CTBC The Connecticut Bank And Trust Company (MM)

The Connecticut Bank and Trust Company ("CBT" or the "Bank") (Nasdaq: CTBC) reported a net loss of $2.5 million for the quarter ended December 31, 2011 compared to net income of $188,000 for the comparable period in 2010. After accounting for preferred stock dividends and accretion, net loss attributable to common shareholders was $2.6 million or ($0.73) per diluted common share for the quarter ended December 31, 2011 compared to net income of $91,000 or $0.02 per diluted common share for the comparable quarter in 2010. Total assets were $280.5 million at December 31, 2011, an increase of $6.3 million over total assets of $274.2 million at December 31, 2010.  

Chairman and CEO David A. Lentini commented, "We felt it was appropriate this quarter to significantly increase our loan loss reserves by $2.3 million as we continue to see financial stress on certain of our commercial borrowers. Loan demand increased, which continues to show why CBT is the bank of choice in meeting the commercial credit needs of our local businesses."

The Bank reported a net loss of $1.5 million for the year ended December 31, 2011 compared to net income of $560,000 for the comparable period in 2010. After accounting for preferred stock dividends and accretion, net loss attributable to common shareholders was $1.9 million, or ($0.51) per diluted common share in 2011 compared to net income of $172,000 or $0.05 per diluted common share in 2010. 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 previously announced, 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. As a result of this transaction, the Bank expended approximately $325,000 for the quarter ended December 31, 2011.

Operating Results for the Quarter Ended December 31, 2011. Net interest income for the quarter ended December 31, 2011 was $2.4 million compared to $2.5 million for the same period in the prior year. The net interest margin was 3.51% for the quarter ended December 31, 2011 compared to 3.67% for the same period in 2010. Interest income decreased $127,000 as lower rates on earning assets more than offset the volume related increase attributable to growth in average earning assets, principally securities. Lower rates across all funding sources and overall lower volume of interest-bearing liabilities added $66,000 to net interest income. 

The provision for loan losses was $2.3 million for the quarter ended December 31, 2011 compared to $135,000 for the same period in 2010 as a result of an increase in specific reserves on impaired loans and to the financial stress of some commercial borrowers. Net charge-offs for the quarter ended December 31, 2011 were $1.2 million compared to $1,000 for the same period in 2010, primarily due to a $1.1 million commercial loan charge off. 

Non-interest income amounted to $234,000 in the quarter, compared to $206,000 for the same period a year ago. Customer service fees totaled $132,000 for the quarter ended December 31, 2011, up $41,000 or 45%, from the same period in the prior year as a result of an increase in the number of deposit accounts. Brokerage commissions were $81,000 for the quarter, up $3,000 or 4%, from the same period in the prior year. Net gains from sales of loans were $21,000 and $37,000, respectively, for the quarters ended December 31, 2011 and December 31, 2010.   

Operating expenses for the quarter totaled $2.9 million, an increase of $542,000, from the same period last year.  Salaries and benefits, including staff additions and related payroll taxes, rose $87,000 for the three-month period ended December 31, 2011 compared to the same period in the prior year. Professional services increased $13,000 from the prior year mainly due to increased legal and consulting costs. General and administrative costs rose $548,000 from the comparable period in the prior year primarily as a result of merger related expenses, higher prices for purchased goods and services and expenses related to problem assets and other real estate owned.    

Operating Results for the Year Ended December 31, 2011. Net interest income for the year totaled $9.9 million, a decrease of $86,000, from $10.0 million in the prior year. The net interest margin for the year was 3.67% compared to 3.83% in the prior year. Interest income decreased $525,000 as lower rates on earning assets more than offset the volume related increase of $673,000 from growth of interest earning assets, principally loans. Lower rates across all funding sources and overall lower volume of interest-bearing liabilities added $439,000 to net interest income. 

The provision for loan losses was $3.0 million for the year ended December 31, 2011 compared to $1.0 million in the prior year as a result of an increase in the specific reserves on impaired loans and an increase in the general reserves on non-impaired loans. Net charge-offs for the year ended December 31, 2011 were $2.1 million compared to $352,000 in the prior year, primarily due to $1.1 million in charge offs on two commercial loans.

Non-interest income amounted to $1.4 million for the year ended December 31, 2011, compared to $754,000 in the prior year. Customer service fees totaled $492,000 for the year, up $152,000 or 44.7% from the prior year, due to an increase in the number of deposit accounts. Brokerage commissions were $332,000 for the year, up $48,000 or 16.8% from the prior year. Gains on sales of securities were $448,000 for the year ended December 31, 2011 compared to $60,000 in the prior year. Net gains from sales of loans were $87,000 and $70,000, respectively, for the fiscal years ended December 31, 2011 and December 31, 2010.   

Operating expenses for the year ended December 31, 2011 totaled $10.5 million, an increase of $1.3 million, from the prior year. Salaries and benefits, including staff additions and related payroll taxes, rose $279,000, for the year ended December 31, 2011 compared to prior year. Professional services increased $258,000 to $906,000 for the year ended December 31, 2011 from the prior year mainly due to increased servicing fees on the consumer loan portfolio and increased legal and consulting costs. FDIC insurance premiums increased $35,000 chiefly related to higher premiums on insured deposits.  General and administrative costs rose $789,000 for the year ended December 31, 2011 compared to the prior year primarily as a result of collection expenses on increased problem assets, other real estate owned, deferred compensation and merger related expenses.         

Allowance for Loan Losses.  The ratio of the allowance for loan losses to total loans was 1.87% at December 31, 2011 compared to 1.51% at December 31, 2010 due to an increase in the specific reserves on impaired loans and an increase in the general reserves on non-impaired loans. Outstanding loans increased $3.6 million to $227.4 million at December 31, 2011 from $223.7 million at December 31, 2010. At December 31, 2011, the allowance was $4.2 million 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 $12.7 million, or 5.60% of total loans outstanding at December 31, 2011, compared to $8.8 million or 3.93% of total loans outstanding at December 31, 2010. Other real estate owned was $2.2 million at December 31, 2011 compared to $682,000 at December 31, 2010, primarily due to one property of $1.5 million added this year. The Bank has seen a migration of loans to nonaccrual status due to increased delinquency primarily from commercial customers. Net loan charge-offs amounted to $1.2 million for the quarter ended December 31, 2011 and $377,000 for the comparable period a year earlier. Net charged-off loans totaled $2.1 million for the year ended December 31, 2011 compared to $352,000 for the year ended December 31, 2010, primarily due to $1.1 million in charge offs on two commercial loans. 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 were $280.5 million at December 31, 2011 compared to $274.2 million at December 31, 2010. Outstanding loans were $227.4 million, up $3.6 million from December 31, 2010. Securities available for sale increased to $42.4 million compared to $35.3 million at December 31, 2010 as a result of purchases of certain government-sponsored residential and commercial mortgage-backed securities. Cash and cash equivalents totaled $4.8 million at December 31, 2011, down $3.9 million  from $8.7 million at December 31, 2010. During the first quarter of 2011, the Bank reduced the valuation allowance against the deferred tax asset by $700,000. Total deposits increased $6.2 million to $220.0 million at December 31, 2011 from $213.8 million at December 31, 2010 primarily from higher core deposits.

Securities sold under agreements to repurchase and secured borrowings increased $2.1 million while advances from the Federal Home Loan Bank of Boston declined by $1.0 million. The Bank remains well-capitalized with stockholders' equity of $23.4 million at December 31, 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

In connection with CBT's merger with Berkshire, Berkshire has filed with the Securities and Exchange Commission (the "SEC") a Registration Statement on Form S-4 that includes a Proxy Statement of CBT and a Prospectus of Berkshire, as well as other relevant documents concerning the proposed transaction. A definitive Proxy Statement will be filed with the Board of Governors of the Federal Reserve System (the "Federal Reserve") and mailed to shareholders of CBT after the Registration Statement is declared effective. The Registration Statement has not yet become effective. 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 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, (860) 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.

	Selected Performance Data
	Quarter Ended				Year Ended
	Dec 31,	Sep 30,	Jun 30,	Mar 31,	Dec 31,	Dec 31,
In thousands, except per share data	2011	2011	2011	2011	2011	2010
Total assets (EOP*)	$ 280,513	$ 284,183	$ 283,277	$ 273,604	$ 280,513	$ 274,231
Net income (loss)	$ (2,549)	$ 165	$ 116	$ 806	$ (1,462)	$ 560
Net income (loss) attributable to common shareholders	$ (2,646)	$ 68	$ 19	$ 709	$ (1,850)	$ 172
Net interest margin	3.51%	3.59%	3.74%	3.86%	3.67%	3.83%
Interest rate spread	3.17%	3.27%	3.43%	3.56%	3.36%	3.53%
Ratio of total stockholders'
equity to total assets (EOP)	8.33%	9.07%	9.14%	9.33%	8.33%	9.07%
Weighted avg shares outstanding (basic)	3,621	3,621	3,621	3,621	3,621	3,617
Net income (loss) per common share (basic)	$ (0.73)	$ 0.02	$ 0.01	$ 0.20	$ (0.51)	$ 0.05
Net income (loss) per common share (diluted)	$ (0.73)	$ 0.02	$ 0.01	$ 0.19	$ (0.51)	$ 0.05
Book value per common share (EOP)	$ 5.02	$ 5.70	$ 5.73	$ 5.64	$ 5.02	$ 5.47
Allowance for loan losses to
total loans (EOP)	1.87%	1.40%	1.53%	1.53%	1.87%	1.51%
Nonperforming loans to total loans (EOP)	5.60%	5.82%	6.16%	4.97%	5.60%	3.93%
Nonperforming assets to total assets (EOP)	5.32%	5.20%	4.92%	4.26%	5.32%	3.87%
*end of period

THE CONNECTICUT BANK AND TRUST COMPANY
Five Quarter Statements of Operations (unaudited)
	Three Months Ended
	Dec 31,	Sept 30,	June 30,	March 31,	Dec 31,
(In thousands,except per share data)	2011	2011	2011	2011	2010
Total interest and dividend income	$ 3,164	$ 3,237	$ 3,204	$ 3,228	$ 3,291
Total interest expense	725	732	727	734	810
Net interest income	2,439	2,505	2,477	2,494	2,481
Provision for loan losses	2,318	398	110	154	135
Net interest income, after provision for loan losses	121	2,107	2,367	2,340	2,346
Total non-interest income	234	552	280	293	206
Total non-interest expenses	2,904	2,494	2,531	2,527	2,362
Net income (loss) before income tax expense	(2,549)	165	116	106	190
Income tax expense (benefit)	--	--	--	(700)	2
Net income (loss)	(2,549)	165	116	806	188
Less: preferred stock dividend and accretion	(97)	(97)	(97)	(97)	(97)
Net income (loss) attributable to common shareholders	$ (2,646)	$ 68	$ 19	$ 709	$ 91
Net income (loss) per common share:
Basic	$ (0.73)	$ 0.02	$ 0.01	$ 0.20	$ 0.03
Diluted	$ (0.73)	$ 0.02	$ 0.01	$ 0.19	$ 0.02

THE CONNECTICUT BANK AND TRUST COMPANY
Statements of Operations
(Unaudited)
	Three Months Ended		Years Ended
	December 31,		December 31,
(In thousands, except per share data)	2011	2010	2011	2010
Interest and dividend income:
Loans, including fees	$ 2,983	$ 3,071	$ 11,909	$ 12,340
Debt securities	163	199	846	927
Other	18	21	78	91
Total interest and dividend income	3,164	3,291	12,833	13,358
Interest expense:
Deposits	453	532	1,845	2,263
Securities sold under agreements to repurchase	4	9	14	19
Federal Home Loan Bank advances	268	269	1,059	1,075
Total interest expense	725	810	2,918	3,357
Net interest income	2,439	2,481	9,915	10,001
Provision for loan losses	2,318	135	2,980	1,031
Net interest income, after provision for loan losses	121	2,346	6,935	8,970
Noninterest income:
Customer service fees	132	91	492	340
Brokerage commissions	81	78	332	284
Net gain on sales of available-for-sale securities	--	--	448	60
Net gain on sales of loans	21	37	87	70
Total noninterest income	234	206	1,359	754
Noninterest expenses:
Salaries and benefits	1,255	1,168	4,841	4,562
Occupancy and equipment	453	461	1,803	1,784
Data processing	116	74	374	322
Marketing	40	136	284	422
Professional services	164	151	906	648
FDIC insurance	58	102	426	391
Other general and administrative	818	270	1,822	1,033
Total noninterest expenses	2,904	2,362	10,456	9,162
Income (loss) before income tax benefit	(2,549)	190	(2,162)	562
Income tax expense (benefit)	--	2	(700)	2
Net income (loss)	(2,549)	188	(1,462)	560
Less preferred stock dividend and accretion	(97)	(97)	(388)	(388)
Net income (loss) attributable to common shareholders	$ (2,646)	$ 91	$ (1,850)	$ 172
Net income (loss) per common share:
Basic	$ (0.73)	$ 0.03	$ (0.51)	$ 0.05
Diluted	$ (0.73)	$ 0.02	$ (0.51)	$ 0.05

THE CONNECTICUT BANK AND TRUST COMPANY
BALANCE SHEETS
(Unaudited)
	December 31,	September 30,	December 31,
(In thousands, except share data)	2011	2011	2010
ASSETS
Cash and cash equivalents	$ 4,832	$ 13,192	$ 8,725
Interest-bearing deposits in banks	429	429	79
Securities available for sale	42,436	42,576	35,349
Federal Reserve Bank stock, at cost	780	780	762
Federal Home Loan Bank stock, at cost	2,057	2,057	2,057
Loans held for sale	--	--	386
Loans	227,370	221,376	223,723
Allowance for loan losses	(4,247)	(3,099)	(3,381)
Loans, net	223,123	218,277	220,342
Premises and equipment, net	1,626	1,744	1,898
Foreclosed assets	2,190	1,710	682
Deferred tax asset	700	700	--
Other assets	4,530	2,718	4,633
	$ 280,513	$ 284,183	$ 274,231
LIABILITIES AND STOCKHOLDERS' EQUITY
Non-interest-bearing deposits	$ 52,014	$ 47,907	$ 35,972
Interest-bearing deposits	167,991	174,637	177,822
Total deposits	220,005	222,544	213,794
Secured borrowings	1,323	1,098	577
Securities sold under agreements to repurchase	4,730	3,987	3,392
Federal Home Loan Bank advances	29,450	29,450	30,450
Other borrowings	--	176	--
Other liabilities	1,635	1,141	1,151
Total liabilities	257,143	258,396	249,364
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	(258)	(287)	(374)
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	30,125	30,115	30,088
Restricted stock unearned compensation	(103)	(118)	(163)
Accumulated deficit	(17,122)	(14,476)	(15,272)
Accumulated other comprehensive income	254	79	114
Total stockholders' equity	23,370	25,787	24,867
	$ 280,513	$ 284,183	$ 274,231

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