Porter Bancorp Placed Under Fed Enforcement Order

Porter Bancorp Inc. in Louisville, Ky., is under orders from the Federal Reserve to serve as a source of strength for its ailing bank.

Under an enforcement order signed Sept. 21 and released Tuesday, the $1.7 billion-asset company must ensure that its PBI Bank complies with a consent order issued by the Federal Deposit Insurance Corp. and the Kentucky Department of Financial Institutions in June. That agreement requires PBI to maintain tier 1 capital of 9% and risk-weighted assets at 12%. At June 30, the bank's Tier 1 risk-based capital ratio was 12.10% and total risk-based capital ratio was 14.04%, but regulators are concerned that weakening asset quality could threaten capital levels.

In the second quarter, Porter reported a $39 million loss after writing off problem loans and taking a $23.8 million goodwill impairment charge to reflect its decreasing market value. Since the beginning of the year, the company's stock price has dropped by nearly 75%.

Porter also cannot declare or take any dividends or incur or guarantee any debt without prior approval from the Fed, It also must t provide a written plan to regulators detailing how it will maintain sufficient capital and pay for debt service and operating expenses.

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