NAUGATUCK — Mission accomplished for William Calderara.
Calderara, of Newtown, was hired in September 2012 as the new president and chief executive officer of Naugatuck Valley Financial Corp., parent of Naugatuck Valley Savings and Loan. His mission: return the financially struggling community bank to profitability and get it out from under restrictions imposed by federal banking regulators.
Done, and done.
In a letter dated Monday, the U.S. Treasury Department’s Office of the Comptroller of the Currency officially notified the bank it has terminated a formal agreement signed in January 2012 that required the bank to improve its practices related to asset quality, management and credit risk, bank officials announced Wednesday. The letter also notified the bank regulators were lifting a requirement imposed in January 2013 that it maintain strict minimum capital levels, bank officials said.
Beginning in January 2013, the OCC required the bank to maintain a Tier 1-leverage-capital-to-adjusted-total-assets ratio of 9 percent, and a risk-based-capital-to-risk-weighted-assets ratio of at least 13 percent.
As of March 31, the bank had a Tier 1 leverage ratio of 11.18 percent and a total risk-based capital ratio of 17.64 percent. Based on that, the bank will now be considered “well capitalized” for regulatory purposes, the OCC said.
The notification comes about a month after the bank reported it had improved its bottom line by almost $10 million over the past year, in large part thanks to selling off its bad loans.
Naugatuck Valley Financial Corp. reported net income of $1 million, or 10 cents per diluted share, for 2014, according to the annual report it filed March 19 with the Securities and Exchange Commission. That compared to a net loss of $8.8 million, or $1.33 per diluted share, a year earlier
“We’re very happy,” Calderara said in a telephone interview. “The formal agreement … basically designated the bank as a troubled bank, so the lifting of that is coinciding with (regulators) saying, ‘You’re no longer in troubled condition.’”
In fact, the bank’s capital ratios are well above the levels for a typical well-capitalized bank, he said.
“We’re extremely well capitalized,” he said.
While that has been the case for some time, the federal restrictions kept the bank operating “with one hand tied behind its back,” Calderara said.
“It’s an added expense,” he said. “You’re under regulatory review or exam every six months. It amounts to about one-quarter of the entire year, because the exams can last a month to a month and a half apiece. That’s almost three months of the year under review, which makes it difficult to do other things.”
The bank continued to lend, he said, “but with the capital restrictions we had to be very careful to never come close to those capital levels.”
Now back on a sound financial footing and out from under the federal restrictions, Naugatuck Valley Savings is poised for stronger growth, Calderara said, though he added the bank won’t forget how it got to this point.
“We put a number of risk-management practices and policies and tools in place, and those will continue,” he said. “We’re not going back.”
Carlos Batista, chairman of the board for Naugatuck Valley Financial, said in a statement that the bank overcame “significant challenges and this is a testament to the hard work and dedication of the directors of the bank and every member of our dedicated staff. We appreciate the loyalty of our customers and shareholders while we tackled the issues facing the company.”
Based in Naugatuck, the bank has nine locations in eight towns — two offices in Naugatuck, and single branches in Beacon Falls, Cheshire, Derby, Seymour, Shelton, Southbury and Waterbury.