No. 2 Texas bank expects to fail

In filing, Guaranty Financial says it's 'critically' short of capital, and is talking to investors about recapitalization.

EMAIL  |   PRINT  |   SHARE  |   RSS
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all RSS FEEDS (close)

  • For more information visit
  • Dont panic your savings are insured
  • Keep paying your loans the terms remain the same.
  • The FDIC will notify you by mail about your accounts/loans.
  • Contact the FDIC with any questions until further notice
  • If your bank is purchased, you will be contacted by your new bank.
Who will benefit most from the Obama administration's proposed financial regulations?
  • Consumers
  • Banks
  • Regulators

NEW YORK (Reuters) -- Guaranty Financial Group Inc , the second-largest publicly traded bank in Texas, said it will probably fail after loan losses and writedowns left it "critically" short of capital.

The bank, whose investors include Carl Icahn and Robert Rowling, is in talks with at least one investor group for a possible recapitalization, said a source familiar with the situation. The source requested anonymity because the talks are not public.

"The company believes that it is probable that it will not be able to continue as a going concern," Guaranty (GFG) said in a regulatory filing.

The Austin-based lender has about $16 billion of assets and more than 150 branches in Texas and California, according to its Web site.

On that basis, if it were to fail, Guaranty would be the largest U.S. bank to collapse in 2009. Guaranty is about half the size of IndyMac Bancorp Inc, which failed last July.

So far 64 banks have failed this year, including seven on Friday, according to the Federal Deposit Insurance Corp. Friday's failures include six bank subsidiaries of Security Bank Corp of Macon, Ga.

In a regulatory filing late Thursday, Guaranty said it has been unable to obtain new capital from shareholders, and believes it will be ineligible for help from U.S. regulators.

Its largest investors include companies run by billionaire Carl Icahn and by Rowling, whose investment firm owns the Omni Hotels chain.

Won't comply: Guaranty said it does not expect to raise enough capital to comply with an April cease-and-desist order from the federal Office of Thrift Supervision (OTS).

It said losses and writedowns have left it "critically undercapitalized," with negative capital ratios.

Guaranty also said it has agreed to an OTS demand for the appointment of the Federal Deposit Insurance Corp as a receiver or conservator. That appointment has not yet happened, but the OTS is exercising "a significant degree of control" over what had been functions of the board of directors, Guaranty said.

The company has not filed official results since the third quarter of 2008. It has estimated it lost $444 million in all of 2008 and another $256 million in the first quarter of 2009.

Chief Marketing Officer John Wessman said in a statement that Guaranty is still working with regulators, and believes it can avoid disruptions to customers.

Guaranty's largest investors include Rowling's investment firm TRT Holdings Inc, which has a 19.9% stake according to a regulatory filing. A company run by Icahn has a 17% stake, Reuters data shows.

Icahn and Rowling did not immediately return calls for comment.

Guaranty began operations in 1988, according to its Web site. It was spun off in December 2007 by Temple-Inland Inc. (TIN) , a corrugated packaging and building products company.

The largest publicly traded bank based in Texas is Dallas-based Comerica Inc. (CMA)

Guaranty shares closed down 7 cents, or 32%, at 15 cents on the New York Stock Exchange on Friday. Their 52-week high is $6.75, set last Sept. 18. To top of page

They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More
Royal wedding: How much will it cost? Meghan Markle's wedding to Prince Harry could cost millions once security is included in the bill. See how the costs break down. More
Robot co-workers? 7 cool technologies changing the way we work Experts believe humans and machines will work much more closely together. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Copyright 2009 Reuters All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.