to $2,033,000 for the three months ended September 30, 2003, $89,000 or 4.2%, less than the $2,122,000 reported in the same quarter last year. Average interest-earning assets were $147.9 million for the quarter ended
September 30, 2003, an increase of $13.3 million, or 9.9%, compared to $134.6 million for the quarter ended September 30, 2002. The increase resulted primarily from increased average balances of $10.6 million in loans and $1.4 million in investment
securities. Average federal funds sold and money market mutual funds totaled $8.4 million for the quarter ended September 30, 2003, a $1.2 million increase from the same period last year.



Interest expense for the quarter was $689,000, $162,000, or 19.0%, less than the $851,000 reported in the same quarter last
year. Average interest-bearing liabilities grew $12.2 million during the quarter ended September 30, 2003 from $119.2 million to $131.4 million that resulted in an additional $173,000 in interest expense. As market rates continued to decline, the
average rate paid on interest-bearing liabilities was 2.10% for the quarter ended September 30, 2003 compared to 2.85 % in the year earlier. The decrease of 75 basis points reduced interest expense $100,000.



For the quarter ended September 30, 2003, interest-earning assets had an
average yield of 5.50%, down 81 basis points from 6.31% for the same period last year due to the lower interest rate environment. The change reduced net interest income $315,000 in the quarter.



12



---

##### Table of Contents

Provision for Loan Losses



The provision for loan losses for the quarter ended September 30, 2003 was $60,000 which was the same amount recorded for
the quarter ended September 30, 2002. There were no charge-offs recorded during the quarter ended September 30, 2003.



Provisions for loan losses are charges to earnings to bring the total allowance for loan losses to a level considered by management as adequate to provide
for estimated loan losses based on managements evaluation of the collectibility of the loan portfolio. While management believes that, based on information currently available, the Companys allowance for loan losses is sufficient to
cover losses inherent in its loan portfolio at this time, no assurances can be given that the Companys level of allowance for loan losses will be sufficient to cover future loan losses incurred by the Company or that future adjustments to the
allowance for loan losses will not be necessary if economic and other conditions differ substantially from the economic and other conditions used by management to determine the current level of the allowance for loan losses. In addition, the Office
of Thrift Supervision as an integral part of its examination process, periodically review the Company to provide additions to the allowance based upon judgments different from management.



Noninterest Income



During the quarter ended September 30, 2003, noninterest income was $97,000 compared to $98,000 in the same quarter a year ago.



Noninterest Expense



Noninterest expense for the quarter ended September 30, 2003 was $1,130,000, an increase of $114,000, or 11.2%, from
$1,016,000 in the quarter ended September 30, 2002. Salaries and employee benefits increased $65,000, or 10.9%, reflecting normal salary increases, higher costs for employee benefits, and additions to staff to support a new branch office. Occupancy
and equipment expense increased $29,000, or 21.3%, to $165,000 primarily from the costs of operating a new banking office opened in October 2002. Professional fees decreased $23,000 in the quarter as a result of a reduction in consulting fees.



Provision for Income Taxes



Reflecting the decrease in pretax net income, the income tax provision for
the quarter ended September 30, 2003 was $78,000 compared to $92,000 for the quarter ended September 30, 2002.



Comparison of Operating Results for the Six Months Ended September 30, 2003 and 2002



Net Income



During the six months ended September 30, 2003 the Company reported net income of $316,000. This was $125,000, or 28.3% less than reported for the same
period last year. Net interest and dividend income increased $241,000, or 9.9% during the period. Growth in earning assets partially offset by a decline in the net interest margin were primarily responsible for this result. Noninterest income
increased $41,000 during the period. The increase in net interest income was offset by an increase in noninterest expense of $477,000, or 25.5%.



13



---

##### Table of Contents

Net Interest and Dividend Income



Net interest and dividend income for the six months ended September 30, 2003 totaled $2,679,000 compared to $2,438,000 for
the same period in 2002. This represented an increase of $241,000, or 9.9%. Interest and dividends earned amounted to $4,101,000 for the six months ended September 30, 2003, a decrease of $83,000, or 2.0%, from $4,184,000 earned during the same
period in 2002. Interest expense for the period was $1,422,000, $324,000, or 18.6%, less than the $1,746,000 reported in the same period last year. The change in net interest and dividend income was due to increases in the average assets and
liabilities coupled with lower interest rates earned or paid on those balances, due to the lower rate environment.



Interest-earning assets averaged $147.3 million for the six months ended September 30, 2003, an increase of $14.0 million, or 10.5%, compared to $133.3
million for the six months ended September 30, 2002. The increase resulted primarily from increased averages of $10.9 million in loans and $2.1 million in investment securities. Total average interest-earning assets for the six months ended
September 30, 2003 increased $14.0 million. The additional volume added approximately $486,000 to interest income. For the six months ended September 30, 2003 interest-earning assets had an average yield of 5.57%, a decrease of 0.71% from the same
period a year ago. The change reduced net interest income $569,000 in the quarter.



Average interest-bearing liabilities grew $9.2 million during the six months ended September 30, 2003 from $121.8 million to $131.0 million. The average interest rate paid was 2.17% compared to 2.87% for the same
period in 2002 as the net decrease in expense for the six months amounted to $324,000 of which $419,000 resulted from changes in rates and $95,000 from changes in volume.



The provision for loan losses for the six months ended September 30, 2003 was $120,000, the same amount reported in the same
period last year. There were no charge-offs recorded during the six months ended September 30, 2003 or the six months ended September 30, 2002.



Noninterest Income



During the six months ended September 30, 2003 noninterest income was $242,000 compared to $201,000 in the same period a year ago. The increase in
noninterest income was primarily due to $25,000, or 192.3%, increase in gains from sales on investment securities available-for-sale.



Noninterest Expense



Noninterest expense for the six months ended September 30, 2003 was $2,347,000, an increase of $477,000, or 25.5%, from $1,870,000 in the six months ended
September 30, 2002. Salaries and employee benefits increased $231,000, or 21.3%, reflecting normal salary increases, higher costs for employee benefits and additions to staff to support the growth of the Company. Professional fees increased $23,000,
or 22.5%, to $125,000 in the period reflecting an increase in legal and consulting expenses associated with the branch opening and employee plan review and analysis.



14



---

##### Table of Contents

Liquidity and Capital Resources



The term liquidity refers to the ability of the Company and the Association to meet current and future short-term financial
obligations. The Company and the Association further define liquidity as the ability to generate adequate amounts of cash to fund loan originations, deposit withdrawals and operating expenses. Liquidity management is both a daily and long-term
function of business management. The Companys main source of liquidity is the proceeds it retained from its stock offering. The Associations primary sources of liquidity are deposits, scheduled amortization and prepayments of loan
principal and mortgage-related securities, funds provided by operations and, to a much lesser extent, Federal Home Loan Bank borrowings. The Association can borrow funds from the Federal Home Loan Bank based on eligible collateral of loans and
securities. The Association had Federal Home Loan Bank borrowings as of September 30, 2003 of $7.5 million with unused borrowing capacity of $8.9 million.



The Associations primary investing activities are the origination of loans and the purchase of mortgage and investment securities. During the three
months ended September 30, 2003 and fiscal 2002, the Association originated loans of approximately $4.3 million and $5.4 million, respectively. Purchases of investment securities totaled $24.4 million and $23.1 million for the six months ended
September 30, 2003 and September 30, 2002, respectively.



Loan
repayment and maturing investment securities are a relatively predictable source of funds. However, deposit flows, calls of investment securities and prepayments of loans and mortgage-backed securities are strongly influenced by interest rates,
general and local economic conditions and competition in the marketplace. These factors reduce the predictability of the timing of these sources of funds. Deposit flows are affected by the level of interest rates, by the interest rates and products
offered by competitors and by other factors. Total deposits were $131.8 million at September 30, 2003, a $2.8 million, or 2.2%, increase from the $129.0 million balance at March 31, 2003. The Association monitors its liquidity position frequently
and anticipates that it will have sufficient funds to meet its current funding commitments.



The Association was well-capitalized at September 30, 2003 and exceeded each of the applicable regulatory capital requirements at such date. The table below presents the capital required and maintained at September
30, 2003.



(dollars in thousands)



|                          |  | Required |   |  | Association |       
|------------------------- |  | -------- | - |  | ----------- | ------
|Tier 1 Capital            |  | 4        | % |  | $           | 21,635
|Total Risk based Capital  |  | 8        | % |  | $           | 22,705
|Tier 1 Risk based Capital |  | 8        | % |  | $           | 21,635



Management is not
aware of any known trends, events or uncertainties that will have or are reasonably likely to have a material effect on the Companys or the Associations liquidity, capital or operations, nor is management aware of any current
recommendations by regulatory authorities which, if implemented, would have a material effect on the Companys or the Associations liquidity, capital or operations.



15



---

##### Table of Contents

|Item 3. |  | Controls and Procedures.
|------- |  | ------------------------



The Companys principal executive officer and principal financial officer has evaluated the effectiveness of the Companys disclosure
controls and procedures, as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, (the Exchange Act). Based upon his evaluation, the principal executive officer and principal
financial officer concluded that, as the end of the period covered by this report, the Companys disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the
Company files or submits under the Exchange Act with the Securities and Exchange Commission (the SEC) (1) is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and (2) is
accumulated and communicated to the Companys principal executive and principal financial officer as appropriate to allow timely decisions regarding required disclosure. In addition, based on the evaluation, no change in the Companys
internal control over financial reporting occurred during the quarter ended September 30, 2003 that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.



PART II. OTHER INFORMATION



|Item 1. |  | Legal Proceedings.
|------- |  | ------------------



The Company is not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business. Such
routine legal proceedings, in the aggregate, are believed by management to be immaterial to the Companys financial condition or results of operations.



|Item 2. |  | Changes in Securities.
|------- |  | ----------------------



None



|Item 3. |  | Defaults Upon Senior Securities.
|------- |  | --------------------------------



None.



|Item 4. |  | Submission of Matters to a Vote of Security Holders.
|------- |  | ----------------------------------------------------



None.



|Item 5. |  | Other Information.
|------- |  | ------------------



None.



16



---

##### Table of Contents

|Item 6. |  | Exhibits and Reports on Form 8-K.
|------- |  | ---------------------------------



| | (a) | Exhibits
| | --- | --------



|     | 
|---- | 
|2.1  | 
|     | 
|2.2  | 
|     | 
|3.1  | 
|     | 
|3.2  | 
|     | 
|4.1  | 
|     | 
|31.1 | 
|     | 
|32.1 | 

---

|* | Incorporated by reference into this document from New England Bancshares, Inc.s Form SB-2, Registration Statement filed under the Securities Act of 1933, Registration No.
333-63271
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|** | Incorporated by reference into this document from the Exhibits to the Form 8-K as filed on January 27, 2003.
|-- | ------------------------------------------------------------------------------------------------------------



| | (b) | Reports on Form 8-K
| | --- | -------------------



On July 25, 2003, the Company furnished a Form 8-K in which it announced its earnings for the quarter ended June 30, 2003. The press release announcing
earnings was attached by exhibit.



SIGNATURES



In accordance with the
requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                        |  |  |  | NEW ENGLAND BANCSHARES, INC.
|----------------------- |  |  |  | ----------------------------
|                        |  |  | 
|Dated: November 3, 2003 |  |  |  | By:                         
|                        |  |  |  |                             
|                        |  |  |  |                             
|                        |  |  |  |                             
|                        |  |  |  |                             



17