CTBC The Connecticut Bank And Trust Company (MM)

The Connecticut Bank and Trust Company ("CBT" or "Bank") (Nasdaq:CTBC) reported a net loss of $135,000 for the third quarter of 2010 compared to net income of $204,000 for the comparable period a year earlier. Net loss attributable to common shareholders, after accounting for $97,000 of preferred dividends, was $232,000 or $.06 per diluted share compared to net income of $176,000 or $0.05 per diluted share, respectively.

Total assets at September 30, 2010 were $272 million compared to $268 million at the start of the quarter. Loans outstanding increased $10 million to $219 million. Investment securities increased $3 million. Funding for the increases was primarily provided by $4 million increase in deposits and $8 million reduction in Federal funds sold.

The Bank reported net income of $372,000 for nine months ended September 30, 2010 compared to net income of $125,000 for the same period in the prior year. Net income available to common shareholders after $291,000 for preferred dividends was $81,000 or $0.02 per diluted share compared to net income of $39,000 or $0.01 per diluted share after $86,000 for preferred dividends for the first nine months of 2009.  

Chairman and CEO David A. Lentini remarked, "The impact of the prolonged recession continues to touch all sectors of the regional economy, including housing, retail sales and manufacturing. We are concerned that there has been very little improvement in the local economy. Our provision for loan losses of $587,000 this quarter is in direct response to this lack of improvement. While Connecticut is faring better than most areas of the country, I believe it is prudent to take action now to strengthen the balance sheet."  

Operating Results for the Quarter Ended September 30, 2010. Net interest income for the quarter ended September 30, 2010, increased $273,000 or 12% over the same period in 2009 and $121,000 or 5% on a linked quarter basis. The net interest margin for the quarter was 3.89% compared to 4.13% for the comparable period a year ago. Growth in average earning assets, principally loans, overcame compression of the margin caused by lower interest rates. The volume related changes increased net interest income $301,000 and were partially offset by $31,000 reduction from rate related changes. 

Noninterest income amounted to $186,000 in the quarter, compared to $153,000 for the comparable period a year ago. With generally no price increases during the period, the increase of $33,000 resulted primarily from increased volumes of deposit and fees from the origination and sales of mortgage loans. 

Operating expenses for the quarter totaled $2.3 million, an increase of $212,000, from the same period last year. Compensation costs, including staff additions, benefits, and related taxes, rose $44,000, for the three month period ended September 30, 2010. Professional services increased $29,000 from the prior year primarily resulting from the introduction of servicing fees on a consumer loan portfolio. All other general and administrative costs rose $110,000 from the comparable period a year prior primarily due to higher prices for goods and services and collection expenses on problem assets. FDIC insurance increased $17,000 compared to the prior period due to increased insurable deposits. 

Operating Results for the Nine Months Ended September 30, 2010. Net interest income for the nine months ended September 30, 2010, increased $1.3 million or 20% over the same period in 2009. The increase was divided evenly between changes related to changes in rates and changes related to changes in volumes.  Loan growth and lower time deposit rates were the principal drivers for this outcome. At 3.86%, in 2010, the net interest margin was virtually unchanged from 3.88% report for the same period in 2009.

Noninterest income increased $71,000 to $544,000 for the nine month period ended September 30, 2010 compared to $473,000 for the comparable period a year ago.  Brokerage, deposit operations, and loans originated for sale all contributed to this increase.

Included in noninterest income were net security gains of $60,000 and gains on loans originated for sale of $33,000 for the nine month period ending September 30, 2010 compared to $56,000 and $15,000, respectively, in the same periods a year prior. The Bank also realized a loss of $4,000 on the sale of other real estate owned during the current year.   

Operating expenses for the nine months ended September 30, 2010 totaled $6.8 million, an increase of $575,000, or 9% from the same period last year. Compensation costs, including merit increases, staff additions, and the increased cost of benefits rose $224,000, for the nine month period ended September 30, 2010. Professional services increased $105,000 from the prior year primarily resulting from the introduction of servicing fees on a consumer loan portfolio and legal and accounting guidance. All other general and administrative costs rose $246,000 due to collection efforts on problem assets, the inception of director fees and higher prices for goods and services. All other categories of expense exhibited only modest changes from the prior year.    

Provision for Loan Losses. The provision for loan losses for the 2010 quarter was $587,000 and increased the reserves to total loans ratio to 1.48% at September 30, 2010 compared to 1.35% at December 31, 2009. Growth in the loan portfolio and internally identified problem loans were the principal factors in determining the need for provisions. At September 30, 2010, the allowance was $3.2 million compared to $2.7 million at December 31, 2009.  

Asset Quality.  All loans are subject to internal risk rating, which is independently reviewed on an annual basis. Internal risk ratings are an integral component in the calculation of reserving for loan losses. Total nonaccrual loans were $3.1 million and represented 1.4% of total loans outstanding at September 30, 2010, compared to $2.0 million, or 1.0% of total loans at December 31, 2009. The coverage ratio of the allowance for loan losses to nonperforming loans was 105% at September 30, 2010. Loans past due 90 days or more and still accruing interest totaled $1.3 million as of September 30, 2010. Charged-off loans amounted to $288,000 for the quarter ended September 30, 2010 and $100,000 in the comparable period a year earlier.      

Balance Sheet Performance. Total assets were $272.3 million at September 30, 2010, up $12.0 million from December 31, 2009 and up $34.0 million or 14% year over year.  Outstanding loans increased $18.0 million from December 31, 2009 to conclude the quarter at $218.8 million. Securities available for sale increased $4.1 million primarily invested in short term mortgage-backed securities. Cash and cash equivalents declined $10.1 million due to the employment of funds into higher yielding assets. Total deposits grew $12.2 million from December 31, 2009 to end the quarter at $213.0 million and fully supported the asset growth during the period. Short-term borrowings declined $1.0 million and borrowings from the Federal Home Loan Bank Boston remained consistent at $30.5 million. The Bank is considered well-capitalized with stockholders' equity of $24.9 million at September 30, 2010.

Selected Performance Data
Quarter Ended
Dollars in thousands,	Sep 30,	Dec 31,	Mar 31,	Jun 30,	Sep 30,
except per share data	2009	2009	2010	2010	2010
Total assets (EOP)	$ 238,263	$ 260,254	$ 266,661	$ 267,531	$ 272,292
Net income (loss)	$ 204	$ 232	$ 246	$ 261	$ (135)
Net income (loss) available to common shareholders	$ 176	$ 135	$ 149	$ 164	$ (232)
Net interest margin	4.13%	4.06%	3.97%	3.74%	3.89%
Net interest spread	3.72%	3.77%	3.62%	3.44%	3.58%
Ratio of total stockholders' equity to total assets (EOP)	10.22%	9.24%	9.25%	9.42%	9.14%
Weighted avg shares outstanding (basic) (1)	3,572	3,572	3,604	3,621	3,621
Income (loss) per common share (basic)	$ 0.05	$ 0.04	$ 0.04	$ 0.05	$ (0.06)
Income (loss) per common share (diluted)	$ 0.05	$ 0.04	$ 0.04	$ 0.04	$ (0.06)
Book value per common share (EOP)	$ 5.44	$ 5.36	$ 5.43	$ 5.57	$ 5.48
Allowance for loan losses to total loans (EOP)	1.55%	1.35%	1.37%	1.40%	1.48%
Nonperforming loans to total loans	1.36%	1.03%	0.87%	1.70%	1.41%
(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		Nine Months Ended
	September 30,		September 30,
(Dollars in thousands, except per share data)	2010	2009	2010	2009
Interest and dividend income:
Interest and fees on loans	$ 3,159	$ 2,887	$ 9,269	$ 8,359
Debt securities	237	317	728	1,001
Dividends/other	23	12	70	29
Total interest and dividend income	3,419	3,216	10,067	9,389
Interest expense:
Deposits	559	629	1,731	2,265
Borrowed funds	277	277	816	831
Total interest expense	836	906	2,547	3,096
Net interest income	2,583	2,310	7,520	6,293
Provision for loan losses	587	154	896	420
Net interest income, after provision for loan losses	1,996	2,156	6,624	5,873
Noninterest income:
Service charges and fees	103	75	249	211
Brokerage commissions	63	71	206	191
Gains from sales of available-for-sale securities, net	--	--	60	56
Loss on sale of other real estate owned	(4)	--	(4)	--
Gains on loans originated for sale, net	24	7	33	15
Total noninterest income	186	153	544	473
Noninterest expenses:
Salaries and benefits	1,131	1,087	3,394	3,170
Occupancy and equipment	452	443	1,323	1,348
Data processing	90	82	248	230
Marketing	100	105	286	268
Professional services	163	134	497	392
FDIC assessment	99	82	289	300
Other general and administrative	282	172	759	513
Total noninterest expenses	2,317	2,105	6,796	6,221
Net income (loss)	(135)	204	372	125
Dividends and accretion of discount on preferred stock issuance	(97)	(28)	(291)	(86)
Net income (loss) available to common shareholders	$ (232)	$ 176	$ 81	$ 39
Net income (loss) per share:
Basic	$ (0.06)	$ 0.05	$ 0.02	$ 0.01
Diluted	$ (0.06)	$ 0.05	$ 0.02	$ 0.01
Shares outstanding (in thousands):
Average basic common shares issued and outstanding	3,621	3,572	3,615	3,572
Average diluted common shares issued and outstanding	3,621	3,572	3,635	3,572

THE CONNECTICUT BANK AND TRUST COMPANY
Balance Sheets
(Unaudited)
ASSETS
	September 30,	December 31,	September 30,
	2010	2009	2009
(Dollars in thousands)
Cash and due from banks	$ 4,161	$ 4,317	$ 13,639
Federal funds sold	12,900	22,800	--
Cash and cash equivalents	17,061	27,117	13,639
Certificates of deposit	79	78	78
Securities available for sale, at fair value	31,554	27,431	29,017
Federal Reserve Bank stock, at cost	762	724	710
Federal Home Loan Bank stock, at cost	2,057	2,057	2,057
Loans	218,777	200,780	191,869
Less: allowance for loan losses	(3,247)	(2,702)	(2,973)
Loans, net	215,530	198,078	188,896
Premises and equipment, net	1,930	2,096	2,203
Accrued interest receivable	1,148	933	894
Prepaid FDIC insurance	835	1,069	--
Other assets	1,336	671	769
Total assets	$ 272,292	$ 260,254	$ 238,263
LIABILITIES AND STOCKHOLDERS' EQUITY
Noninterest-bearing deposits	$ 34,653	$ 34,442	$ 31,407
Interest-bearing deposits	178,302	166,330	149,961
Short-term borrowings	2,989	3,988	1,173
Long-term debt	30,450	30,450	30,450
Other liabilities	1,001	991	922
Total liabilities	247,395	236,201	213,913
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	(402)	(489)	(518)
Common stock, $1.00 par value; 10,000,000 shares authorized; 3,620,950 and 3,572,450 shares issued and outstanding at September 30, 2010 and December 31, 2009, respectively	3,621	3,572	3,572
Common stock warrants	1,405	1,405	1,405
Additional paid-in capital	30,069	29,858	29,839
Restricted stock unearned compensation	(176)	(29)	(49)
Retained deficit	(15,363)	(15,444)	(15,579)
Accumulated other comprehensive income (loss)	295	(268)	232
Total stockholders' equity	24,897	24,053	24,350
Total liabilities and stockholders' equity	$ 272,292	$ 260,254	$ 238,263

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