CTBC The Connecticut Bank And Trust Company (MM)

The Connecticut Bank and Trust Company ("CBT" or "Bank") (Nasdaq:CTBC) reported net income of $261,000 for the quarter ended June 30, 2010. Income available to common shareholders after payment of preferred dividends was $164,000 or $0.04 per diluted share.  This represents the fourth consecutive quarter of profitability. Chairman and CEO, David A. Lentini, commented, "I am pleased that our results continue to show progress in the midst of extended financial difficulties in Connecticut and the rest of the country." 

Operating Results for Second Quarter. Net interest income for the quarter ended June 30, 2010 remained essentially unchanged at $2.5 million compared to the first quarter. Modest growth in loans offset the effect of the narrower net interest margin. Included in the second quarter was a seven-basis point decrease in margin from the impact of a recently announced program of early redemption of mortgage-backed securities by issuer, Fannie Mae. Income from fee-based services was $149,000, unchanged from the previous quarter. The Bank reported a $60,000 gain from sales of securities during the second quarter. There were no security sales during the first quarter.

Operating expenses for the quarter totaled $2.3 million, an increase of 1.5%, or $33,000, from the first quarter. Compensation costs decreased $79,000 on reduced benefit costs and employment taxes. Professional services increased $34,000 primarily resulting from the introduction of servicing fees on a consumer loan portfolio. All other general and administrative costs rose due to higher prices for goods and services, collection efforts on problem assets and maintenance of other real estate owned. 

Asset Quality.  Our internal analysis of all credit relationships reflects stable asset quality. We closely monitor all loan relationships and identify problem loans through an internal risk-rating system, which is independently reviewed on an annual basis. Charged-off loans amounted to $37,000 for the quarter ended June 30, 2010, compared to $48,000 in the immediately preceding quarter. Total nonaccrual loans were $3.5 million and represented 1.70% of total loans outstanding at June 30, 2010, compared to $1.8 million, or 0.87% of total loans at March 31, 2010. The increase reflects one commercial credit of $1.8 million which was placed on nonaccrual during the quarter. Management currently believes there is no risk of principal loss on this credit. The coverage ratio of the allowance for loan losses to nonperforming loans was 83% at June 30, 2010. CBT had no loans that were past due more than 90 days and still accruing as of June 30, 2010.   

Provision for Loan Losses. The provision for loan losses for the quarter was $154,000. The ratio of the allowance to total loans increased to 1.40% at June 30, 2010, compared to 1.37% at March 31, 2010. Growth in the loan portfolio and internally identified problem loans were the principal factors in determining the need for provisions. 

Operating Results for the Six Months Ended June 30, 2010.

The Bank reported net income of $507,000 for six months ended June 30, 2010 compared to a net loss of $79,000 for the same period in the prior year. After preferred stock dividends, the net income available to common shareholders was $313,000 or $0.09 per diluted share compared to a net loss of $137,000, or $(0.04) per diluted share for the comparable period in 2009.

Net interest income for the six months ended June 30, 2010, increased $954,000 or 24% over the same period in 2009, while earning assets grew by $44.3 million, led by $23.6 million growth in average loans.  CBT's core savings and demand deposits grew a combined $24 million and time deposits increased $16 million and provided the funds for this growth. The effect of this growth contributed approximately half of the improvement in net interest with the balance coming from an overall favorable change in rates for assets and liabilities. Fee-based income totaled $289,000 for the six months ended June 30, 2010 compared to $256,000 for the comparable period a year ago. The Bank reported net security gains and gain on sales of loans of $60,000 and $9,000, respectively, compared to $56,000 and $8,000, respectively, in the same period a year prior. 

Operating expenses for the six months ended June 30, 2010 totaled $4.5 million, an increase of $363,000, or 8.8% from the same period last year. Compensation costs, including staff additions, benefits, and payroll taxes, rose $180,000, for the six months ended June 30, 2010. Professional services increased $74,000 from the prior year primarily resulting from the introduction of servicing fees on a consumer loan portfolio and retention of legal and accounting guidance. All other general and administrative costs rose $138,000 due to collection efforts on problem loans, maintenance of other real estate owned, the commencement of director fees, and generally reflecting higher prices for goods and services. All other categories of expense exhibited only modest changes from the prior year.    

Balance Sheet Performance. Total assets were $267.5 million at June 30, 2010, up from $266.7 million reported at March 31, 2010. The loan portfolio expanded $3.6 million to conclude the quarter at $205.9 million.   Securities available for sale increased $556,000 and loans held for sale increased $642,000. Asset growth was primarily funded through the conversion of cash and cash equivalents. Deposits grew $1.2 million and short-term overnight borrowings declined $1.0 million. Borrowings from the Federal Home Loan Bank Boston remained consistent at $30.5 million. The Bank is considered well capitalized with stockholders' equity of $25.2 million at June 30, 2010.

Selected Performance Data
Quarter Ended
Dollars in thousands, except per share data	Jun 30, 2009	Sept 30, 2009	Dec 31, 2009	Mar 31, 2010	Jun 30, 2010
Total assets (EOP)	$ 241,645	$ 238,263	$ 260,254	$ 266,661	$ 267,531
Net income (loss)	$ (106)	$ 204	$ 232	$ 246	$ 261
Net income (loss) available to common shareholders	$ (135)	$ 176	$ 135	$ 149	$ 164
Net interest margin	3.80%	4.13%	4.06%	3.97%	3.74%
Net interest spread	3.41%	3.72%	3.77%	3.62%	3.44%
Ratio of total stockholders'
equity to total assets (EOP)	9.69%	10.22%	9.24%	9.25%	9.42%
Weighted avg shares outstanding (basic) (1)	3,572	3,572	3,572	3,604	3,621
Income (loss) per common share (basic)	$ (0.04)	$ 0.05	$ 0.04	$ 0.04	$ 0.05
Income (loss) per common share (diluted)	$ (0.04)	$ 0.05	$ 0.04	$ 0.04	$ 0.04
Book value per common share (EOP)	$ 5.19	$ 5.44	$ 5.36	$ 5.43	$ 5.57
Allowance for loan losses to
total loans (EOP)	1.56%	1.55%	1.35%	1.37%	1.40%
Nonperforming loans to total loans	2.03%	1.36%	1.03%	0.87%	1.70%
(1) Prior periods restated in accordance with adoption of ASC 260-10-45-49A (Formerly EITF 06-3-1)

Caution concerning forward-looking statements:

Statements contained in this release, which are not historical facts, may be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those currently anticipated, due to a number of factors which include, without limitation, the effects of future economic conditions, governmental fiscal and monetary policies, legislative and regulatory changes, changes in the interest rates, the effects of competition, and other factors that could cause actual results to differ materially from those provided in any such forward-looking statements. CBT does not undertake to update its forward-looking statements. See financial statements accompanying this release for additional data.

THE CONNECTICUT BANK AND TRUST COMPANY
Statements of Operations
(Unaudited)
	Three Months Ended June 30,		Six Months Ended June 30,
(Dollars in thousands, except per share data)	2010	2009	2010	2009
Interest and dividend income:
Interest and fees on loans	$ 3,062	$ 2,769	$ 6,110	$ 5,472
Debt securities	223	326	491	684
Dividends/other	28	11	47	17
Total interest and dividend income	3,313	3,106	6,648	6,173
Interest expense:
Deposits	580	785	1,172	1,636
Borrowed funds	271	272	539	554
Total interest expense	851	1,057	1,711	2,190
Net interest income	2,462	2,049	4,937	3,983
Provision for loan losses	154	179	309	266
Net interest income, after provision for loan losses	2,308	1,870	4,628	3,717
Noninterest income:
Service charges and fees	77	70	146	136
Brokerage commissions	72	61	143	120
Gains from sales of available-for-sale securities, net	60	17	60	56
Gains from sales of loans, net	--	8	9	8
Total noninterest income	209	156	358	320
Noninterest expenses:
Salaries and benefits	1,092	1,060	2,263	2,083
Occupancy and equipment	436	437	871	905
Data processing	80	70	158	148
Marketing	93	83	186	163
Professional services	183	136	332	258
FDIC assessment	93	177	190	218
Other general and administrative	279	169	479	341
Total noninterest expenses	2,256	2,132	4,479	4,116
Net income (loss)	261	(106)	507	(79)
Dividends and accretion of discount on preferred stock issuance	(97)	(29)	(194)	(58)
Net income (loss) available to common shareholders	$ 164	$ (135)	$ 313	$ (137)
Net income (loss) per share:
Basic	$ 0.05	$ (0.04)	$ 0.09	$ (0.04)
Diluted	$ 0.04	$ (0.04)	$ 0.09	$ (0.04)
Shares outstanding (in thousands):
Average basic common shares issued and outstanding	3,621	3,572	3,613	3,572
Average diluted common shares issued and outstanding	3,663	3,572	3,642	3,572

THE CONNECTICUT BANK AND TRUST COMPANY
Balance Sheets
(Unaudited)
ASSETS
	June 30, 2010	March 31, 2010	June 30, 2009
(Dollars in thousands)
Cash and due from banks	$ 4,242	$ 4,314	$ 20,409
Federal funds sold	20,700	24,000	--
Cash and cash equivalents	24,942	28,314	20,409
Certificates of deposit	79	78	78
Securities available for sale, at fair value	28,130	27,574	29,569
Federal Reserve Bank stock, at cost	723	724	710
Federal Home Loan Bank stock, at cost	2,057	2,057	2,057
Loans held for sale	642	--	728
Loans	208,821	205,228	187,072
Less: allowance for loan losses	(2,926)	(2,809)	(2,918)
Loans, net	205,895	202,419	184,154
Premises and equipment, net	2,003	2,005	2,315
Accrued interest receivable	1,072	1,095	923
Prepaid FDIC insurance	915	995	--
Other assets	1,073	1,400	702
Total assets	$ 267,531	$ 266,661	$ 241,645
LIABILITIES AND STOCKHOLDERS' EQUITY
Noninterest-bearing deposits	$ 29,586	$ 30,294	$ 26,968
Interest-bearing deposits	179,401	177,486	157,723
Short-term borrowings	1,884	2,893	2,292
Long-term debt	30,450	30,450	30,450
Other liabilities	1,007	874	786
Total liabilities	242,328	241,997	218,219
Stockholders' equity:
Preferred stock, no par value; 1,000,000 shares authorized;
5,448 shares issued and outstanding; aggregate liquidation
preference of $5,448	5,448	5,448	5,448
Discount on preferred stock	(431)	(460)	(546)
Common stock, $1.00 par value; 10,000,000 shares authorized;
3,620,950 shares issued and outstanding at June 30 and
March 31, 2010 and 3,572,450 at June 30, 2009	3,621	3,621	3,572
Common stock warrants	1,405	1,405	1,405
Additional paid-in capital	30,051	30,032	29,821
Restricted stock unearned compensation	(189)	(207)	(79)
Retained deficit	(15,131)	(15,295)	(15,755)
Accumulated other comprehensive income (loss)	429	120	(440)
Total stockholders' equity	25,203	24,664	23,426
Total liabilities and stockholder's equity	$ 267,531	$ 266,661	$ 241,645

CONTACT:  The Connecticut Bank and Trust Company
          David A. Lentini
          860-748-4250
          dlentini@thecbt.com