A federal regulator has ordered First National Bank and Trust of Atmore to bring bad loans into line.

FNB&T President and CEO Shep Marsh said getting the notice isn’t a great thing to have happen, but the institution is well on its way to setting everything into its rightful position.

“This has been something we’ve been working on for a while,” Marsh said Thursday. “We are more at the end of this thing than at the beginning and we’re very comfortable with where we are in the process.”

The process was put into motion after a Feb. 15 agreement was reached with the Office of the Comptroller of the Currency. The bank has agreed to take a number of actions intended to strengthen its financial condition and operating procedures, Marsh said.

“Like so many other businesses and people in this area, First National’s business has been negatively affected by the ongoing economic downturn,” Marsh said. “The board of directors and management of First National have been working with the bank’s regulators to determine specific actions the bank needs to take to address the effects of the weaknesses in the economy.”

With officers and staff of FNB&T working to bring each area into line, Marsh said confidence in improving the bank is high among the group.

“We are confident that the plans that have been developed with the regulators will succeed in improving the bank’s financial position and strengthening the institution for the long term,” Marsh said.

In the agreement, FNB&T agreed to take action to improve the quality of its assets, Marsh said.

“Along with other things, we are taking action to ensure that the bank continues to operate with adequate capital,” Marsh said. “The principal issue confronting the bank is asset quality, which has been affected by rising unemployment, depressed real estate prices and a general economic slowdown. All of this has made it difficult for an increased number of our borrowers to repay their loans.”

Marsh said FNB&T officers had discussed steps needed at the bank before meeting with OCC officials.

“For a number of months, even before the bank entered into discussion about the agreement with the OCC, the board of directors and management had been at work identifying measures that needed to be taken to overcome the effects of the economic downturn,” Marsh said. “And, we’ve been devising the best ways to implement them. As a result, the bank already had begun to put in place many of the things that are called for in the Agreement.”

According to reports released about findings at FNB&T, regulators did not order the institution to raise additional capital. Currently, the bank has a Tier I capital ratio of 10.7, well above the 6 percent mark to be considered well capitalized. FNB&T has reported modest profits for 2008 through 2010 and is showing a positive profit margin so far in 2011.

“Even during these difficult economic times, First National’s net income has remained positive and on par with peers,” Marsh said.

“Its capital levels have remained well in excess of well-capitalized levels. The board and management are confident that being proactive in our efforts to address the bank’s weaknesses, while continuing to work cooperatively with our regulator to comply with the requirements of the Agreement, will enable the bank to resolve these issues and continue serving its customers and its communities as it has since 1915.”

First National Bank and Trust has offices in Atmore and Excel.