Britton & Koontz Bank in Natchez, Miss., has been ordered by its regulator to immediately take steps to reduce the level of risk in its loan portfolio.

The $366 million-asset bank said in a Securities and Exchange filing Tuesday that it has signed a formal agreement with the Office of the Comptroller of the Currency that requires it to adopt formal plans for monitoring its borrowers and obtaining up-to-date appraisals on any criticized loan that is secured by real estate. The bank was also ordered to obtain "current and satisfactory" credit data on all loans that lack such information and establish a program to ensure that its provisions for loan losses are adequate.

Britton & Koontz is the lone bank subsidiary of Britton & Koontz Capital Corp. Though the company was profitable in 2011, its earnings fell sharply from the prior year due primarily to weakening loan quality. For the year, the company earned $394,000, down nearly 80% from 2010. At Dec. 31, 3.47% of its assets were not performing, up from 3.01% a year earlier.

The agreement with the OCC also requires the bank to maintain a total risk-based capital ratio of 12% and a Tier 1 capital ratio above 8%. Both ratios were well above those levels at Dec. 31.

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