Profitable returns

Naugatuck Valley Financial Corp. reports second quarter results

NAUGATUCK — Naugatuck Valley Financial Corp., the parent company of Naugatuck Valley Savings and Loan, returned to profitability in the second quarter thanks in part to selling off bad loans.

The company on Thursday reported net income of $94,000, or 1 cent per diluted share, for the quarter ended June 30, up from a net loss of $4.8 million, or 72 cents per diluted share, a year earlier.

The bank sold $10.4 million in nonperforming loans during the quarter, allowing it to credit its provision for loan losses by $2.5 million. The loan sale resulted in net proceeds of $8.7 million and a total loss on sale of $1.9 million, the bank said.

That loss was offset, however, by the $2.5 million credit to the bank’s provision for loan losses, which totaled $3.6 million during the second quarter of 2013.

The credit to the provision for loan losses was due to an improvement in the bank’s credit quality as a result of selling the bad loans, as well as originating new loans during the quarter, said William Calderara, president and CEO of Naugatuck Valley Financial Corp.

“Getting rid of problem assets and replacing them with good assets was the main driver,” he said.

The bank originated $17.4 million in commercial loans during the second quarter, he said.

Net charge-offs — money the bank does not expect to be repaid — totaled $85,000 for this year-second quarter, nearly 99 percent less than the bank’s $7.1 million in net charge-offs a year ago.

The bank said the $4.8 million net loss in last year’s second quarter was “largely due to” the $3.6 million provision for loan losses, driven by the $7.1 million in total net charge-offs. The bank said it had loan sales of $20.8 million in the second quarter of 2013, with $5.1 million in net charge-offs attributable to those sales.

The bank’s net interest income after provision for loan losses for this year’s second quarter totaled $6.8 million, up from $762,000 a year ago. Non-interest income in the second quarter was $658,000, down 30 percent from $936,000 a year ago. The decline was primarily due to a 64 percent decrease in mortgage banking income driven by significantly lower mortgage origination and loan sales volume during the second quarter of 2014.

Interest expenses for the second quarter totaled $787,000, down from $1 million a year ago.

Non-interest expenses in the quarter were $7.3 million, up 13 percent from $6.5 million a year ago. The uptick is primarily due to a $1.2 million increase in loan sale-related expenses to $1.9 million for the second quarter of 2014, from $765,000 a year ago.

For the first half of 2014, the bank posted a net loss of $715,000, or 11 cents per diluted share, compared to a net loss of $5.4 million, or 81 cents per diluted share.

Net charge-off for the first six months of 2014 totaled $111,000, down from $7.6 million a year ago.

Net interest income after provision for loan losses for this year’s first half totaled $10.9 million, compared to $4.8 million a year earlier. Non-interest income for the first six months totaled $1.4 million, down from $1.9 million a year ago.

Interest expenses for this year’s first half were $1.5 million, down from $2.1 million a year ago. Non-interest expenses for this period were $13 million, compared to $12.1 million a year ago.

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