Prosperity Bank agrees to FDIC consent order

Prosperity Bank’s board of directors has agreed to a consent order from the Federal Deposit Insurance Corp. and the Florida Office of Financial Regulation to raise its Tier 1 capital ratio to 8 percent and its total risk-based capital ratio to 12 percent.

President and Chief Executive Officer Eddie Creamer, shown here with Chairman of the Board, Mark Bailey, said the bank already has a plan in place that will not only raise both ratios, but will also raise them above the minimum the regulators are requesting.

“The bank is negotiating with both existing investors and new investors to raise more capital,” Creamer said. “The capital injection should come by the end of the third quarter.”

The Tier 1 capital ratio is the ratio of a bank’s core equity capital to its total assets. The total risk-based capital ratio is the percentage of a bank’s capital to its risk-weighted assets. The minimum to be well-capitalized is ordinarily 5 percent for the Tier 1 capital ratio and the minimum capital requirement is 4 percent, but because of the current level of bad loans, regulators are now requiring many banks to be at 8 percent to be well-capitalized, according to analysts.

An increasing number of Florida community banks have come under consent orders since the recession began. Creamer said, “The bank will not have to close any branches or lay off any employees to meet the regulators’ requirements.”

At the end of the second quarter that ended June 30, Prosperity Bank, based in St. Augustine, had a Tier 1 ratio of 5.85 percent and a total risk-based ratio of 10.45 percent.

Total deposits at Prosperity Bank fell 28.4 percent to $619 million in March from $864.7 million in December 2009, according to the FDIC.