The Connecticut Department of Banking and the Federal Deposit Insurance Corp. have lifted a five-year-old memorandum of understanding against Tolland Bank.

The action comes as the $224 million-asset bank continues to improve its condition, reducing bad assets and boosting earnings.

Tolland also reported net income of $342,000 for the second quarter and $644,000 for the first six months of 1996. That's a improvement from losses of $1.96 million and $1.81 million in the same periods of last year due to additional loan loss reserves and writedowns of foreclosed assets.

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