PBI Bank in Louisville, Ky., has announced that it expects to enter into a consent agreement with state and federal regulators that will require it reduce its loan concentrations, improve its asset quality and maintain capital levels above regulatory minimums.

The sole banking unit of the $1.7 billion-asset Porter Bancorp Inc., PBI is already under orders from the Kentucky Department of Financial Institutions and the Federal Deposit Insurance Corp. to maintain total risk-based capital of at least 12% — two percentage points above the minimum threshold for well-capitalized institutions. Weeks after reporting a sharp increase in problem real estate loans in the first quarter, the bank said in a news release Friday that the forthcoming consent order would require it to establish benchmarks for asset quality and loan concentrations as well.

"While most of these loans were made several years ago when the economy was much stronger, the increase in unemployment rates and depreciating real estate values since that time put more pressure on construction and land development loans where we have experienced a higher-than-normal loss rate," said Maria L. Bouvette, Porter Bancorp's president and chief executive officer, in a statement.

At March 31, Porter reported that 8.28% of its assets were nonperforming, up from 7.43% three months earlier. The company pointed out, however, that its percentage of construction and development loans to total loans declined by nearly 30% from a year earlier.

Porter said Friday that PBI Bank would file a copy of the consent order with the Securities and Exchange Commission once an agreement with regulators is finalized.

In early morning trading Monday, Porter Bancorp's shares were down 6.7% to $4.86.

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