The Federal Reserve Bank of Boston has terminated a February 1994 regulatory agreement with Merchants Bancshares after performance at the bank improved.

The regulatory agreement had required $615 million-asset Merchants to meet certain conditions and obtain approval before paying a dividend or incurring debt. The Fed imposed the conditions after the bank's nonperforming assets rose.

The bank says its nonperforming assets have declined to a 4.5-year low.

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