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Guaranty Financial, No. 2 Texas bank, says may fail
July 24, 2009 / 12:25 PM / 8 years ago

Guaranty Financial, No. 2 Texas bank, says may fail

NEW YORK, July 24 (Reuters) - Guaranty Financial Group Inc GFG.N, the second-largest publicly traded bank in Texas, said it will probably fail after loan losses and writedowns left it “critically” short of capital.

In a regulatory filing late on Thursday, the Austin-based lender said it had been unable to obtain a capital infusion from its shareholders, and believes it will not be eligible for help from federal regulators.

Guaranty has about $16 billion of assets and more than 150 branches in Texas and California, according to its website. On that basis, if it were to fail, Guaranty would be the largest U.S. bank to do so in 2009.

Companies owned by billionaire investor Carl Icahn own 17 percent of Guaranty, Reuters data show. Neither Guaranty nor Icahn immediately returned calls seeking comment.

Guaranty has been operating under a cease-and-desist order from the federal Office of Thrift Supervision (OTS) since April, and said it does not expect to raise sufficient capital to comply with the order. It said losses and writedowns have left it “critically undercapitalized,” with negative capital ratios.

“In light of these developments, the company believes that it is probable that it will not be able to continue as a going concern,” Guaranty said.

The company also said it has agreed to an OTS demand that the regulator exercise its statutory authority to appoint the Federal Deposit Insurance Corp as a receiver or conservator for the bank.

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

Guaranty shares closed Thursday at 22 cents. (Reporting by Jonathan Stempel; Editing by Derek Caney)

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