CBT Reports Net Income of $261,000

HARTFORD, Conn., July 27, 2010 (GLOBE NEWSWIRE) -- 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.

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.