CTBC The Connecticut Bank And Trust Company (MM)

The Connecticut Bank and Trust Company ("CBT" or "Bank") (Nasdaq:CTBC) reported net income of $165,000 for the quarter ended September 30, 2011 compared to a net loss of $135,000 for the comparable period a year earlier. After accounting for preferred stock dividends and accretion, net income available to common shareholders was $68,000 or $0.02 per diluted common share compared to a net loss of $232,000 or $0.06 per diluted common share, respectively. Total assets increased $10.0 million and totaled $284.2 million at September 30, 2011 compared to $274.2 million at December 31, 2010.        

Chairman and CEO David A. Lentini commented, "The bank continues to be challenged by economic conditions which have not improved markedly from the reported end of the recession. Loan demand has slackened of late, reflective of small business owners continuing to be cautious in this environment. On a positive note, operating expenses were reduced during the period as we continue to control costs."

The Bank reported net income of $1.1 million for the nine months ended September 30, 2011 compared to net income of $372,000 for the comparable period a year earlier. After accounting for preferred stock dividends and accretion, net income available to common shareholders was $796,000, or $0.22 per diluted common share compared to net income of $81,000 or $0.02 per diluted common share, respectively. The Bank's 2011 results included $700,000 in income tax benefits related to net operating loss carryforwards recognized by reversing a portion of the deferred tax valuation allowance.

As announced on October 25, 2011, the Bank signed a definitive merger agreement on October 25, 2011 under which Berkshire Hills Bancorp, Inc. will acquire the Bank in a transaction valued at approximately $30 million.  For additional details, please refer to the Bank's Form 8-K filed with the Federal Reserve on October 26, 2011 and posted on the Bank's website at www.thecbt.com under the tab "Investors Relations" and then under the tab "SEC Reports".

Operating Results for the Quarter Ended September 30, 2011. Net interest income for the quarter ended September 30, 2011 was $2.5 million compared to $2.6 million from the same period in the prior year. The net interest margin was 3.59% for the quarter ended September 30, 2011, 3.89% for the comparable period a year ago and 3.74% for the quarter ended June 30, 2011. Interest income decreased $182,000 as lower rates on earning assets more than offset the volume related changes due to growth in average earning assets, principally loans. Lower rates across all funding sources and overall lower volume of interest-bearing liabilities added $104,000 to net interest income. 

Non-interest income amounted to $552,000 in the quarter, compared to $186,000 for the comparable period a year ago. Customer service fees totaled $130,000, up $27,000 or 26%, from the same period in the prior year resulting from an increase in the number of deposit accounts. Brokerage commissions were $88,000, up $25,000 or 40%, for the same period a year prior. Gains on sales of securities were $310,000 for the quarter compared to zero for the same period a year prior. Net gains from sales of loans were $24,000, which is unchanged from the same period in the prior year.    

Operating expenses for the quarter totaled $2.5 million, an increase of $177,000, from the same period last year. Salaries and benefits, including staff additions and related payroll taxes, rose $34,000 for the three-month period ended September 30, 2011 compared to the same period in the prior year. Professional services increased $99,000 from the prior year mainly due to servicing fees on the consumer loan portfolio and increased legal and consulting costs. General and administrative costs rose $36,000 from the comparable period a year prior primarily due to higher prices for purchased goods and services and collection expenses on increased problem assets.

Operating Results for the Nine Months Ended September 30, 2011. Net interest income for both the nine months ended September 30, 2011 and 2010 was $7.5 million. The net interest margin was 3.73% for the nine months ended September 30, 2011 compared to 3.86% for the same period a year ago. Interest income decreased $398,000 as lower rates on earning assets more than offset the volume related increase of $654,000 from growth in average earning assets, principally loans. Lower rates across all funding sources and overall lower volume of interest-bearing liabilities added $354,000 to net interest income. 

Non-interest income amounted to $1.1 million for the nine months ended September 30, 2011, compared to $544,000 for the comparable period a year ago. Customer service fees totaled $360,000, up $111,000 or 45%, from the same period in the prior year, due to an increase in the number of deposit accounts. Brokerage commissions were $251,000, up $45,000 or 22%, for the same period a year prior. Gains on sales of securities were $448,000 for the nine months ended September 30, 2011 compared to $60,000 for the same period a year prior. Net gains from  sales of loans were $66,000 and $33,000, respectively.   

Operating expenses for the nine months ended September 30, 2011 totaled $7.6 million, an increase of $756,000, from the same period last year. Salaries and benefits, including staff additions and related payroll taxes, rose $192,000, for the nine month period ended September 30, 2011 compared to the same period in the prior year. Professional services increased $245,000 to $742,000 from the prior year mainly due to servicing fees on the consumer loan portfolio and increased legal and consulting costs. FDIC insurance premiums increased $79,000 chiefly related to higher premiums on insured deposits. General and administrative costs rose $245,000 from the comparable period a year prior primarily due to increased costs of goods and services and collection expenses on increased problem assets.       

Provision for Loan Losses. The provision for loan losses was $398,000 for quarter ending September 30, 2011 compared to $587,000 for the same period in the prior year. Provisions for loan losses totaled $662,000 for the nine months ended September 30, 2011 compared to $896,000 for the same period in the prior year. The ratio of the allowance for loan losses to total loans was 1.40% at September 30, 2011 compared to 1.51% at December 31, 2010 due to a decrease in specific reserves on impaired loans offset by an increase in the general reserve. Outstanding loans decreased $2.3 million to $221.4 million compared to $223.7 million at December 31, 2010 mainly due to a $1.6 million transfer to other real estate owned and net charge offs of $944,000. The allowance was $3.1 million at September 30, 2011 compared to $3.4 million at December 31, 2010.  

Asset Quality.  All loans are subject to internal risk rating, which are independently reviewed on an annual basis. Internal risk ratings and delinquency status are integral components in the calculation of the allowance for loan losses. Total non-performing loans were $12.9 million, or 5.82% of total loans outstanding at September 30, 2011, compared to $8.8 million or 4% of total loans at December 31, 2010. Several nonaccrual loans contain government guarantees totaling $2.7 million and $2.4 million, respectively, providing additional protection against losses. There were no loans past due 90 days or more and still accruing interest at September 30, 2011 compared to $1.2 million as of December 31, 2010. Total other real estate owned was $1.9 million at September 30, 2011 compared to $682,000 at December 31, 2010. Lentini remarked, "The Bank has experienced delayed payments from our customers and have seen a migration of loans to nonaccrual status. In response to delinquent payments, the Bank charged off $704,000 of loans this quarter." Net loan charge-offs amounted to $703,000 for the quarter ended September 30, 2011 and $266,000 in the comparable period a year earlier. Net charged-off loans totaled $944,000 for the nine months ended September 30, 2011 and $351,000 in the comparable period a year earlier. Management mitigates the risk of loss through sound underwriting standards, strong collateral management, diversification among industries and government guarantees from the USDA and SBA, when available.       

Balance Sheet Performance. Total assets at September 30, 2011 were $284.2 million compared to $274.2 million at the prior year end. Outstanding loans were $221.4 million, down $2.3 million from December 31, 2010. Securities available for sale increased to $42.6 million compared to $35.3 million at December 31, 2010 which resulted from purchases of certain government-sponsored residential and commercial mortgage-backed securities. Cash and cash equivalents totaled $13.2 million, up $4.5 million at December 31, 2010. During the first quarter, the Bank reduced the valuation allowance against the deferred tax asset by $700,000, after concluding it is more likely than not that this portion of the deferred tax asset will be realized based upon available evidence of historical taxable income levels for the past two years and projected taxable income. Total deposits increased $8.8 million from December 31, 2010 to $222.5 million at September 30, 2011 chiefly from core deposit relationships.

Securities sold under agreements to repurchase and secured borrowings increased $1.1 million while advances from the Federal Home Loan Bank of Boston declined by $1.0 million. The Bank is considered well-capitalized with stockholders' equity of $25.8 million at September 30, 2011.

About The Connecticut Bank and Trust Company

CBT is a full service commercial bank headquartered in Hartford, CT, with 8 branches located in the Greater Hartford area. CBT serves privately-owned business customers and individuals with a focus on customer service and responsiveness.

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. 

This release may also contain forward-looking statements about the proposed merger of Berkshire Hills Bancorp, Inc. ("Berkshire") and CBT, including information regarding the surviving entity in the merger, expected synergies from the merger of CBT and Berkshire, combined operating and financial data, competitive strengths, growth opportunities, and whether and when the transactions contemplated by the merger agreement will be consummated. The discussion of such matters is qualified by the inherent risk and uncertainties surrounding future expectations generally, and also may materially differ from actual future experience involving any one or more of such matters. Such risks and uncertainties include: the failure to realize capital and operating expense synergies in the timeframe expected or at all; unexpected costs or liabilities associated with the merger; the result of the review of the proposed merger by various regulatory agencies, and any conditions imposed on the new company in connection with the consummation of the merger; approval of the merger by the shareholders of CBT and satisfaction of various other conditions to the closing of the merger contemplated by the merger agreement; and the risks that are described from time to time in CBT's reports filed with the Federal Reserve, including CBT's annual report on Form 10-K for the year ended December 31, 2010, and subsequent reports filed with the Federal Reserve.

Additional Information for Shareholders

Berkshire and CBT will file a proxy statement/prospectus, registration statement and other relevant documents concerning the proposed merger with the Securities and Exchange Commission (the "SEC") and the Board of Governors of the Federal Reserve System (the "Federal Reserve"). SHAREHOLDERS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS AND REGISTRATION STATEMENT WHEN THEY BECOME AVAILABLE AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC AND THE FEDERAL RESERVE, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE MERGER. You will be able to obtain a free copy of the proxy statement/prospectus, as well as other filings containing information (i) about Berkshire at the SEC's Internet site (http://www.sec.gov) and (ii) about CBT at CBT's Internet site (http://www.thecbt.com). Copies of the proxy statement/prospectus to be filed by Berkshire and CBT can also be obtained, when available and without charge, (i) at CBT's Internet site at http://www.thecbt.com under the tab "Investors Relations" and then under the tab "SEC Reports" or by directing a request to the Connecticut Bank and Trust Company, Attention: Anson Hall, 58 State House Square, Hartford, Connecticut 06103, (203) 246-5200, or (ii) at Berkshire's Internet site at http://www.berkshirebank.com under the tab "About Us" and then under the tab "Investor Relations" and then under the tab "SEC Filings" or by directing a request to Berkshire Hills Bancorp, Inc., Attention: Investors Relations Department, 24 North Street, Pittsfield, Massachusetts 01201, (413) 443-5601.

CBT and Berkshire and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of CBT in connection with the merger. Information about the directors and executive officers of CBT and their ownership of CBT common stock is set forth in CBT's most recent proxy statement for its 2011 annual meeting of shareholders held on May 19, 2011, which is available at CBT's Internet site (http://www.thecbt.com) and upon request from CBT at the address in the preceding paragraph. Information about the directors and executive officers of Berkshire is set forth in Berkshire's most recent proxy statement filed with the SEC on Schedule 14A on March 24, 2011, which is available at the SEC's Internet site (http://www.sec.gov) and upon request from Berkshire at the address set forth in the preceding paragraph. Additional information regarding the interests of these participants may be obtained by reading the proxy statement/prospectus regarding the proposed merger when it becomes available.

	Selected Performance Data
	Quarter Ended
	Sep 30,	Jun 30,	Mar 31,	Dec 31,	Sep 30,
In thousands, except per share data	2011	2011	2011	2010	2010
Total assets (EOP*)	$ 284,183	$ 283,277	$ 273,604	$ 274,231	$ 272,292
Net income (loss)	$ 165	$ 116	$ 806	$ 188	$ (135)
Net income (loss) available to common shareholders	$ 68	$ 19	$ 709	$ 91	$ (232)
Net interest margin	3.59%	3.74%	3.86%	3.64%	3.89%
Interest rate spread	3.27%	3.43%	3.56%	3.33%	3.57%
Ratio of total stockholders' equity to total assets (EOP)	9.07%	9.14%	9.33%	9.07%	9.14%
Weighted avg shares outstanding	3,621	3,621	3,621	3,621	3,621
Net income (loss) per common share (basic)	$ 0.02	$ 0.01	$ 0.20	$ 0.03	$ (0.06)
Net income (loss) per common share (diluted)	$ 0.02	$ 0.01	$ 0.19	$ 0.02	$ (0.06)
Book value per common share (EOP)	$ 5.70	$ 5.73	$ 5.64	$ 5.47	$ 5.48
Allowance for loan losses to total loans (EOP)	1.40%	1.53%	1.53%	1.51%	1.48%
Nonperforming loans to total loans (EOP)	5.82%	6.16%	4.97%	4.44%	2.03%
Nonperforming assets to total assets (EOP)	5.20%	4.92%	4.26%	3.87%	1.29%
*end of period

THE CONNECTICUT BANK AND TRUST COMPANY
Five Quarter Statements of Operations (unaudited)
	Three Months Ended
	Sept. 30,	June 30,	March 31,	Dec. 31,	Sept. 30,
(In thousands,except per share data)	2011	2011	2011	2010	2010
Total interest and dividend income	$ 3,237	$ 3,204	$ 3,228	$ 3,291	$ 3,419
Total interest expense	732	727	734	810	836
Net interest income	2,505	2,477	2,494	2,481	2,583
Provision for loan losses	398	110	154	135	587
Net interest income, after provision for loan losses	2,107	2,367	2,340	2,346	1,996
Total non-interest income	552	280	293	206	186
Total non-interest expenses	2,494	2,531	2,527	2,364	2,317
Net income (loss) before income tax expense	165	116	106	188	(135)
Income tax benefit	--	--	700	--	--
Net income (loss)	165	116	806	188	(135)
Less: preferred stock dividend and accretion	(97)	(97)	(97)	(97)	(97)
Net income (loss) attributable to common shareholders	$ 68	$ 19	$ 709	$ 91	$ (232)
Net income (loss) per common share:
Basic	$ 0.02	$ 0.01	$ 0.20	$ 0.03	$ (0.06)
Diluted	$ 0.02	$ 0.01	$ 0.19	$ 0.02	$ (0.06)

THE CONNECTICUT BANK AND TRUST COMPANY
Statements of Operations
(Unaudited)
	Three Months Ended		Nine Months Ended
	September 30,		September 30,
(In thousands, except per share data)	2011	2010	2011	2010
Interest and dividend income:
Loans, including fees	$ 2,974	$ 3,159	$ 8,926	$ 9,269
Debt securities	239	237	683	728
Other	24	23	60	70
Total interest and dividend income	3,237	3,419	9,669	10,067
Interest expense:
Deposits	461	559	1,392	1,731
Securities sold under agreements to repurchase	4	--	10	6
Federal Home Loan Bank advances	267	277	791	810
Total interest expense	732	836	2,193	2,547
Net interest income	2,505	2,583	7,476	7,520
Provision for loan losses	398	587	662	896
Net interest income, after provision for loan losses	2,107	1,996	6,814	6,624
Noninterest income:
Customer service fees	130	103	360	249
Brokerage commissions	88	63	251	206
Net gain on sales of available-for-sale securities	310	--	448	60
Loss on sale of other real estate owned	--	(4)	--	(4)
Net gain on sales of loans	24	24	66	33
Total noninterest income	552	186	1,125	544
Noninterest expenses:
Salaries and benefits	1,165	1,131	3,586	3,394
Occupancy and equipment	454	452	1,350	1,323
Data processing	88	90	258	248
Marketing	106	100	244	286
Professional services	262	163	742	497
FDIC insurance	101	99	368	289
Other general and administrative	318	282	1,004	759
Total noninterest expenses	2,494	2,317	7,552	6,796
Income (loss) before income tax benefit	165	(135)	387	372
Income tax benefit	--	--	700	--
Net income (loss)	165	(135)	1,087	372
Less preferred stock dividend and accretion	(97)	(97)	(291)	(291)
Net income (loss) attributable to common shareholders	$ 68	$ (232)	$ 796	$ 81
Net income (loss) per common share:
Basic	$ 0.02	$ (0.06)	$ 0.22	$ 0.02
Diluted	$ 0.02	$ (0.06)	$ 0.22	$ 0.02
Average basic common shares issued and outstanding	3,621	3,621	3,621	3,615
Average diluted common shares issued and outstanding	3,677	3,621	3,670	3,629

THE CONNECTICUT BANK AND TRUST COMPANY
BALANCE SHEETS
(Unaudited)
	September 30,	December 31,	September 30,
(In thousands, except share data)	2011	2010	2010
ASSETS
Cash and due from banks	$ 13,192	$ 8,725	$ 4,161
Federal funds sold	--	--	12,900
Cash and cash equivalents	13,192	8,725	17,061
Interest-bearing deposits in banks	429	79	79
Securities available for sale	42,576	35,349	31,554
Federal Reserve Bank stock, at cost	780	762	762
Federal Home Loan Bank stock, at cost	2,057	2,057	2,057
Loans held for sale	--	386
Loans	221,376	223,723	218,777
Allowance for loan losses	(3,099)	(3,381)	(3,247)
Loans, net	218,277	220,342	215,530
Premises and equipment, net	1,744	1,898	1,930
Deferred tax asset	700	--	--
Other assets	4,428	4,633	3,319
	$ 284,183	$ 274,231	$ 272,292
LIABILITIES AND STOCKHOLDERS' EQUITY
Non-interest-bearing deposits	$ 47,907	$ 35,972	$ 35,237
Interest-bearing deposits	174,637	177,822	177,718
Total deposits	222,544	213,794	212,955
Secured borrowings	1,098	577	--
Securities sold under agreements to repurchase	3,987	3,392	2,989
Federal Home Loan Bank advances	29,450	30,450	30,450
Other borrowings	176	--	--
Other liabilities	1,141	1,151	1,001
Total liabilities	258,396	249,364	247,395
Stockholders' equity:
Preferred stock, no par value; 1,000,000 shares authorized; issued and outstanding: 5,448 shares; aggregate liquidation preference of $5,448	5,448	5,448	5,448
Discount on preferred stock	(287)	(374)	(402)
Common stock, $1.00 par value; 10,000,000 shares authorized; 3,620,950 shares issued and outstanding	3,621	3,621	3,621
Common stock warrants	1,405	1,405	1,405
Additional paid-in capital	30,115	30,088	30,069
Restricted stock unearned compensation	(118)	(163)	(176)
Accumulated deficit	(14,476)	(15,272)	(15,363)
Accumulated other comprehensive income	79	114	295
Total stockholders' equity	25,787	24,867	24,897
	$ 284,183	$ 274,231	$ 272,292

CONTACT: David A. Lentini
         860-748-4250
         dlentini@thecbt.com