First National Bank of Greencastle in Pennsylvania has agreed to monitor its lending more closely under a memorandum of understanding with the Office of the Comptroller of the Currency.

Tower Bancorp Inc., the parent of the $534.9 million-asset bank, disclosed the agreement Friday in a filing with the Securities and Exchange Commission.

The bank signed the agreement Wednesday and had already made "substantial progress" toward resolving its issues, Tower said.

The agreement requires the bank to develop and implement a loan review system; ensure regulatory reports accurately reflect its condition; revise its internal audit procedure to include certain steps; refrain from any unsecured lending without obtaining current borrower information; and take action to protect criticized assets, among other things.

Tower said that both it and the bank remain well capitalized, and that the agreement would not constrain business or affect operating results.

The bank had a risk-based capital ratio of 13.23% at midyear, according to data from the Federal Deposit Insurance Corp. Its earnings for the second quarter fell 10% from a year earlier, to $1.4 million.

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