MIDDLETOWN, Conn. - Farmers & Mechanics Bank announced "significant progress" in disposing of approximately half of its nonperforming assets and improving future operating earnings, but said the disposition would result in a third quarter loss of $2.1 million to $2.5 million.

John F. Beckert, president and chief executive, said "the bank acted on market opportunities enabling swifter resolution of NPAs which, combined with other income enhancements, should permit fuller and more timely realization of the bank's core earning power."

The bank said the Federal Deposit Insurance Corp. and State Banking Department have extended the deadline for achieving and maintaining a 6% Tier 1 capital ratio has been extended to Dec. 31, 1996 from Dec. 31, 1995.

In the interim, a 5% Tier 1 capital ratio has been established as the minimum level to be maintained.

The Bank had a Tier 1 capital ratio of 6% at June 30, 1995, and expects to meet the terms of the modified regulatory agreement.

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