<PAGE>

                                 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 June 30, 2000

                                      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 0-28389


                         CONNECTICUT BANCSHARES, INC.
--------------------------------------------------------------------------------

            (Exact name of registrant as specified in its charter)
--------------------------------------------------------------------------------

        Delaware                                                  06-1564613
--------------------------------------------------------------------------------
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               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 changes 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 [_]

                     APPLICABLE ONLY TO CORPORATE ISSUERS

     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 11,232,000
shares of common stock, par value $0.01 per share, outstanding as of August 10,
2000.
<PAGE>

CONNECTICUT BANCSHARES, INC.
FORM 10-Q

INDEX


<TABLE>
<CAPTION>
                                                                   Page
                                                                   ----
<S>     <C>                                                     <C>

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

         Condensed Consolidated Statements of Condition as of
         June 30, 2000 and December 31, 1999 (unaudited)...........   2

         Condensed Consolidated Statements of Operations for the
         Three Months Ended June 30, 2000 and 1999 (unaudited).....   3

         Condensed Consolidated Statements of Operations for the
         Six Months Ended June 30, 2000 and 1999 (unaudited).......   4

         Condensed Consolidated Statement of Changes in
         Stockholders' Equity for the Six Months Ended
         June 30, 2000 (unaudited).................................   5

         Condensed Consolidated Statements of Cash Flows for the
         Six Months Ended June 30, 2000 and 1999 (unaudited).......   6

         Notes to Condensed Consolidated Financial Statements
         (unaudited)...............................................   7

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations.......................  11

Item 3.  Quantitative and Qualitative Disclosures
         About Market Risk.........................................  24

PART II: OTHER INFORMATION

Item 1.  Legal Proceedings.........................................  25
Item 2.  Changes in Securities and Use of Proceeds.................  25
Item 3.  Defaults Upon Senior Securities...........................  25
Item 4.  Submission of Matters to a Vote of Security Holders.......  25
Item 5.  Other Information.........................................  25
Item 6.  Exhibits and Reports on Form 8-K..........................  26

SIGNATURES.........................................................  27

</TABLE>
<PAGE>

PART I.  FINANCIAL INFORMATION


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

CONNECTICUT BANCSHARES, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Condition
(In thousands)

<TABLE>
<CAPTION>

                                                                     June 30,    December 31,
ASSETS                                                                 2000         1999
                                                                    ----------   ----------
                                                                           (unaudited)
<S>                                                                 <C>          <C>

Cash and cash equivalents                                           $   56,191     $   26,678
Securities available for sale (cost of $295,504 at June 30, 2000
 and $165,802 at December 31, 1999)                                    311,939        181,854
Securities held to maturity (market value of $44,998
 at December 31, 1999)                                                       -         46,060
Loans held for sale                                                        454             38
Loans, net                                                             984,081        938,340
Federal Home Loan Bank stock, at cost                                    6,654          5,909
Premises and equipment, net                                             13,915         14,436
Accrued interest receivable                                              8,091          6,900
Other real estate owned                                                    239            604
Excess of purchase price over fair value on branch acquisitions          2,183          2,398
Other assets                                                             4,480          4,581
                                                                    ----------     ----------

   Total assets                                                     $1,388,227     $1,227,798
                                                                    ==========     ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits                                                            $  918,751     $  906,591
Short-term borrowed funds                                              114,778         95,814
Mortgagors' escrow accounts                                             10,132          8,674
Advances from Federal Home Loan Bank                                   114,000         84,000
Other liabilities                                                        9,571          9,496
                                                                    ----------     ----------

   Total liabilities                                                 1,167,232      1,104,575
                                                                    ----------     ----------

Commitments and contingencies (Note 3)

Stockholders' equity:
 Common stock ($.01 par value; 45,000,000 authorized shares;
  11,232,000 shares issued and outstanding at June 30, 2000)               112              -
 Additional paid-in capital                                            108,022              -
 Retained earnings                                                     111,174        112,308
 ESOP unearned compensation                                             (9,305)             -
 Accumulated other comprehensive income                                 10,992         10,915
                                                                    ----------     ----------

   Total stockholders' equity                                          220,995        123,223
                                                                    ----------     ----------

   Total liabilities and stockholders' equity                       $1,388,227     $1,227,798
                                                                    ==========     ==========
</TABLE>

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

2
<PAGE>

CONNECTICUT BANCSHARES, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                              Three Months Ended
                                                            June 30,      June 30,
                                                              2000           1999
                                                              ----           ----
                                                                  (unaudited)

<S>                                                         <C>           <C>
Interest and dividend income:
 Interest income on loans                                   $    18,773   $16,160
 Interest and dividends on investment securities                  4,949     2,993
                                                            -----------   -------

    Total interest and dividend income                           23,722    19,153
                                                            -----------   -------

Interest expense:
 Interest on deposits                                             9,173     8,265
 Interest on borrowings                                           1,656       707
                                                            -----------   -------

    Total interest expense                                       10,829     8,972
                                                            -----------   -------

Net interest income                                              12,893    10,181
Provision for loan losses                                           225       150
                                                            -----------   -------

Net interest income after provision for loan losses              12,668    10,031
                                                            -----------   -------

Noninterest income:
 Service charges and fees                                         1,971     1,446
 (Losses) gains on sales of securities, net                         (29)       97
 Gains on mortgage loan sales, net                                   51        74
 Other                                                              431       471
                                                            -----------   -------

    Total noninterest income                                      2,424     2,088
                                                            -----------   -------

Noninterest expense:
 Salaries                                                         3,972     3,878
 Pension and other employee benefits                              1,401     1,065
 Occupancy, net                                                     712       743
 Fees and services                                                1,223       883
 Furniture and equipment                                            717       738
 Marketing                                                          896       429
 Foreclosed real estate expense                                      37        26
 (Gains) losses on sales of other real estate owned, net            (16)        4
 Other operating expenses                                         1,317     1,620
                                                            -----------   -------

    Total noninterest expense                                    10,259     9,386
                                                            -----------   -------

 Income before income taxes                                       4,833     2,733
 Provision for income taxes                                       1,599       875
                                                            -----------   -------

    Net income                                              $     3,234   $ 1,858
                                                            ===========   =======

Earnings per share:
 Basic                                                            $0.31       N/A
 Diluted                                                          $0.31       N/A

Weighted average shares outstanding:
 Basic                                                       10,355,904       N/A
 Diluted                                                     10,355,904       N/A
</TABLE>

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

3
<PAGE>

CONNECTICUT BANCSHARES, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Operations
(In thousands)

<TABLE>
<CAPTION>
                                                             Six Months Ended
                                                           June 30,       June 30,
                                                             2000           1999
                                                             ----           ----
                                                                  (unaudited)
<S>                                                           <C>       <C>

Interest and dividend income:
 Interest income on loans                                     $36,734   $32,071
 Interest and dividends on investment securities                8,733     6,112
                                                              -------   -------

    Total interest and dividend income                         45,467    38,183
                                                              -------   -------

Interest expense:
 Interest on deposits                                          18,212    16,286
 Interest on borrowings                                         2,968     1,407
                                                              -------   -------

    Total interest expense                                     21,180    17,693
                                                              -------   -------

Net interest income                                            24,287    20,490
Provision for loan losses                                         450       300
                                                              -------   -------

Net interest income after provision for loan losses            23,837    20,190
                                                              -------   -------

Noninterest income:
 Service charges and fees                                       3,629     2,755
 (Losses) gains on sales of securities, net                    (1,784)      543
 Gains on mortgage loan sales, net                                 90       370
 Other                                                          1,007       852
                                                              -------   -------

    Total noninterest income                                    2,942     4,520
                                                              -------   -------

Noninterest expense:
 Salaries                                                       7,979     7,030
 Pension and other employee benefits                            2,823     1,998
 Occupancy, net                                                 1,539     1,613
 Fees and services                                              2,147     1,703
 Furniture and equipment                                        1,487     1,528
 Marketing                                                      1,219       831
 Foreclosed real estate expense                                   151       140
 (Gains) losses on sales of other real estate owned, net          (42)       44
 Securities contributed to SBM Charitable Foundation, Inc.      8,316         -
 Other operating expenses                                       2,847     2,250
                                                              -------   -------

    Total noninterest expense                                  28,466    17,137
                                                              -------   -------

 (Loss) income before income taxes                             (1,687)    7,573
 Benefit from (provision for) income taxes                        553    (2,424)
                                                              -------   -------

    Net (loss) income                                         $(1,134)  $ 5,149
                                                              =======   =======

Earnings per share:

 Basic                                                        N/A       N/A
 Diluted                                                      N/A       N/A

Weighted average shares outstanding:

 Basic                                                        N/A       N/A
 Diluted                                                      N/A       N/A
</TABLE>

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

4
<PAGE>

CONNECTICUT BANCSHARES, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Changes in Stockholders' Equity
For the Six Months Ended June 30, 2000 (unaudited)
(Dollars in thousands)



<TABLE>
<CAPTION>
                                                                                                         Accumulated
                                                                 Additional                  ESOP           Other
                                                Common Stock      Paid-In     Retained     Unearned     Comprehensive
                                               Shares    Amount   Capital     Earnings   Compensation      Income        Total
                                             ----------  ------  ----------  ----------  -------------  -------------  ----------

<S>                                          <C>         <C>     <C>         <C>         <C>            <C>            <C>
BALANCE, December 31, 1999
   (unaudited)                                        -  $    -   $      -    $112,308   $          -       $10,915     $123,223
                                             ----------  ------   --------   ---------   ------------   -------------   --------

 Proceeds from issuance of
   common stock in connection
   with conversion, after expenses of
   approximately $4,300                      10,400,000     104      99,714          -         (9,305)              -     90,513
                                             ----------  ------  ----------  ---------   ------------   -------------   --------

 Common stock issued to SBM
   Charitable Foundation, Inc.                  832,000       8       8,308          -              -               -      8,316
                                             ----------  ------  ----------  ---------   ------------   -------------   --------

 Comprehensive (loss) income:
   Net loss                                           -       -           -     (1,134)             -               -     (1,134)
   Change in unrealized gain on
        securities available for sale,
        net of taxes                                  -       -           -          -              -              77         77
                                             ----------  ------  ----------  ---------   ------------   -------------   --------

 Total comprehensive (loss) income                    -       -           -     (1,134)             -              77     (1,057)
                                             ----------  ------  ----------  ---------   ------------   -------------   --------
BALANCE, June 30, 2000
     (unaudited)                             11,232,000    $112    $108,022   $111,174        $(9,305)        $10,992   $220,995
                                             ==========  ======  ==========  =========   ============   =============   ========
</TABLE>

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

5
<PAGE>

CONNECTICUT BANCSHARES, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Cash Flows
(In thousands)

<TABLE>
<CAPTION>
                                                                                             Six Months Ended
                                                                                       June 30,               June 30,
                                                                                         2000                   1999
                                                                                      ---------               --------
                                                                                                (unaudited)
<S>                                                                       <C>                     <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
 Net (loss) income                                                                    $  (1,134)              $  5,149
 Adjustments to reconcile net (loss) income to net cash
   provided by operating activities:
    Securities contributed to SBM Charitable Foundation, Inc.                             8,316                      -
    Provision for loan losses                                                               450                    300
    Depreciation                                                                          1,313                  1,331
    Amortization/accretion -
      Premium on deposits                                                                   216                    216
      Premium on loans and bonds                                                            131                    382
    Net (gains) losses on sales of other real estate owned                                  (42)                    44
    Losses (gains) on sales of securities, net                                            1,784                   (543)
    Gains on mortgage loan sales, net                                                       (90)                  (370)
    Changes in operating assets and liabilities -
      Accrued interest receivable                                                        (1,191)                   (94)
      Other assets                                                                          101                   (551)
      Other liabilities                                                                  (2,007)                    27
                                                                                      ---------               --------

       Net cash provided by operating activities                                          7,847                  5,891
                                                                                      ---------               --------

CASH FLOWS FROM INVESTING ACTIVITIES:
 Loan originations and purchases, net of repayments                                     (50,588)               (69,377)
 Proceeds from sales of loans                                                             2,799                 13,414
 Proceeds from maturities of held to maturity securities                                      -                  2,078
 Proceeds from maturities of available for sale securities                                6,010                 17,100
 Proceeds from sales of available for sale securities                                    80,461                  3,312
 Purchases of available for sale securities                                            (175,967)                (2,971)
 Purchases of Federal Home Loan Bank stock                                                 (745)               (18,748)
 Proceeds from principal payments of mortgage-
     backed securities                                                                    5,289                  7,385
 Proceeds from sales of other real estate owned                                             441                    446
 Purchases of premises and equipment                                                       (793)                  (672)
                                                                                      ---------               --------

       Net cash used in investing activities                                           (133,094)               (48,033)
                                                                                      ---------               --------


CASH FLOWS FROM FINANCING ACTIVITIES:
 Net proceeds from issuance of common stock                                              90,513                      -
 Net increase in savings, money market, NOW and
     demand deposits                                                                     36,518                 30,707
 Net decrease in certificates of deposit                                                (24,358)               (10,140)
 Net increase in short-term borrowed funds                                               18,964                 12,259
 Increase in mortgagors' escrow accounts                                                  3,122                  2,218
 Increase in advances from Federal Home Loan Bank                                        30,000                      -
                                                                                      ---------               --------

       Net cash provided by financing activities                                        154,759                 35,044
                                                                                      ---------               --------

       Net increase (decrease) in cash and cash
         equivalents                                                                     29,513                 (7,098)

CASH AND CASH EQUIVALENTS, beginning of period                                           26,678                 45,048
                                                                                      ---------               --------

CASH AND CASH EQUIVALENTS, end of period                                              $  56,191               $ 37,950
                                                                                      =========               ========

SUPPLEMENTAL INFORMATION:
 Cash paid for -
   Interest and dividends                                                             $  21,475               $ 17,926
   Income taxes                                                                           1,950                  2,100
 Non-cash transactions -
   Transfers from loans to other real estate owned                                          183                     79
</TABLE>

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

6
<PAGE>

CONNECTICUT BANCSHARES, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    Basis of Financial Statements Presentation

    The accompanying condensed consolidated financial statements were prepared
    in accordance with instructions to Form 10-Q, and therefore, do not include
    information or notes necessary for a complete presentation of financial
    position, results of operations and cash flows in conformity with generally
    accepted accounting principles. However, all normal recurring adjustments
    which, in the opinion of management, are necessary for a fair presentation
    of the financial statements have been included. These condensed consolidated
    financial statements should be read in conjunction with the audited
    consolidated financial statements and the notes thereto for Connecticut
    Bankshares, M.H.C. (MHC) and subsidiary included in Connecticut Bancshares,
    Inc.'s Form 10-K for the year ended December 31, 1999. The results for the
    six months ended June 30, 2000 are not necessarily indicative of the results
    that may be expected for the year ending December 31, 2000.

    Principles of consolidation and presentation

    The accompanying condensed consolidated financial statements include the
    accounts of Connecticut Bancshares, Inc. (Connecticut Bancshares or the
    Company), successor to MHC, and its wholly-owned subsidiary, The Savings
    Bank of Manchester (SBM), and its wholly-owned subsidiaries (all
    collectively, the Bank). All material intercompany balances and transactions
    have been eliminated in consolidation.

    Business

    The Company does not transact any material business other than through the
    Bank. The Company retained 50% of the net proceeds from the conversion (see
    Note 3), which primarily were invested in fixed income securities. The Bank,
    with its main office located in Manchester, Connecticut, operates through
    twenty-three branches located primarily in eastern Connecticut. The Bank's
    primary source of income is interest received on loans to customers, which
    include small and middle market businesses and individuals residing within
    the Bank's service area. As discussed in Note 3, the MHC adopted a Plan of
    Conversion pursuant to which, in March 2000, MHC merged into SBM, with SBM
    being the surviving corporation, and SBM continuing as a state-chartered
    stock savings bank and a wholly-owned subsidiary of the Company.

    Earnings per share

    Basic earnings per share represents income available to common stock divided
    by the weighted-average number of common shares outstanding during the
    period. Diluted earnings per share reflects additional common shares that
    would have been outstanding if dilutive potential shares had been issued.
    For the three and six months ended June 30, 2000, the Bank had no
    outstanding dilutive securities. Earnings per share data is not presented in
    these condensed consolidated financial statements for the six months ended
    June 30, 2000 and the three and six months ended June 30, 1999 since shares
    of common stock were not issued until March 1, 2000 and therefore per share
    information is not meaningful.

7
<PAGE>

    The following table sets forth the calculation of basic and diluted earnings
    per share for the periods indicated (dollars in thousands):

<TABLE>
<CAPTION>

                                                  Three Months Ended          Six Months Ended
                                                  June 30,    June 30,      June 30,       June 30,
                                                   2000        1999          2000           1999
                                                -----------   --------  ----------------   --------
                                                                  (Unaudited)
<S>                                             <C>           <C>       <C>                <C>

       Net income                               $     3,234        N/A               N/A        N/A

       Weighted average shares outstanding:
         Weighted average shares outstanding     11,232,000        N/A               N/A        N/A
         Less: unearned ESOP shares                (876,096)       N/A               N/A        N/A
                                                -----------

              Basic                              10,355,904        N/A               N/A        N/A
                                                -----------

              Diluted                            10,355,904        N/A               N/A        N/A
                                                -----------

       Earnings per share:

              Basic                             $      0.31        N/A               N/A        N/A
              Diluted                           $      0.31        N/A               N/A        N/A
</TABLE>

(2) RECENT ACCOUNTING PRONOUNCEMENTS

    In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
    No. 133, "Accounting for Derivative Instruments and Hedging Activities"
    (SFAS No. 133). This statement establishes accounting and reporting
    standards requiring that every derivative instrument (including certain
    derivative instruments embedded in other contracts) be recorded in the
    balance sheet as either an asset or liability measured at its fair value.
    The statement requires that changes in the derivative's fair value be
    recognized currently in earnings unless specific hedge accounting criteria
    are met. Special accounting for qualifying hedges allows a derivative's
    gains and losses to offset related results on the hedged item in the
    statement of income and requires that an entity formally document, designate
    and assess the effectiveness of transactions that receive hedge accounting.

    The Bank early adopted SFAS No. 133, as amended by SFAS No. 137, "Accounting
    for Derivatives and Hedging Activities - Deferral of the Effective Date of
    FASB Statement No. 133 and SFAS No. 138, "Accounting for Certain Derivative
    Instruments and Hedging Activities - Deferral of the Effective Date of FASB
    Statement No. 133 - An Amendment of FASB Statement No. 133", on January 1,
    2000. In connection with the adoption, the Bank reclassified all held to
    maturity investments to available for sale as allowed by SFAS No. 133. In
    March 2000, the Bank realized approximately $72,000 on the sale of an
    interest rate cap, which amount is included in other noninterest income in
    the accompanying condensed consolidated statement of operations for the six
    months ended June 30, 2000. As of June 30, 2000, the Bank did not have any
    other derivative instruments.

    On December 3, 1999, the Securities and Exchange Commission released Staff
    Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
    Statements." The guidelines set forth in SAB No. 101 stipulate that revenue
    should not be recognized until it is realized or realizable and earned. The
    Bank adopted SAB No. 101 on January 1, 2000 without effect on the Bank's
    condensed consolidated financial condition or results of operations since
    the Bank's previous revenue recognition policies complied with SAB No. 101.

(3) CONVERSION TO STOCK FORM OF OWNERSHIP

    On August 30, 1999, the Boards of Directors of MHC and SBM adopted a Plan of
    Conversion and, on October 6, 1999 and October 26, 1999, unanimously amended
    the Plan of Conversion (as amended, the Plan), pursuant to which, on March
    1, 2000, MHC converted from the mutual holding company form to the stock
    holding company form. All of the outstanding common stock of SBM was sold to
    the Company which issued and sold its stock pursuant to the Plan. The net
    proceeds of the offering were $90.5 million, after expenses of approximately
    $4.3 million. All of the stock of the Company sold in the conversion was
    offered to eligible account holders, employee benefit plans of the Bank and
    certain other eligible subscribers in subscription and direct community
    offerings pursuant to subscription rights in order of priority as set forth
    in the Plan. Additionally, the Bank established an Employee Stock Ownership
    Plan (ESOP) for the benefit of eligible employees, which became effective
    upon the conversion. The ESOP borrowed $9,305,000 from the

8
<PAGE>

    Company to fund the purchase in the open market of 898,560 shares, or 8%, of
    the common stock issued in the conversion. The Bank expects to make annual
    contributions adequate to fund the repayment of the indebtedness of the
    ESOP.

    The Plan provided for the establishment of an additional charitable
    foundation, SBM Charitable Foundation, Inc. (the New Foundation) in
    connection with the conversion. The New Foundation was funded with a
    contribution of 832,000 common shares, or 8%, of the common stock sold in
    the conversion. This contribution resulted in the recognition of an expense
    of $8.3 million in March 2000, related to the fair value of the shares
    contributed, which is reflected as such in the accompanying condensed
    consolidated statement of operations. The New Foundation is dedicated to
    charitable purposes within the Bank's local community, including community
    development activities.

    Effective upon the conversion, the Company entered into employment and
    change in control agreements with certain executives and certain eligible
    employees of the Bank. The agreements include, among other things,
    provisions for minimum annual compensation and certain lump-sum severance
    payments in the event of a "change in control" of approximately $17.4
    million.

    The Bank's deposit accounts continue to be insured by the FDIC and were not
    affected by the conversion. In accordance with the Plan, upon the completion
    of the conversion, the Bank established a special "liquidation account" for
    the benefit of eligible account holders and in an amount equal to the equity
    capital of the Bank less any subordinated debt approved as bona fide capital
    of the Bank, as of the date of its latest statement of condition contained
    in the final prospectus used in connection with the conversion. Eligible
    account holders continuing to maintain deposit accounts at the Bank are
    entitled, on a complete liquidation of the Bank after the conversion, to an
    interest in the liquidation account prior to any payment to the stockholders
    of the Bank. The Bank's retained earnings are substantially restricted with
    respect to payment of dividends to stockholders due to the liquidation
    account. The liquidation account will terminate on the tenth anniversary of
    the consummation date of the conversion.

    The primary source of funds for the Company to pay dividends is in the form
    of dividends received from SBM. Neither the Company nor SBM may declare or
    pay dividends on, or repurchase any of its shares of common stock, if the
    effect thereof would cause stockholders' equity to be reduced below either
    the balance required for the liquidation account or applicable regulatory
    capital maintenance requirements, or if such declaration, payment or
    repurchase would otherwise violate regulatory requirements.


(4) LOANS

<TABLE>
<CAPTION>

   Loans are summarized as follows (in thousands):

                                         June 30,     December 31,
                                           2000           1999
                                         --------     ------------
<S>                                      <C>        <C>

     Residential mortgages               $591,568       $549,950
     Commercial real estate mortgages     184,429        190,885
     Commercial business loans            142,363        134,550
     Installment loans                     76,879         73,572
                                         --------       --------

     Total loans                          995,239        948,957
     Less - Allowance for loan losses     (11,158)       (10,617)
                                         --------       --------

          Total loans, net               $984,081       $938,340
                                         ========       ========
</TABLE>

9
<PAGE>

    A summary of the allowance for loan losses is as follows (in thousands):
<TABLE>
<CAPTION>

                                          Six
                                      Months Ended    Year Ended
                                        June 30,     December 31,
                                          2000           1999
                                         -------        -------

<S>                                 <C>            <C>
    Balance, beginning of period         $10,617        $10,585
    Provision for loan losses                450          1,100
    Loans charged off                       (110)        (1,360)
    Recoveries                               201            292
                                         -------        -------

    Balance, end of period               $11,158        $10,617
                                         =======        =======
</TABLE>

    Nonperforming assets were approximately $8.9 million and $12.1 million at
    June 30, 2000 and December 31, 1999, respectively. During 1999, the Bank
    added two large lending relationships totaling $10.0 million to non-
    performing loans. One of these lending relationships was a commercial
    mortgage with an outstanding balance of $4.3 million. The Bank received full
    repayment of the principal on this loan on April 25, 2000. The second of
    these two relationships, the Bank's largest residential development
    relationship, had an outstanding balance of $5.7 million as of December 31,
    1999. During the first six months of 2000, this loan was paid down by $1.2
    million to $4.5 million.

<TABLE>
<CAPTION>

(5) DEPOSITS

    Deposits were as follows:

                                                    June 30,       December 31,
                                                      2000            1999
                                                    --------       -----------
                                                    (in thousands)
<S>                                            <C>             <C>

    Certificates of Deposit:
      One to twelve-month certificates              $275,995       $210,597
      One to five year certificates                   97,119        179,261
      Time certificates in denominations of
       $100,000 or more (1)                           52,875         60,489
                                                    --------       --------

                                                     425,989        450,347
                                                    --------       --------

    Savings accounts                                 226,823        223,656
    Money market accounts                             73,788         68,532
    NOW accounts                                     132,495        112,741
    Demand deposits                                   59,656         51,315
                                                    --------       --------

       Total deposits                               $918,751       $906,591
                                                    ========       ========
</TABLE>

(1)  Deposit balances in excess of $100,000 are not federally insured.

10
<PAGE>

Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         -----------------------------------------------------------------------
         of Operations.
         --------------

     The following analysis discusses changes in the financial condition and
results of operations for the three and six months ended June 30, 2000 and 1999,
and should be read in conjunction with Connecticut Bancshares, Inc. and
subsidiary's condensed consolidated financial statements and the notes thereto,
appearing elsewhere herein.

Private Securities Litigation Reform Act Safe Harbor Statement

     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 Bank 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 Bank, are
generally identified by use of the words "believe," "expect," "intend,"
"anticipate," "estimate," "project," or similar expressions. The Bank'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 Bank and its subsidiaries include, but are not limited to,
changes in: interest rates, general economic conditions, legislative/regulatory
changes, 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 Bank'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 Bank and
its business, including additional factors that could materially affect the
Bank's financial results, is included in the Company's Form 10-K filing for the
year ended December 31, 1999.

     The Bank does not undertake--and specifically disclaims any obligation--to
publicly release the result of any revisions which may be made to forward-
looking statements to reflect events or circumstances after the date of such
statements or to reflect the occurrence of anticipated or unanticipated events.

General

     The Bank's results of operations depend primarily on net interest income,
which represents the difference between interest income earned on interest-
earning assets, such as loans and securities, and interest expense on interest-
bearing liabilities, such as deposits and borrowings. The Bank also generates
noninterest income primarily from fees charged on customers' accounts and fees
earned on activities such as investment services provided through a third party
registered broker-dealer. The Bank's noninterest expenses primarily consist of
employee compensation and benefits, occupancy expense, advertising and other
operating expenses. The Bank's results of operations are also affected by
general economic and competitive conditions, notably changes in market interest
rates, government policies and regulations. SBM exceeded all of its regulatory
capital requirements at June 30, 2000.

11
<PAGE>

Comparison of Financial Condition at June 30, 2000 and December 31, 1999
------------------------------------------------------------------------

     Total assets increased $160.4 million, or 13.1%, to $1.39 billion at June
30, 2000 as compared to $1.23 billion at December 31, 1999. The increase was due
to a $29.5 million increase in cash and cash equivalents, a $46.3 million
increase in the loan portfolio, a $84.0 million increase in the investment
portfolio and a $600,000 increase in other assets. The increase in cash and cash
equivalents and investments reflects the net proceeds from the public offering
which were temporarily invested in Federal funds (cash equivalents) and
investments and a program to reposition the Bank's investment portfolio by
selling lower yielding fixed income securities and replacing them with higher
yielding securities to improve future income. Loans increased due to continued
loan demand in most sectors of the loan portfolio, despite a higher interest
rate environment. The Bank continues to offer a broad array of loan products to
an expanded market area using aggressive marketing efforts such as media
advertising and application fee rebate programs. The growth in the loan
portfolio was enhanced by management's decision in 1999 to reduce the level of
sales of fixed rate residential mortgages to the secondary market. This decision
reflects management's reevaluation of the Bank's asset/liability position and
desire for fixed rate products, despite the inherent interest rate risk in a
rising interest rate environment. Sales of fixed rate loans were $2.8 million in
the first six months of 2000 compared to $13.4 million for the first six months
of 1999. The growth in assets was funded by growth in deposits of $12.2 million,
growth in short-term borrowed funds of $19.0 million, advances from Federal Home
Loan Bank of $30.0 million and net proceeds from the public offering of $90.5
million.

     Commercial loans increased $1.4 million, or 0.42%, from $325.4 million at
December 31, 1999, to $326.8 million at June 30, 2000. As of June 30, 2000,
commercial loans represented 32.8% of the Bank's loan portfolio. Residential
mortgages increased $41.6 million, or 7.6%, from $550.0 million to $591.6
million due to continued loan demand and a reduction in the number of loans that
were paid off resulting from rising interest rates. Consumer installment loans
increased $3.3 million, or 4.5%, from $73.6 million to $76.9 million.

     Deposits totaled $918.8 million at June 30, 2000, an increase of $12.2
million, or 1.3%, compared to $906.6 million at December 31, 1999. The deposit
increase reflects a decrease in certificates of deposits of $24.4 million, or
5.4%, from $450.3 million to $426.0 million, due to increasing rate competition,
offset by an increase of $5.3 million, or 7.7%, in money market accounts and a
$28.1 million, or 17.1%, increase in NOW accounts and demand deposits. Savings
accounts increased $3.2 million, or 1.4%, from $223.7 million to $226.8 million.
The increases in money market, NOW, and demand deposit accounts reflect
aggressive marketing of both retail and commercial deposit accounts. In
addition, the Bank continues to market a short-term transactional repurchase
agreement (repo) account to commercial businesses and retail customers. These
repo accounts are shown as short-term borrowed funds in the accompanying
condensed consolidated statements of condition. Short term borrowed funds
increased $19.0 million, or 19.8%, from $95.8 million to $114.8 million during
the quarter. Advances from the Federal Home Loan Bank increased $30.0 million,
or 35.7%, from $84.0 million to $114.0 million to fund loan growth.

     Nonperforming assets totaled $8.9 million at June 30, 2000, compared to
$12.1 million at December 31, 1999, a decrease of $3.2 million, or 26.4%. The
decrease was partially due to payments on the two large commercial real estate
relationships, which were placed on nonaccrual status during 1999. One of these
lending relationships was a commercial mortgage with an outstanding balance of
$4.3 million. The Bank received full repayment of the principal on this loan on
April 25, 2000. The second of these two relationships, the Bank's largest
residential development relationship, had an outstanding balance of $5.7 million
as of December 31, 1999. During the first six months of 2000, this relationship
was paid down by $1.2 million to $4.5 million. The Bank obtained an appraisal of
the collateral as of December 1, 1999 which indicates that the loans as of June
30, 2000 are realizable. During the quarter ended June 30, 2000, the sales of
units in the residential development were less than projected by management, and
as a result, the Bank has ordered an updated appraisal for the remaining
collateral. As of August 10, 2000, Bank management believes the loans are fully
collectible. The Bank is in workout negotiations with the borrower and if these

12
<PAGE>

negotiations fail, the Bank's remaining course of action would be to institute
foreclosure proceedings, which could result in a loss to the Bank.

While management believes that, based on information currently available, the
allowance for loan losses is sufficient to cover probable losses inherent in its
loan portfolio at this time, no assurances can be given that the Bank's level of
allowance for loan losses will be sufficient to cover loan losses incurred by
the Bank 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.

Other real estate owned declined $365,000 or 60.4%, from $604,000 to $239,000
during the first six months of 2000 due to the sale of several properties.

     The following table sets forth information regarding nonperforming loans
and other real estate owned (dollars in thousands):

<TABLE>
<CAPTION>

                                                                      June 30,                   December 31,
                                                                       2000                          1999
                                                                      --------                   ------------
<S>                                                              <C>                        <C>

Nonperforming loans:
  Real estate:
      One- to four-family........................                        $  294                       $   501
      Commercial and multi-family real estate....                         4,996                        10,513
      Consumer...................................                            63                            17
      Commercial.................................                         3,301                           454
                                                                         ------                       -------
         Total nonperforming loans...............                         8,654                        11,485

Other real estate owned..........................                           239                           604
                                                                         ------                       -------
         Total nonperforming assets..............                        $8,893                       $12,089
                                                                         ======                       =======

Total nonperforming loans as a percentage of
    total loans..................................                          0.87%                         1.21%
                                                                         ======                       =======
Total nonperforming assets as a percentage
    of total assets..............................                          0.64%                         0.98%
                                                                         ======                       =======
</TABLE>

     Total stockholders' equity increased $97.8 million, or 79.3%, to $221.0
million at June 30, 2000 compared to $123.2 million on December 31, 1999. The
increase is due primarily to the net proceeds from the stock offering completed
on March 1, 2000. The loss of $1.1 million for the period and an increase of
$77,000 in accumulated other comprehensive income related to unrealized gains on
available for sale securities for the period ended June 30, 2000 were reflected
in the net increase in stockholders' equity.

Comparison of Operating Results for the Three Months Ended June 30, 2000 and
----------------------------------------------------------------------------
1999
----

     Net Income. Net income for the quarter ended June 30, 2000 was $3.2 million
compared to net income of $1.9 million for the second quarter of 1999. The
operating results for the quarter ended June 30, 2000 include a $2.7 million
increase in net interest income, primarily due to an increase in interest and
dividend income on investment securities of $2.0 million, higher average
interest-earning assets and the increasing interest rate environment. Net income
was also impacted by higher service charge and fee income of $525,000 offset by
lower securities gains of $126,000, lower gains on the sale of mortgages of
$23,000, higher operating expenses associated with salaries and benefits of
$430,000, fees and services paid of $340,000 and a new marketing program of
$467,000, and increased income taxes of $724,000.

13
<PAGE>

     The following table presents the amortized cost and fair value of the
Company's securities, by type of security, at the dates indicated (in
thousands):



<TABLE>
<CAPTION>

                                                    At June 30, 2000                      At December 31, 1999
                                             -------------------------------        -------------------------------
                                              Amortized              Fair            Amortized              Fair
                                                Cost                Value              Cost                Value
                                             -----------          ----------        -----------          ----------
<S>                                          <C>                  <C>               <C>                  <C>

Debt securities held to maturity:
   Asset-backed securities............       $         -           $       -           $ 17,481            $ 17,418
   U.S. Government and agency
      obligations.....................                 -                   -                  -                   -
   Other debt securities..............                 -                   -              3,105               2,950
                                                --------            --------           --------            --------
         Total........................                 -                   -             20,586              20,368
                                                --------            --------           --------            --------

Debt securities available for sale:
   Asset-backed securities............            34,184              34,457                  -                   -
   U.S. Government and agency
      obligations.....................            89,698              89,294             82,486              81,328
   Corporate securities...............            66,951              66,707             33,870              33,345
                                                --------            --------           --------            --------
         Total........................           190,833             190,458            116,356             114,673
                                                --------            --------           --------            --------

Equity securities available for sale:
   Marketable equity securities.......            34,122              51,476             32,273              50,545
   Other equity securities............               432                 432                432                 432
                                                --------            --------           --------            --------
         Total........................            34,554              51,908             32,705              50,977
                                                --------            --------           --------            --------
         Total debt and equity
          securities..................           225,387             242,366            169,647             186,018
                                                --------            --------           --------            --------

Mortgage-backed securities:
   Mortgage-backed securities held
      to maturity:
   Freddie Mac........................                 -                   -              7,182               6,960
   Fannie Mae.........................                 -                   -              6,077               5,807
   Ginnie Mae.........................                 -                   -             12,215              11,863
                                                --------            --------           --------            --------
         Total mortgage-backed
             securities held to
              maturity................                 -                   -             25,474              24,630
                                                --------            --------           --------            --------

   Mortgage-backed securities
    available
      for sale:
   Freddie Mac........................             5,966               5,837              2,099               2,080
   Fannie Mae.........................            32,226              31,807              7,425               7,115
   Ginnie Mae.........................            31,925              31,929              7,217               7,009
                                                --------            --------           --------            --------

         Total mortgage-backed
              securities available
               for sale...............            70,117              69,573             16,741              16,204
                                                --------            --------           --------            --------
         Total mortgage-backed
            securities................            70,117              69,573             42,215              40,834
                                                --------            --------           --------            --------
         Total investment securities..          $295,504            $311,939           $211,862            $226,852
                                                ========            ========           ========            ========
</TABLE>


14
<PAGE>

     Net Interest Income. Net interest income increased $2.7 million, or 26.6%,
to $12.9 million for the second quarter of 2000 compared to $10.2 million for
the second quarter of 1999. The increase was primarily a result of higher
interest income from an increase in average interest-earning assets and
increasing interest yields on loans and investments, partially offset by an
increase in the average cost of funds on interest bearing liabilities and
increased short-term borrowings and advances from the Federal Home Loan Bank.
Interest and dividend income increased $4.6 million, or 23.9%, to $23.7 million
for the second quarter of 2000 from $19.2 million for 1999. The average yield on
interest earning assets increased 9 basis points to 7.26% for the three months
ended June 30, 2000 from 7.17% for the three months ended June 30, 1999, due to
the higher interest rate environment. Interest income on loans increased $2.6
million, or 16.2%, to $18.8 million for the three months ended June 30, 2000
compared to $16.2 million for the three months ended June 30, 1999. The increase
was due to a $132.2 million increase in the average balance of loans outstanding
and a 6 basis point increase in the average yield on such loans. Interest and
dividend income from investment securities increased $2.0 million, or 65.4%, to
$4.9 million for the three months ended June 30, 2000 compared to $3.0 million
for the three months ended June 30, 1999. The increase in interest and dividend
income from investment securities was due to an increase in the average balance
of investment securities of $89.7 million, or 46.7%, to $281.8 million for the
quarter ended June 30, 2000 and a 56 basis point increase in the average yield
on investment securities during the quarter ended June 30, 2000.

     Interest expense increased $1.9 million, or 20.7%, to $10.8 million for the
three months ended June 30, 2000 from $9.0 million for the three months ended
June 30, 1999. The increase reflects an increase in interest expense on short-
term borrowed funds and on advances from Federal Home Loan Bank of $949,000, and
increased interest expense of $908,000 on core deposits. Advances from Federal
Home Loan Bank increased from $45.0 million as of June 30, 1999 to $114.0
million at June 30, 2000. Short-term borrowed funds, represented primarily by
commercial transactional repurchase agreements, increased to $114.8 million at
June 30, 2000 from $91.8 million at June 30, 1999. The average rate paid on
Federal Home Loan Bank advances increased 11 basis points to 6.41% for the three
months ended June 30, 2000 from 6.30% for the three months ended June 30, 1999
due to higher rates paid on new advances. Interest on deposits increased $0.9
million, or 11.0%, to $9.2 million for the three months ended June 30, 2000 from
$8.3 million for the three months ended June 30, 1999, reflecting a higher
interest rate environment for certificates of deposit and money market funds.

   Average Balances, Interest and Average Yields/Cost. The following table
presents certain information for the periods indicated regarding average
balances of assets and liabilities, as well as the total dollar amounts of
interest income from average interest-earning assets and interest expense on
average interest-bearing liabilities and the resulting average yields and costs.
The yields and costs for the periods indicated are derived by dividing income or
expense by the average balances of assets or liabilities, respectively, for the
periods presented. The yields and rates include fees which are considered
adjustments to yields.

15
<PAGE>

<TABLE>
<CAPTION>

                                                                   For the Three Months Ended June 30,
                                                 -------------------------------------------------------------------------
                                                               2000                                 1999
                                                 ------------------------------------   ----------------------------------
                                                  Average                  Average       Average                Average
                                                  Balance     Interest    Yield/Rate     Balance   Interest    Yield/Rate
                                                 ----------  ----------  ------------   --------  ----------  ------------
                                                                            (Dollars in thousands)
<S>                                             <C>         <C>           <C>       <C>       <C>          <C>

Interest-earning assets:
   Loans (1):
      Real estate...........................    $  768,536   $14,078           7.37%    $  663,541   $12,212         7.38%
      Consumer..............................        76,405     1,563           8.23         70,977     1,367         7.73
      Commercial............................       141,808     3,132           8.88        119,959     2,581         8.63
                                                ----------   -------                    ----------   -------
         Total loans........................       986,749    18,773           7.65        854,477    16,160         7.59
   Mortgage-backed securities (2)...........        62,369     1,185           7.64         35,054       590         6.75
   Investment securities (3):
      U.S. Government and agency
         obligations........................        81,888     1,436           7.05         65,343       915         5.62
      Corporate securities..................        59,701       996           6.71         39,872       584         5.88
      Marketable equity securities..........        51,565       216           1.68         30,494       223         2.93
      Other equity securities...............           432         -              -            414         -            -
      Asset-backed securities...............        25,832       427           6.65         20,969       330         6.31
   Other interest-bearing assets:
      Federal Home Loan Bank stock..........         6,654       104           6.29          5,909        93         6.31
      Federal funds sold....................        39,487       585           5.96         19,500       258         5.31
                                                ----------   -------                    ----------   -------
         Total interest-earning assets......     1,314,677   $23,722           7.26      1,072,032   $19,153         7.17
                                                             =======                                 =======
   Noninterest-earning assets...............        43,547                                  58,590
                                                ----------                              ----------
         Total assets.......................    $1,358,224                              $1,130,622
                                                ==========                              ==========

Interest-bearing liabilities:
   Deposits:
      NOW accounts..........................    $  119,467   $   424           1.43     $  111,000   $   388         1.40
      Savings and money market accounts.....       299,789     2,013           2.70        274,573     1,680         2.45
      Certificates of deposit...............       426,086     5,669           5.35        439,730     5,494         5.01
      Escrow deposits.......................         7,857        54           2.76          7,835        51         2.61
                                                ----------   -------                    ----------   -------
         Total interest-bearing deposits....       853,199     8,160           3.85        833,138     7,613         3.67
   Short-term borrowed funds................       118,432     1,013           3.44         86,814       652         3.01
   Advances from FHLB.......................       103,890     1,656           6.41         45,000       707         6.30
                                                ----------   -------                    ----------   -------
         Total interest-bearing
           liabilities......................     1,075,521   $10,829           4.05        964,952   $ 8,972         3.73
                                                             =======                                 =======
   Non-interest bearing liabilities.........        63,775                                  49,439
                                                ----------                              ----------
         Total liabilities..................     1,139,296                               1,014,391
   Capital..................................       218,928                                 116,231
                                                ----------                              ----------
         Total liabilities and capital......    $1,358,224                              $1,130,622
                                                ==========                              ==========
   Net interest-earning assets..............    $  239,156                              $  107,080
                                                ==========                              ==========
   Net interest income......................                 $12,893                                 $10,181
                                                             =======                                 =======
   Interest rate spread (4).................                                   3.21                                  3.44
   Net interest margin (5)..................                                   3.94                                  3.81
   Ratio of interest-earning assets to
      interest-bearing liabilities..........                                 122.24                                111.10
</TABLE>
____________________________

(1) Balances are net of undisbursed proceeds of construction loans in process
    and include nonperforming loans.
(2) Includes mortgage-backed securities available for sale and held to maturity.
(3) Includes investment securities available for sale at market value and held
    to maturity at amortized cost.
(4) Interest rate spread represents the difference between the weighted average
    yield on interest-earning assets and the weighted average cost of interest-
    bearing liabilities.
(5) Net interest margin represents net interest income as a percentage of
    average interest-earning assets.

16
<PAGE>

     Rate/Volume Analysis. The following table presents the effects of changing
rates and volumes on the interest income and interest expense of the Bank. The
rate column shows the effects attributable to changes in rate (changes in rate
multiplied by prior volume). The volume column shows the effects attributable to
changes in volume (changes in volume multiplied by prior rate). The net column
represents the sum of the prior columns. For purposes of this table, changes
attributable to changes in both rate and volume, which cannot be segregated,
have been allocated proportionately based on the absolute value of the change
due to rate and the change due to volume.
<TABLE>
<CAPTION>

                                    Three Months Ended June 30, 2000 Compared to
                                          Three Months Ended June 30, 1999
                                  --------------------------------------------------
                                     Increase (Decrease) Due to
                                  -------------------------------
                                     Rate                Volume                 Net
                                  --------              ---------              -----
<S>                               <C>                 <C>                    <C>

Interest-earning assets:
   Loans:
    Real estate.................     $ (62)             $1,928                 $1,866
    Consumer....................        88                 108                    196
    Commercial..................        75                 476                    551
                                     -----              ------                 ------
        Total loans.............       101               2,512                  2,613
   Mortgage-backed securities...       106                 489                    595
   Investment securities........       225               1,136                  1,361
                                     -----              ------                  ------
        Total interest-earning
            assets..............     $ 432              $4,137                 $4,569
                                     =====              ======                 ======

Interest-bearing liabilities:
   Deposits:
    Demand accounts.............     $   6              $   30                 $   36
    Savings.....................       174                 162                    336
    Certificates of deposit.....       351                (176)                   175
                                     -----              ------                 ------
        Total deposits..........       531                  16                    547
   Advances from Federal
       Home Loan Bank...........        17                 932                    949
   Other borrowings.............       107                 254                    361
                                     -----              ------                 ------
        Total interest-bearing
           liabilities..........     $ 655              $1,202                 $1,857
                                     =====              ======                 ======

Increase (decrease) in net
    interest income.............     $(223)             $2,935                 $2,712
                                     =====              ======                 ======
</TABLE>

     Provision for Loan Losses. The provision for loan losses was $225,000 for
June 30, 2000 compared to $150,000 for the quarter ended June 30, 1999. For the
quarter ended June 30, 2000, management increased the provision by $75,000 to
reflect the continued growth of the Bank's loan portfolio. The allowance for
loan losses was 1.12% of total loans and 128.9% of nonperforming loans at June
30, 2000 compared to 1.23% and 153.9%, respectively, at June 30, 1999.

     The allowance for loan losses is maintained at a level believed by
management to be adequate to absorb losses in the portfolio. Management's
determination of the adequacy of the allowance is based upon an evaluation of
individual loans and the overall risk characteristics of the loan portfolio, the
financial condition of borrowers and guarantors, past loss experience, current
real estate and economic conditions, the composition and size of the portfolio,
credit risks, the value of underlying collateral and other factors. Based on a
review of these factors, management has decided to increase future additions to
the allowance by increasing the Company's quarterly provision for loan losses to
$375,000 beginning in the quarter ending September 30, 2000. While management
believes that, based on information currently available, the

17



<PAGE>

allowance for loan losses is sufficient to cover probable losses inherent in its
loan portfolio at this time, no assurances can be given that the allowance for
loan losses will be sufficient to cover loan losses incurred by the Bank 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.

     Noninterest Income. Noninterest income totaled $2.4 million and $2.1
million for the three months ended June 30, 2000 and 1999, respectively. The
increase was due to increased fee income, partially offset by losses on sales of
securities in the 2000 period and reduced gains from the sale of mortgages to
the secondary market. During the quarter ended June 30, 2000, the Bank realized
investment losses of $29,000 compared to a $97,000 gain in three months ended
June 30, 1999. The decreased gains from the sale of mortgages to the secondary
market reflects management's decision to retain fixed-rate mortgages in order to
grow the loan portfolio, despite the inherent interest rate risk in a rising
interest rate environment. During the three months ended June 30, 2000, the Bank
sold $1.9 million of loans to the secondary market, realizing gains of $51,000,
compared to sales of $2.2 million in the three months ended June 30, 1999, which
generated gains of $74,000. Fee income from service charges and account fees was
$2.0 million for the three months ended June 30, 2000 compared to $1.4 million
for the three months ended June 30, 1999. Income from service charges and fees
increased $112,000 due to growth in merchant services operations, $232,000 from
increased fees and number of transaction accounts, and increased loan fees of
$47,000. Other fee income decreased from $471,000 for the three months ended
June 30, 1999 to $431,000 for the three months ended June 30, 2000 and reflects
decreased fees earned from brokerage services and rental income.

     Noninterest Expense. Noninterest expense increased $873,000, or 9.3%, for
the three months ended June 30, 1999 from $9.4 million for the three months
ended June 30, 1999 to $10.3 million for the three months ended June 30, 2000.
The increase in noninterest expense for the quarter was primarily due to charges
associated with the restructuring of the Company's compensation plans to align
them with other publicly-traded financial institutions and holding companies,
and to a lesser extent, additional expenses associated with general business
growth. Wages and compensation reflect merit and promotional awards, increased
staff and sales incentives related to mortgage production in the second quarter
of 2000. Benefits increased due to new benefit plans adopted and increased
health insurance costs. Other operating expense increases were related to costs
associated with the Bank's new in-house check imaging system and increased loan
servicing expenses.

     Provision for Income Taxes. The effective tax rate was 33.1% for the three
months ended June 30, 2000 and 32.0% for the three months ended June 30, 1999.

     Comparison of Operating Results for the Six Months Ended June 30, 2000 and
     --------------------------------------------------------------------------
     1999
     ----

     Net Loss. The net loss for the six months ended June 30, 2000 was $1.1
million compared to net income of $5.2 million, a decrease of $6.3 million, or
122%. The operating results for the six months ended June 30, 2000 include a
$8.3 million contribution to fund SBM Charitable Foundation, Inc. with shares of
Company stock, which was recorded as an expense by the Company, expenses related
to the restructuring of the Company's compensation plans, securities losses
realized to reposition the investment portfolio and other related expenses which
reflect the formation of a publicly-traded financial institution, partially
offset by a $3.8 million increase in net interest income.

     Net Interest Income. Net interest income increased $3.8 million, or 18.5%,
to $24.3 million for the six months ended June 30, 2000 compared to $20.5
million for the six months ended June 30, 1999. The increase was due to
increased average balance for loans and investments, offset partially by lower
yields on earning assets, and by increased interest expense on interest bearing
deposits, short-term borrowed funds, and advances from Federal Home Loan Bank.
The average rate on interest bearing liabilities increased 23 basis points due
to a lower average cost on Federal Home Loan Bank advances resulting from the
retirement of higher rate advances which matured during 1999. Interest and
dividend income increased $7.3 million,

18
<PAGE>

or 19.1%, to $45.5 million for the first six months of 2000 from $38.2 million
for 1999. The average yield on interest earning assets declined 16 basis points
to 7.15% for the six months ended June 30, 2000 from 7.31% for the six months
ended June 30, 1999, due to the competitive loan market. Interest income on
loans increased $4.7 million, or 14.5%, to $36.7 million for the six months
ended June 30, 2000 compared to $32.1 million for the six months ended June 30,
1999. The increase was due to a $131.2 million increase in the average balance
of loans outstanding, partially offset by a 9 basis point decrease in the
average yield on such loans. Interest and dividend income from investment
securities increased $2.6 million or 42.9%, to $8.7 million for the six months
ended June 30, 2000 compared to $6.1 million for the six months ended June 30,
1999. The increase in interest and dividend income from investment securities
was due to an increase in the average balance of investment securities of $60.0
million, or 30.9%, to $254.4 million for the six months ended June 30, 2000,
offset by a 9 basis point decrease in the average yield during the six months
ended June 30, 2000.

     Interest expense increased $3.5 million, or 19.7%, to $21.2 million for the
six months ended June 30, 2000 from $17.7 million for the six months ended June
30, 1999. The increase reflects an increase in interest expense on short-term
borrowed funds and on advances from Federal Home Loan Bank of $1.6 million and
increased interest expense of $1.9 million on core deposits. Advances from
Federal Home Loan Bank increased from $45.0 million as of June 30, 1999 to
$114.0 million at June 30, 2000. Short-term borrowed funds, represented
primarily by commercial transactional repurchase agreements, increased to $114.8
million at June 30, 2000 from $91.8 million at June 30, 1999. The average rate
paid on Federal Home Loan Bank advances decreased 5 basis points to 6.26% for
the six months ended June 30, 2000 from 6.31% for the six months ended June 30,
1999 due to the repayment of several older long-term advances at higher rates.
Interest expense on deposits increased $1.9 million, or 11.8%, to $18.2 million
for the six months ended June 30, 2000 from $16.3 million for the six months
ended June 30, 1999, reflecting a higher interest rate environment for
certificates of deposits and borrowings.

   Average Balances, Interest and Average Yields/Cost. The following table
presents certain information for the periods indicated regarding average
balances of assets and liabilities, as well as the total dollar amounts of
interest income from average interest-earning assets and interest expense on
average interest-bearing liabilities and the resulting average yields and costs.
The yields and costs for the periods indicated are derived by dividing income or
expense by the average balances of assets or liabilities, respectively, for the
periods presented. The yields and rates include fees which are considered
adjustments to yields.

19
<PAGE>

<TABLE>
<CAPTION>

                                                                     For the Six Months Ended June 30,
                                                 ------------------------------------------------------------------------

                                                              2000                                  1999
                                                 ----------------------------------  ------------------------------------

                                                 Average                 Average       Average                 Average
                                                 Balance    Interest    Yield/Rate     Balance    Interest    Yield/Rate
                                                ---------  ----------  ------------  ----------  ----------  ------------
                                                            (Dollars in thousands)

<S>                                          <C>         <C>           <C>         <C>           <C>          <C>
Interest-earning assets:
   Loans (1):
      Real estate...........................    $  758,729  $27,634            7.32% $  652,284   $24,347           7.53%
      Consumer..............................        75,013    3,022            8.10      70,758     2,647           7.54
      Commercial............................       138,754    6,078            8.81     118,271     5,077           8.66
                                                ----------  -------                  ----------   -------
         Total loans........................       972,496   36,734            7.60     841,313    32,071           7.69
   Mortgage-backed securities (2)...........        50,985    1,860            7.34      34,866     1,139           6.59
   Investment securities (3):
      U.S. Government and agency
         obligations........................        81,795    2,663            6.55      66,498     1,956           5.93
      Corporate securities..................        48,532    1,576            6.53      40,757     1,231           6.09
      Marketable equity securities..........        51,400      436            1.71      30,107       577           3.86
      Other equity securities...............           432        -               -         406         -              -
      Asset-backed securities...............        21,214      687            6.51      21,700       683           6.35
   Other interest-bearing assets:
      Federal Home Loan Bank stock..........         6,298      202            6.45       5,909       189           6.45
      Federal funds sold....................        44,864    1,309            5.87      11,286       337           6.02
                                                ----------  -------                  ----------   -------
         Total interest-earning assets......     1,278,016  $45,467            7.15   1,052,842   $38,183           7.31
                                                            =======                               =======
   Noninterest-earning assets...............        40,410                               63,729
                                                ----------                          -----------
         Total assets.......................    $1,318,426                          $ 1,116,571
                                                ==========                          ===========

Interest-bearing liabilities:
   Deposits:
      NOW accounts..........................    $  115,393  $   818            1.43 $  108,860    $   740           1.37
      Savings and money market accounts.....       313,070    4,121            2.65    268,552      3,180           2.39
      Certificates of deposit...............       435,425   11,401            5.27    441,872     11,090           5.06
      Escrow deposits.......................         6,280       85            2.72      6,679         80           2.42
                                                ----------  -------                 ----------    -------
         Total interest-bearing deposits....       820,168   16,425            3.80    825,963     15,090           3.68
   Short-term borrowed funds................       108,600    1,787            3.31     83,353      1,196           2.89
   Advances from FHLB.......................        95,333    2,968            6.26     45,000      1,407           6.31
                                                ----------  -------                 ----------    -------
         Total interest-bearing
           liabilities......................     1,074,101  $21,180            3.97    954,316    $17,693           3.74
                                                            =======                               =======
   Non-interest bearing liabilities.........        66,150                              47,091
                                                ----------                          ----------
         Total liabilities..................     1,140,251                           1,001,407
   Capital..................................       178,175                             115,164
                                                ----------                         -----------
         Total liabilities and capital......    $1,318,426                          $1,116,571
                                                ==========                         ===========
   Net interest-earning assets..............    $  203,915                          $   98,526
                                                ==========                         ===========
   Net interest income......................                $24,287                               $20,490
                                                            =======                              ========
   Interest rate spread (4).................                                   3.18                                 3.57
   Net interest margin (5)..................                                   3.82                                 3.92
   Ratio of interest-earning assets to
      interest-bearing liabilities..........                                 118.98                               110.32

</TABLE>
____________________________

(1) Balances are net of undisbursed proceeds of construction loans in process
    and include nonperforming loans.
(2) Includes mortgage-backed securities available for sale and held to maturity.
(3) Includes investment securities available for sale at market value and held
    to maturity at amortized cost.
(4) Interest rate spread represents the difference between the weighted average
    yield on interest-earning assets and the weighted average cost of interest-
    bearing liabilities.
(5) Net interest margin represents net interest income as a percentage of
    average interest-earning assets.

20
<PAGE>

     Rate/Volume Analysis. The following table presents the effects of changing
rates and volumes on the interest income and interest expense of the Bank. The
rate column shows the effects attributable to changes in rate (changes in rate
multiplied by prior volume). The volume column shows the effects attributable to
changes in volume (changes in volume multiplied by prior rate). The net column
represents the sum of the prior columns. For purposes of this table, changes
attributable to changes in both rate and volume, which cannot be segregated,
have been allocated proportionately based on the absolute value of the change
due to rate and the change due to volume.

<TABLE>
<CAPTION>

                                      Six Months Ended June 30, 2000 Compared to
                                              Six Months Ended June 30, 1999
                                     ----------------------------------------------
                                       Increase (Decrease) Due to
                                     -------------------------------
                                       Rate                  Volume           Net
                                     -------               ---------         ------
<S>                                  <C>                   <C>              <C>

Interest-earning assets:
   Loans:
    Real estate....................  $  (638)                 $3,925         $3,287
    Consumer.......................      210                     165            375
    Commercial.....................      112                     889          1,001
                                     -------                  ------         ------
        Total loans................     (316)                  4,979          4,663
   Mortgage-backed securities......      164                     557            721
   Investment securities...........     (248)                  2,148          1,900
                                     -------                  ------         ------
        Total interest-earning
         assets....................  $  (400)                 $7,684         $7,284
                                     =======                  ======         ======

Interest-bearing liabilities:
   Deposits:
    Demand accounts................  $    33                  $   45         $   78
    Savings........................      394                     552            946
    Certificates of deposit........      476                    (165)           311
                                     -------                  ------         ------
        Total deposits.............      903                     432          1,335
   Advances from Federal
       Home Loan Bank..............       (9)                  1,570          1,561
   Other borrowings................      202                     389            591
                                     -------                  ------         ------
        Total interest-bearing
         liabilities...............  $ 1,096                  $2,391         $3,487
                                     =======                  ======         ======

Increase (decrease) in net
    interest income................  $(1,496)                 $5,293         $3,797
                                     =======                  ======         ======
</TABLE>

     Provision for Loan Losses. The provision for loan losses was $450,000 for
the six months ended June 30, 2000 compared to $300,000 for the six months ended
June 30, 1999. For the six months ended June 30, 2000, management increased the
provision by $150,000 to reflect the continued growth of the Bank's loan
portfolio. The allowance for loan losses as 1.12% of total loans and 128.9% of
nonperforming loans at June 30, 2000 compared to 1.23% and 153.9%, respectively,
at June 30, 1999.

     The allowance for loan losses is maintained at a level believed by
management to be adequate to absorb losses in the portfolio. Management's
determination of the adequacy of the allowance is based upon an evaluation of
individual loans and the overall risk characteristics of the loan portfolio, the
financial condition of borrowers and guarantors, past loss experience, current
real estate and economic conditions, the composition and size of the portfolio,
credit risks, the value of underlying collateral and other factors. Based on a
review of these factors, management has decided to increase future additions to
the allowance by increasing the Company's quarterly provision for loan losses to
$375,000 beginning in the quarter ending September 30, 2000. While management
believes that, based on information currently available, the

21
<PAGE>

allowance for loan losses is sufficient to cover probable losses inherent in its
loan portfolio at this time, no assurances can be given that the allowance for
loan losses will be sufficient to cover loan losses incurred by the Bank 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.

     Noninterest Income. Noninterest income totaled $2.9 million and $4.5
million for the six months ended June 30, 2000 and 1999, respectively. The
decrease was due to the combined effect of losses realized on sales of
securities in a program to reposition the investment portfolio and reduced gains
from the sale of mortgages to the secondary market. During the six months ended
June 30, 2000, the Bank realized investment losses of $1.8 million compared to a
$543,000 gain for the six months ended June 30, 1999. The decreased gains from
the sale of mortgages to the secondary market reflects management's decision to
retain fixed-rate mortgages in order to grow the loan portfolio. During the six
months ended June 30, 2000, the Bank sold $2.8 million of loans to the secondary
market, realizing gains of $90,000, compared to sales of $13.4 million in the
six months ended June 30, 1999, which generated gains of $370,000. Fee income
from service charges and account fees was $3.6 million for the six months ended
June 30, 2000 compared with $2.8 million for the six months ended June 30, 1999.
Other fee income increased from $852,000 for the six months ended June 30, 1999
to $1.0 million for the six months ended June 30, 2000 and reflects increased
fees earned from brokerage services and other fee income from rental income.

     Noninterest Expense. Noninterest expense increased $11.3 million, or 66.1%,
to $28.5 million for six months ended June 30, 2000 from $17.1 million for the
six months ended June 30, 1999. The increase in noninterest expense is primarily
due to the $8.3 million expense recorded by the Company to fund SBM Charitable
Foundation, Inc., with shares of Company stock. The increase in noninterest
expense for the first six months of 2000 (exclusive of the contribution to the
charitable foundation) was primarily due to charges associated with the
restructuring of the Company's compensation plans to align them with other
publicly-traded financial institutions and holding companies, and to a lesser
extent, additional expenses associated with general business growth. The
increase in salaries of $900,000 from $7.0 million to $7.9 million reflects
merit and promotional awards, increased staff and sales incentives related to
mortgage production in the first half of 2000. Pension and employee benefits
increased $800,000 from $2.0 million to $2.8 million due to new benefit plans
adopted and increased health insurance costs. Fees and services paid increased
$400,000 from $1.7 million to $2.1 million due to expenses associated with
becoming a public company. Higher marketing expenses of $400,000 in the first
six months of 2000 reflects the development of a new marketing campaign. Other
operating expense increases were related to costs associated with the Bank's new
in-house check imaging system, Year 2000 expenses for armored car and automatic
teller machines, increased loan servicing expenses, and Merchant Service Center
expenses.

     Provision for Income Taxes. The effective tax rate was 32.8% for the six
months ended June 30, 2000 and 32.0% for the six months ended June 30, 1999.

Liquidity and Capital Resources

     Liquidity is the ability to meet current and future financial obligations
of a short-term nature. The Company further defines liquidity as the ability to
respond to the needs of depositors and borrowers as well as maintaining the
flexibility to take advantage of investment opportunities. Primary sources of
funds consist of deposit inflows, loan repayments, maturities, paydowns, sales
of investment and mortgage-backed securities and advances from Federal Home Loan
Bank of Boston. While maturities and scheduled amortization of loans and
securities are predictable sources of funds, deposit outflows and mortgage
prepayments are influenced by general interest rates, economic conditions and
competition.

22
<PAGE>

     The Bank's primary investing activities are (1) originating residential
one-to four-family mortgage loans and, to a lesser extent, commercial business
and real estate loans, multi-family loans, single-family construction loans,
home equity loans and lines of credit and consumer loans and (2) investing in
mortgage-backed securities, U.S. Government and agency obligations and corporate
equity securities and debt obligations. These activities are funded primarily by
principal and interest payments on loans, maturities of securities, deposit
growth and Federal Home Loan Bank of Boston advances. During the six months
ended June 30, 2000, the Bank's loan originations totaled $79.9 million. For the
six months ended June 30, 2000, the Bank purchased investments in mortgage-
backed securities, U.S. Government and agency obligations and corporate
securities and debt obligations totaling $176.0 million. The Bank experienced a
net increase in total deposits of $12.2 million for the six months ended June
30, 2000. Deposit flows are affected by the overall level of interest rates, the
interest rates and products offered by the Bank and its local competitors and
other factors. The Company closely monitors its liquidity position on a daily
basis. If the Company should require additional funds, additional funds are
available through Federal Home Loan Bank advances and through repurchase
agreement borrowing facilities.

     Outstanding commitments for all loans and unadvanced construction loans and
lines of credit totaled $167.0 million at June 30, 2000. Management of the Bank
anticipates that it will have sufficient funds available to meet its current
loan commitments. Certificates of deposit that are scheduled to mature in one
year or less from June 30, 2000 totaled $276.0 million. The Bank relies
primarily on competitive rates, customer service, and long-standing
relationships with customers to retain deposits. Occasionally, the Bank will
also offer special competitive promotions to its customers to increase retention
and promote deposit growth. Based upon the Bank's historical experience with
deposit retention, management believes that a significant portion of its
deposits will remain with the Bank.

     SBM must satisfy various regulatory capital requirements administered by
the federal banking agencies including a risk-based capital measure. The risk-
based capital guidelines include both a definition of capital and a framework
for calculating risk-weighted assets by assigning balance sheet assets and off-
balance sheet items to broad risk categories. At June 30, 2000, SBM exceeded all
of its regulatory capital requirements with a leverage capital level of $164.2
million, or 12.3% of average assets, which is above the required level of $53.4
million, or 4.0%, and risk-based capital of $175.3 million, or 18.9% of risk
weighted assets, which is above the required level of $74.3 million, or 8.0%.
SBM is considered "well capitalized" under regulatory guidelines.

Impact of Inflation and Changing Prices

     The condensed consolidated financial statements and related data presented
in this report have been prepared in conformity with accounting principles
generally accepted in the United States, which require the measurement of
financial position and operating results in terms of historical dollars, without
considering changes in the relative purchasing power of money over time due to
inflation. Unlike many industrial companies, substantially all of the assets and
liabilities of the Company are monetary in nature. As a result, interest rates
have a more significant impact on the Company's performance than the general
level of inflation. Over short periods of time, interest rates may not
necessarily move in the same direction or in the same magnitude as inflation.

Impact of New Accounting Standards

     For a discussion of accounting standards, see Note 2 of Notes to Condensed
Consolidated Financial Statements (unaudited).

23
<PAGE>

Item 3. Quantitative and Qualitative Disclosures About Market Risk.
        -----------------------------------------------------------

     At June 30, 2000, there have been no material changes in information
regarding quantitative and qualitative disclosure about market risk from the
information presented as of December 31, 1999 in the Company's Form 10-K.

24


<PAGE>

                                 PART II. OTHER INFORMATION

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

         Periodically, there have been various claims and lawsuits involving
the Company, such as claims to enforce liens, condemnation proceedings on
properties in which the Company holds security interests, claims involving the
making and servicing of real property loans and other issues incident to the
Company's business. The Company is not a party to any pending legal proceedings
that it believes would have a material adverse effect on the consolidated
financial condition or operations of the Company.

Item 2.  Changes in Securities and Use of Proceeds.
         -----------------------------------------

         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.


25
<PAGE>

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

    (a)  Exhibits

   2.1   Amended Provisional Plan of Conversion for Connecticut Bankshares,
         M.H.C. and The Savings Bank of Manchester (including the Amended and
         Restated Stock Articles of Incorporation and Bylaws of The Savings Bank
         of Manchester) (1)
   3.1   Certificate of Incorporation of Connecticut Bancshares, Inc. (1)
   3.2   Amended and Restated Bylaws of Connecticut Bancshares, Inc.
   10.1  Employment Agreement between The Savings Bank of Manchester and Richard
         P. Meduski (2)
   10.2  Employment Agreement between The Savings Bank of Manchester and Charles
         L. Pike (2)
   10.3  Employment Agreement between The Savings Bank of Manchester and Douglas
         K. Anderson (2)
   10.4  Employment Agreement between The Savings Bank of Manchester and Roger
         A. Somerville (2)
   10.5  Employment Agreement between The Savings Bank of Manchester and
         Nicholas B. Mason (2)
   10.6  Employment Agreement between Connecticut Bancshares, Inc. and Richard
         P. Meduski (2)
   10.7  Employment Agreement between Connecticut Bancshares, Inc. and Charles
         L. Pike (2)
   10.8  Employment Agreement between Connecticut Bancshares, Inc. and Douglas
         K. Anderson (2)
   10.9  Employment Agreement between Connecticut Bancshares, Inc. and Roger A.
         Somerville (2)
   10.10 Employment Agreement between Connecticut Bancshares, Inc. and Nicholas
         B. Mason (2)
   10.11 Employment Agreement between The Savings Bank of Manchester and
         Thomas A. Bailey (2)
   27.0  Financial Data Schedule
   _____________________________
   (1)   Incorporated by reference into this document from the Exhibits filed
         with the Registration Statement on Form S-1, and any amendments
         thereto, Registration No. 333-90865.
   (2)   Incorporated by reference into this document from the 1999 Annual
         Report on Form 10-K filed on March 30, 2000.

    (b)  Reports on Form 8-K

         None.


26
<PAGE>

CONFORMED
                                 SIGNATURES

     Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                    CONNECTICUT BANCSHARES, INC.


Dated: August 10, 2000     By: /s/ Richard P. Meduski
                               -------------------------------------------------
                               Richard P. Meduski
                               President and Chief Executive Officer
                               (principal executive officer)

Dated: August 10, 2000     By: /s/ Nicholas B. Mason
                               -------------------------------------------------
                               Nicholas B. Mason
                               Senior Vice President and Chief Financial Officer
                               (principal financial and accounting officer)



27