Naugatuck Valley Financial Corp., awaiting its merger with a New Haven area lender, saw its first quarter profits slip 15 percent as the savings and loan operator put aside more money to cover problem loans.
The parent of Naugatuck Valley Savings and Loan, which serves southwestern Connecticut with nine branches, said its net income for the quarter ended March 31 was $314,000, down from $369,000 in the year ago period.
Despite the profit drop, the lender said it will pay a dividends of 3 cents a share on June 1 to stockholders of record on May 10.
During the quarter the bank set aside $809,000 for bad loans, up from $285,000 a year ago. About $325,000 of that amount was related to one commercial real estate loan, whose collateral was recently appraised, the bank said.
Nonperforming loans totaled $11.2 million at quarter end, up from $6 million at the end of December, while the bank’s net interest income increased 23 percent in the quarter to $4.5 million.
“Although our nonperforming loans have risen recently, management has been proactive in establishing what it believes to be appropriate loan loss reserve levels considering the characteristics of our loan portfolio as well as current economic conditions,” said John C. Roman, Naugatuck Valley president and CEO.
Naugatuck Valley’s total assets and deposits both grew in the quarter to $564.2 million and $388.1 million, respectively.
In February, Naugatuck Valley reached a $19.5 million deal to acquire Southern Connecticut Bancorp, a small- to medium-sized business lender with $137.9 million in assets and four offices in the New Haven area.
In connection with the merger, Naugatuck Valley Mutual would convert from an institution partly owned by its depositors to a stock-owned institution, selling to the public a 60 percent stake in the company.
The deal is expected to close in the third quarter.
