Castle Bank and Trust Company's promising future
by Larry McGoldrick, President and CEO of Castle Bank and Trust Company, Meriden

On Friday, October 7, 2005, Castle Bank and Trust Company announced that it will join Naugatuck Savings Bank as wholly owned subsidiaries of Nutmeg Financial, a mutual holding company.  This business combination is subject to regulatory approval and the approval of Castle Bank�s shareholders. The two banks will operate as separate community banks under the umbrella of a mutual holding company.  There will be no changes in the management or staff of either bank. Most importantly, there will be no change in the basic community banking philosophy of either institution.

In August of 1996 when Castle Bank�s Organizer�s first met, we had one primary goal, to create a local community bank that would focus its resources on the growth and welfare of our community.  We also felt that creating a strong local bank would be a source of community pride.  Meriden has a rich history of community banking that we hoped to rekindle. To do so we had to raise the capital required by regulators by means of a public offering.  Our offering successfully raised over $6MM, primarily from local investors.  The confidence of those investors has allowed us to grow Castle Bank into a profitable local institution that has helped to spur an economic resurgence in Meriden.  The community owes them a debt of gratitude.

As our Board of Directors considered the proposal to join with Naugatuck Savings Bank under a mutual holding company structure, it was clear that such an action would not only provide our shareholders with a fair financial return, but would also provide the liquidity that is very difficult to develop as a small local bank.  Also, most of the original investors in Castle Bank invested to help create a local community Bank, not just to create a financial return.  This combination achieves both the goal of providing a fair return to shareholders, but also provides the opportunity for Castle Bank to serve the community�s financial needs for the foreseeable future.

One unique aspect of this transaction is that it changes the underlying ownership of Castle Bank from private stock ownership to �mutual� ownership.  Many of the community banks we grew up with were mutually owned banks with no stockholders.  Central Bank for Savings (Meriden Savings Bank), City Savings Bank, Dime Savings Bank all were originally mutual.  Their mutual charters and ownership allowed them to focus their profitability on their customers and their communities in a special way because they did not have shareholders.  These institutions are unique and unfortunately (as was the case with Meriden�s mutual banks) are disappearing from the financial landscape.  Only 20 still operate in Connecticut.  The communities in which they still exist are the great beneficiaries of their financial strength and resources.  Naugatuck Savings Bank has been one of those institutions and Greater Naugatuck has received great benefits from its hometown mutual bank for 135 years.  A visit to Naugatuck Savings Bank�s website provides insight into the Bank�s tremendous community commitment.

The business combination we have created will afford our community the unique benefit of bringing mutual banking back to Meriden.  As we grow Castle Bank and develop more resources, we hope to develop many of the same avenues to reinvest our profits back into the community as Naugatuck Savings.  An example of this is the Community Foundation established by Naugatuck Savings Bank and funded by a percentage of the Bank�s profits.  It is a very real example of the Bank�s commitment to community that in turn supports it.

By joining with Naugatuck, Castle Bank will gain much greater financial resources to devote to our customers as well as our community.  By consolidating many of the back office operations, both banks will have more resources to devote to customer products and services and to community development.  Castle Bank customers will have access to internet banking, bill pay services and telephone banking services.  We will have much higher loan limits to provide more service to larger customers. Most importantly, all these additional products and services will be brought to our customers by the same management and staff who have built our reputation for caring and professional personal service. Our focus will continue to be on the small and medium sized businesses that are the backbone of our town.

In summary, Castle Bank and the greater Meriden community have a wonderful opportunity to participate in a unique partnership that will bring more resources to our customers and to our community.  Since we started Castle Bank I have always believed that what makes a community bank different than other banks is the need for �mutual� support among the community bank, its customers and its community.   We are committed to continue to work hard to make Castle Bank the premier �community� bank in central Connecticut.  We thank you for your past business and continue to seek your trust and support in the future.

Larry McGoldrick
President and CEO
Castle Bank and Trust Company

Saturday, October 08, 2005

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