University National Bank isn’t writing many new loans for construction or development, now that the community bank is operating under an agreement with federal banking regulators.

The bank, 1400 Kasold Drive, is working to reduce financial risk brought on by exposure to commercial real estate, said Todd Sutherland, the bank’s president. The bank is curtailing that particular line of business, to bring it in line with standards outlined by regulators.

The bank and the U.S. Comptroller of the Currency entered into a formal agreement May 27, outlining specific restrictions the bank must adhere to during the coming months and, perhaps, years. Among them: limiting loan volume until the bank corrects “deficiencies in asset quality,” and returns the bank “to a satisfactory condition.”

Construction and development loans represented 142 percent of the bank’s total capital as of Sept. 30, or above the threshold of 100 percent preferred by regulators, Sutherland said. By March 31, University National had trimmed the level to 116 percent.

Getting below 100 percent could take six months to a year, Sutherland said.

The bank is making changes to policies and other procedures related to construction and real estate loans, fuel for a major engine that helped drive development in the Lawrence area for years.

“It’s the economy,” Sutherland said. “As a community bank, you make loans in the community. And in this community, it’s heavily real estate oriented. …

“It’s been an incredible run, and it’s just coming back.”

The agreement with the Comptroller of the Currency stipulates that the bank establish a three-year plan that incorporates all of the requirements outlined in the agreement. Among them: The bank “cannot offer or introduce new products or enter new market segments until it adopts an appropriate credit culture, implements sound liquidity management practices and sound risk management principles, and returns the bank to a satisfactory condition.”

The bank’s board and management, Sutherland said, “are committed to executing a plan that addresses the areas of emphasis in the agreement. We have capital in excess of that required to be considered a well-capitalized bank and are profitable this year to date, as we have been every year of our 20-year history.

“We strongly believe that we have the people and capital resources to weather the current difficult economic environment. Over the last 20 years, we have successfully contributed to the growth of Lawrence and we fully intend to participate as the economy recovers.”