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NAPLES — Southwest Florida’s largest privately held community bank has caught the eye of federal regulators.

The Federal Reserve Bank of Atlanta and Florida’s Office of Financial Regulation have taken a formal enforcement action against Naples-based Orion Bank, requiring it to strengthen its board oversight, improve its assets and change its loan policies.

A 15-page agreement reached with regulators last week spells out a plan to “maintain the financial soundness” of the bank and its holding company, Orion Bancorp Inc. It does not say the bank violated any laws or regulations, and does not impose any fines or penalties.

Jerry Williams, Orion’s chairman, president and CEO, said regulators are just doing their job and that the agreement is a reflection of the economy, not the bank.

“All they want to do is assist and strengthen the institution,” he said.

While many other banks here and across the country are reporting losses, Orion remains one of the more profitable institutions, though it’s operating in one of the toughest markets. Florida is one of the hardest hit states in the nation’s real estate and mortgage meltdown. Cape Coral-Fort Myers has been cited as the state’s foreclosure capital.

Everywhere in the U.S. bankers have seen their problem loans grow and profits slide.

“We didn’t change. The economy changed,” Williams said.

Orion has nearly $3 billion in assets.

In its most recent quarter, ending June 30, Orion reported a profit of $8.3 million, down from $16.9 million a year ago. Non-current loans and leases — those that are 90 days past due, aren’t accruing the expected interest or are under risk — increased to $108.9 million in the last quarter, up from $5.2 million a year ago. That’s more than 5 percent of its total loans.

“Any time you are over 5 percent it’s a red flag,” said Ken Thomas, a Miami-based independent bank consultant and economist.

The Federal Reserve Bank has taken a little more than a dozen of these types of enforcement actions this year. Every case is different.

“The fact that this was a formal enforcement action and the fact that there has only been so many that happen each year makes it certainly a situation to be taken seriously,” Thomas said.

Often, the actions the Federal Reserve takes against banks are informal and never made public.

“When they make something public it has the negative effect on the institution, the idea being that it would create a greater degree of urgency for the institution to fix the problem.”

Regulators won’t comment specifically on the agreement, or what led to it.

“We let the order speak for itself,” said Jean Tate, a spokeswoman for the Federal Reserve Bank of Atlanta.

“We use these as a roadmap to correcting issues that we may have observed,” said Linda Charity, a director for the financial institution division at Florida’s Office of Financial Regulation.

She said bank management is working closely with regulators to resolve the issues.

The enforcement action came as a result of a regular bank exam by the Federal Reserve back in October, Williams said.

He said regulators just want to make sure the bank maintains its

strong capital and strong balance sheet, and has adequate reserves for loan losses.

Since 2007, Orion has filed more than three dozen foreclosure actions in Lee and Collier counties. The bank has branch offices in Fort Myers, Cape Coral, Estero and Marco Island.

It’s also had problem loans in such counties as Manatee and Sarasota, and on the east coast of Florida, where it has a handful of branches.

Orion has been making adjustments in its operations since the shift in the market, Williams said. Last year, it formed a special assessment department to deal with problem loans, he said.

“You don’t know your roof leaks until it rains,” Williams said.

He said Orion, a 31-year-old bank, rarely had a problem loan to deal with until 2007, after the local real estate market took a tumble.

In the first six months of the year, the bank sold $55 million in assets and lost $2.2 million, Williams said. Most of those sales were related to foreclosures on past-due loans, he said.

He points out that Orion remains one of the most successful banks in the state. It ranked No. 5 out of 309 institutions in Florida for its profitability based on its performance in the first six months of this year. Williams said there’s nothing in the agreement he’s not on board with. It was jointly adopted by the bank and regulators.

The agreement requires Orion to come up with a plan to strengthen board oversight of the bank’s management and operations within 90 days.

The bank will also have to develop a plan to better manage its real estate loans, including reducing its risks, and revise its loan policies, including its standards for renewing, extending, or modifying existing loans.

Within 10 days, the bank will have to “eliminate from its books” all assets, or portions of assets, that have been classified as a loss that have not be charged-off or already collected.

The agreement also requires a plan to ensure the bank maintains sufficient capital.

Regulators seem to be coming down hardest on banks in markets where “the housing bubble has made the most impact,” said Thomas, the Miami banking consultant.

He said he was surprised to see board oversight mentioned first in the agreement, however.

“I’m sure the bank, management and board are taking it very seriously,” Thomas said. “You really have no choice.”

Williams said he doesn’t think the action is critical of the bank or of himself as the board chairman and controlling shareholder.

“A community bank reflects a community,” he said. “It’s a mirror of the community it’s in. If your clients and the community are having difficulties a community bank is going to reflect that.”