According to the bank, the U.S. Office of the Comptroller of the Currency, an independent bureau within the Treasury Department, imposed the requirements effective June 4. The action comes more than a year after the bank signed an agreement with the OCC in January 2012 to improve its banking practices related to asset quality, management and credit risk.
Under the requirements imposed last month, Naugatuck Valley Savings and Loan must maintain a Tier 1 leverage capital to adjusted total assets ratio of at least 9 percent, and a total risk-based capital to risk-weighted assets ratio of at least 13 percent.
“Tier 1 leverage capital is mostly your stockholders equity, and it’s divided by total assets to calculate the ratio,” James Hastings, the bank’s executive vice president and chief financial officer, said.
Hastings said, however, that because of its earlier agreement with the OCC, the bank had already “self-imposed” those capital levels, and exceeded them in the first quarter of this year.
The bank reported a Tier 1 leverage ratio of 9.85 percent and a total risk-based capital ratio of 16.09 percent in the quarter, he said.
Hastings also noted that bank’s holding company, Naugatuck Valley Financial Corp., had $12.6 million available as of March 31 that could be used if necessary to support the bank. He said the holding company is regulated by the Federal Reserve, not the OCC, and the Fed would allow the money to be used to help the bank.
The formal agreement with the OCC signed by the bank in January 2012 was in part a result of the bank’s switch in regulators in June 2011 from the U.S. Office of Thrift Supervision to the OCC under the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Stephanie Collins, a spokeswoman for the OCC, said the bureau does not comment on specific banks “as a general rule.”
Naugatuck Valley Savings and Loan has been struggling financially. It reported a loss of more than $5 million for the fourth quarter of 2012, and a loss of more than $15 million for the year, due primarily to increases in its provision against loan losses. It rebounded in the first quarter of this year, posting a net loss of $591,000, in part due to setting aside about 94 percent less for bad loans.
Hastings said the capital requirements won’t affect the bank’s day-to-day operations or its ability to make loans.
“This really is just that the regulators want to make sure the operation of the bank is safe and sound,” he said.